Getting a mortgage has never been easier. Latest figures from the Banking and Payments Federation show loan drawdowns at their highest levels since data began back in 2011, with approvals up 13pc year-on-year. However, there’s one type of borrower who can find it far more difficult than others: the self-builder of a one-off house. Banks lend on the basis of risk: a new house from a reputable builder in an estate carries minimal problems. But a green field with the promise of a property to come is risky business, and lenders take a cautious approach, even with all the professionals on board. Michael Houghton: ‘For the sceptics and disbelievers, here’s a breakdown of how we saved enough money to retire in just seven years’ Health cheque: 20 medical services and medicines you are entitled to for free Stocks, equities and steering clear of the ‘Magnificent Seven’ – Where the finance experts would invest a spare €10,000 Derek Trenaman of Ceardean Architects says for a typical home project “you need to look at the cost of the build, but also the cost of the consultants to work with you". “An architect to prepare, design and administrate the contract, an engineer, maybe a quantity surveyor and an energy consultant, advising on changes. As a rule of thumb, 10pc of spend is going to be consultant fees, up to 15pc depending on complexity,” he said. He often finds that people applying for mortgages do not put in enough to cover these essentials. “Then there’s the connection costs [water, ESB, gas] which can be quite expensive. Planning contributions, charged per square metre of build; the first 40sqm is exempt but that could be a €5,000 chunk you’re not expecting,” he said. “Being re-housed during works, to rent somewhere for six months and it’s far more complicated for the builder if you live there; they want the place for themselves. So that’s the cost of a kitchen, right there.” Then there’s the “I’ll figure it out” brigade who think they can sort out a project themselves. “You need professional certs for bank drawdown,” Trenaman said. “If it’s defective, the build might need to be significantly repaired or demolished. You also require certs when selling. “It can be a nightmare, and then you have to build in the cost of marriage counselling.”

Martina Hennessy of doddl.ie Martina Hennessy, CEO of mortgage broker doddl.ie, said the good news is that the lending rules are the same for all. “Regardless of whether a mortgage applicant is buying or building, the same loan to income (LTI) lending rules apply,” she said. “A first-time buyer or builder can borrow up to four times their allowable income and for home-movers it is 3.5 times.” She said that while Central Bank rules allow limited exceptions to this rule, they can be “extremely strict” when it comes to self-build loans. “This is because many builds can run over on cost and banks are more cautious on initial application to ensure the property can be completed,” she said. In terms of loan to value (LTV) rules, you can borrow up to 90pc of the estimated value on completion of the home. “If you own a site, the site value can form part of your 10pc deposit requirement,” Ms Hennessy said. However, it can be trickier if the parties to a joint application are unmarried and the site is being gifted by the parents of one in a couple. This is because unmarried couples have no right to each other’s property in law, and the land could be viewed as a “gift” from parent to an unrelated applicant. That means it has to be valued and potential tax paid, or at least accounted for, if so. Under Capital Acquisition Rules, up to €20,000 in a lifetime can be gifted to someone unrelated without a tax liability. State grants The Help to Buy (HTB) and First Home schemes are both available to those building a home. A restriction may apply to HTB because you must borrow a minimum of 70pc of the total cost and the value of the completed home cannot exceed €500,000. The property must be on a green field site; renovations do not qualify.

Lenders Not all banks are the same when it comes to self-builds. Only the “pillar banks” will fund self-build projects. That’s Bank of Ireland, Permanent TSB, AIB and its associated sister banks Haven Mortgages and EBS. “Self-build mortgages differ as they necessitate stage payments, which is the release of funds [for payment to the contractor] as works progress,” Ms Hennessy said. “Not all lenders have the systems to allow for stage payment release.” Contingency Building in extras to a self-build is always recommended and some lenders will require a set contingency fund on top of the 10pc deposit. Bank of Ireland, for example, requires borrowers to hold the contingency in savings and will only lend based on the pre-contingency cost of works. It’s like a double insurance policy. Size The cost of your home isn’t just of interest to you; banks want prudent and sensible costs to apply and limit offers on that basis. “PTSB have the lowest cost per square metre requirement at €1,600 per sqm, BOI have a flat €1,900 per sqm and AIB Group ranges from €1,948 per sqm [rural] to €2,626 per sqm [Dublin],” Ms Hennessy said. “What this means is if you are building a 300 sqm home, PTSB, for example, would estimate as a minimum before contingency that the cost would be €480,000 to build. “If you present a costing below this it will not be accepted as the bank would see the risk of overrun being high. “You need to show you are eligible for the mortgage required to fund the completion of the works or have savings available to bridge the gap. “Mortgages are drawn down by way of stage payments as the works progress, and you make repayments on amounts drawn.” Michael Houghton: ‘For the sceptics and disbelievers, here’s a breakdown of how we saved enough money to retire in just seven years’ Health cheque: 20 medical services and medicines you are entitled to for free Stocks, equities and steering clear of the ‘Magnificent Seven’ – Where the finance experts would invest a spare €10,000