What is approval in principle for a self-build mortgage?

How it works in Ireland

An approval in principle lets you test your budget before you spend on a design. The lender looks at your income, outgoings and credit record against the Central Bank’s mortgage measures, which limit lending to 4 times gross income for first-time buyers and 3.5 times for second and subsequent buyers, and tells you roughly what it could lend. It is conditional on the full assessment, which also covers the site, the plans and the valuation.

The approval is time-limited. Many last about six months, and full approvals typically last six to 12 months, though each lender sets its own. If yours lapses before you complete, you may need to reapply and be reassessed, with different rates or rules.

You can discuss affordability early. A formal application for a self-build mortgage may require full planning permission, so ask your lender when it needs the final grant. After planning, you supply costings (a fixed-price contract quotation or a detailed cost plan), the lender’s panel valuer reports on the site and plans, and the lender issues a letter of offer with the drawdown schedule.

Treat the AIP as a ceiling, not a budget. Work backwards from the whole project cost: site, fees, build, services and contingency. Then ask what mix of mortgage, deposit and savings covers it. See staged drawdown for how the money is released once you have an offer.

A common mistake

Spending on the site or design as if the AIP were a loan offer. It is not binding on the lender, and the valuation can come in below your cost. Keep your spending before the offer to what you could afford to lose, and read the offer’s conditions before you commit.