Bridging Loan A Guide to Building Your Dream Home

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1 Bridging Loan A Guide to Building Your Dream Home

2 Helping you to get on the property ladder Whether you are considering building a new home, or renovating or extending your current home, our Bridging Loan could help you achieve your dreams. At Danske Bank, we will help you throughout the build process. Our team of specialist Mortgage Consultants are on hand to give advice and share their knowledge and expertise. We will explain the process from start to finish, help you understand the full costs involved and work closely with you throughout the build. Read on to find out more about how you can create your dream home with a Danske Bank Bridging Loan. You must be in permanent employment (i.e. successfully completed any probationary period) and not be employed on a fixed term contract. You must be over 18. Lending criteria, terms and conditions apply. Your home is security for your mortgage. Other security may be required. 2

3 A Danske Bank Bridging Loan Things to Consider for the Build A Bridging Loan differs from a residential mortgage. It is a short term Interest Only loan that releases funds in stages as the build progresses. This means that you only start to make interest payments as funds are released, which could help keep costs to a minimum during the build period. Key Features and benefits Minimum term is 6 months, with a maximum of 18 months No restrictions on making overpayments or lump sum payments and, as interest is calculated daily, this means you get the benefit straight away No Early Repayment Charges No minimum loan amount Only available on residential properties in Northern Ireland An arrangement fee will apply The overall cost for comparison is 5.8% APR The actual rate and fee will depend upon your circumstances. Ask for a personalised illustration. When your home is nearing completion you will be required to convert the bridging loan to a Danske Bank residential repayment mortgage or repay the loan. 1. When considering your dream home, draw up a list of what you want from the house, such as: the design of the house size of the house number of bedrooms and bathrooms number of storeys type of materials for construction type of heating a budget to work to if planning permission is approved already consider how long this is valid for is it sufficient? the site must have unrestricted third party access from a public road A Danske Bank personal current account will be required to service your mortgage. APR stands for annual percentage rate. It aims to give people a more accurate idea of how much money they are being charged when they borrow money. It allows people to compare the total cost of borrowing money for different types of loan, and lengths of time. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE. 3 No higher lending charges apply, but other fees and charges such as solicitors fees may apply which are not charged by us or paid through us. 4

4 Things to Consider for the Build Things to Consider for the Build 2. Project Planning Who is going to design the house? One of the first decisions you need to make, is which architect you are going to use. Things to consider when choosing an architect: ask around, architects receive most of their work through word of mouth check that they are registered with Architects Registration Board check references, ask local planners. It is important to choose an architect that matches your style and has a good track record it is good at this stage to get a rough cost from each architect on the approximate cost of the build all professional fees must be met up front from your own funds, so consider these costs when working out your budget 3. Working out the costs When working out a build budget, there are a number of things to consider. It is important to spend time getting this right: choose architect, get costings for drawing up the plans and for submitting them choose how the build will be supervised, choose a builder, get quotations remember it is important to get a few quotations before settling on a figure, check their work. Once you decide who to use, you should obtain a written/fixed price contract - do not accept a verbal agreement find out what warranty/structural guarantee will protect the home once built planning fees, Discharge of Effluent, Building Control application costs survey costs exterior and interior furnishings solicitors costs check any materials being used are covered by the appropriate guarantees costs to connect utilities to the property e.g. electricity, water, phone lines, gas consider the costs of alternative accommodation it is easy to overspend when building a property - this can be due to delays or unexpected costs, therefore a 10% contingency fund should be included in your budget for unforeseen overruns VAT costs To help speed the process up, it is important that you bring the correct documentation to your interview. Details of the documents you will require are listed in the Bridging Loan Checklist on page

5 Things to Consider for the Build Step by step guide to building your dream home Reclaiming VAT New houses are zero rated for Value Added Tax (VAT). This means that if you are building your own home, you can reclaim some (but not all) of the VAT incurred during the build. It is important that you read and understand the rules of VAT reclaim as claims need to be made within specified time frames. For the purposes of the application, you must ensure to allow for VAT costs as part of the build. VAT rates are subject to change. For more rules and information go to new-home.htm 4. Find out how much you can borrow When deciding how much you can borrow, we will take into consideration how much you earn, your financial history and existing financial commitments. Our specialist Mortgage Consultants will discuss the following at the first meeting: a financial budget to assess affordability for both the bridging loan and for when the build is completed and a residential repayment mortgage may be required provide and explain the documentation required discuss how much is affordable discuss the costings, valuations and fees associated with build explain the features and benefits of the product go through the application process and what happens at the end of the build consider how much you are able to put towards the build (also known as your stake ) You can get full details of fees, service charges and interest rates that may apply to the Danske Bank personal current accounts from all Danske Bank branches in the UK and on our website at 7 8

6 Step by step guide to building your dream home Step by step guide to building your dream home 5. Applying for a Bridging Loan 6. Protecting the Build Once you are ready to complete your application and have collected the required documentation, we will make a second appointment with one of our Mortgage Consultants. This meeting may consist of the following: reviewing the documentation for the application (please see the Self Build checklist on Page 12) agreeing stages to release funds and how much will be required, as decided with your NHBC Builder or Architect. An example of these would be: 1. On completion of the footings and foundations 2. Construction of the walls and roof 3. Completion go through financial proposition and review affordability arrange a valuation of the build from the plans, which will include the value of the current site when assessing affordability, your Mortgage Consultant will consider affordability for both the bridging application and conversion to a residential repayment mortgage - this will include upkeep costs of the property Your home is probably your single biggest financial commitment, so it makes sense to prepare for the unexpected. At Danske Bank, we have a range of ways to help make sure that your family and property are protected for the future. You can ask for more information during your mortgage interview. Life & Critical Illness Cover At Danske Bank, we can provide you with advice on Life and Critical Illness cover: Life Insurance Cover designed to repay your bridging loan in the event of your death Critical Illness Cover designed to repay your bridging loan in the event of you being diagnosed with a specified critical illness and being eligible to claim For full details and a personalised quotation, please ask your Mortgage Consultant who will be pleased to provide you with recommendations to help meet your individual needs. Insurances are subject to eligibility. Further information can be provided separately. submit the application for credit assessment An independent professional valuation may be required If you have a mortgage, you must have adequate buildings insurance in place. You do not have to arrange this cover through Danske Bank. 9 10

7 Step by step guide to building your dream home The things you need to know about 7. Completion of the Build It is important that the property is finished to a habitable standard and that all relevant documentation, certificates and sign offs on the build are obtained, such as: - Certificate of Completion - Building Control Completion Certificate - NHBC 10 Year Guarantee/Architects Warranty 8. Arrange mortgage appointment to discuss funding options once the build is complete. When your home is nearing completion you will be required to convert the bridging loan to a residential repayment mortgage or repay the bridging loan. Our Mortgage Consultants will be happy to provide advice on the best option for you. Bridging Loan Checklist The following items are required for Bridging Loans Item Documents Required Planning Permission (both outlined and full) Fixed Price Contract - Where there is no Fixed Price Contract, please provide detailed costings with a letter from the surveyor/architect confirming that these are realistic and written formal agreement for the work from the Builder House plans with stamp attached Building control approval Discharge of Effluent Certificate Confirmation that the builder is NHBC registered NHBC certificate and All Risks Constructors Insurance (or equivalent) If the builder is not NHBC registered, please obtain a letter from the Architect confirming: - They are properly registered - They will provide the Bank with a copy of their Public Liability Insurance (this must be adequate to cover the costs of the build) - They will oversee construction of the property - They will issue interim certificates in respect to stage payments and the amount spent to date on the property - They will issue the Final Architect s Certificate If a NHBC registered builder is not being used, you must obtain Course of Construction Insurance and a copy of this is to be provided to the Bank Name and address of Solicitor Address of the new property Checklist When the build is complete, if you decide not to convert to a Danske Bank residential repayment mortgage you will be required to repay the outstanding capital to us. 11 Please note that all of the items detailed above may not be available at the first interview but they will be required prior to the release of funds 12

8 Over to you Speak to one of our specialist Mortgage Consultants today in branch or by telephone. Call us on * *Lines are open between 8am and 8pm Monday to Friday and between 9am and 4.30pm on Saturdays, except for bank holidays or other holidays in Northern Ireland when the bank is not open for business. We may record and monitor calls for your protection, to train our staff and to maintain the quality of our ongoing service. Call charges may vary. Please refer to your phone company for more details. 13

9 Registered in Northern Ireland R568 Registered Office: Donegall Square West Belfast BT1 6JS Danske Bank is a trading name of Northern Bank Limited which is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Northern Bank Limited is a member of the Danske Bank Group. This publication is also available in Braille, in large print, on tape and on disk. Speak to a member of staff for details. Correct as at 10/2014 COM UK