Building a house without a mortgage in Ireland: cash first, mortgage after

Plenty of people building in Ireland want to avoid a self-build mortgage. They have savings, a site that came with the family, or the money from selling a previous home. Some plan to build with cash and borrow at the end, and others plan never to borrow. You must arrange the inspections, payment checks and insurance that a lender would otherwise require. Building Regulations are the legal standards for the home’s design and construction; building control is the system of notices and compliance records that still applies without a lender.

What a lender normally makes you do

A self-build mortgage comes with payment conditions that protect the lender. Depending on its requirements and your certification route, these can include:

• planning permission in place before the money is released;
• an engineer or architect inspecting before each stage payment, where the lender releases part of the loan as work progresses;
• insurance on the works and the site;
• completion and compliance documents accepted by the lender before the last payment.

Without a lender, you set your own payment schedule. Planning and building-control duties still apply, including Building Regulations compliance. Arrange your own inspections and payment checks, and agree insurance and the records you will need for a future sale or loan before work starts.

Build in phases you can finish

Cash builders often run into the same problem: the money runs out when the shell is up. Plan phases that each leave a safe, dry result.

1. Site and foundations, including services such as water, electricity and wastewater connections, in a season you can complete.
2. Shell to weathertight, meaning roof, windows and external doors fitted, so the interior can start drying.
3. First fix and second fix, then heating, kitchen and finishes. First fix includes pipes and cables before walls are closed; second fix includes fittings and final connections.

Price each phase with VAT before you begin, and keep a contingency for the whole job. The cost guide shows how to build up the budget, and the stages guide lists the order of work. Planning permission does not last forever, so check how long yours runs in the permission duration guide before you stretch a build over years.

Insurance you still need

With no lender checking cover, it is easy to skip, and skipping is a risk. A fire, a theft of materials or a worker’s injury with no cover can cost more than the savings you built with. Read the self-build insurance guide and if you manage the work yourself, insurance when you project manage.

Choose your certification route before work starts

How you pay does not decide the building-control route. Discuss it with your architect, engineer or building surveyor before filing the commencement notice, the notice to your council before construction starts:

• Statutory certification: appoint an assigned certifier, the registered professional who coordinates inspections and certifies compliance, before filing. Agree the inspection plan. At the end, the builder and assigned certifier sign the Certificate of Compliance on Completion; it must be validated by the council and entered on its public building-control register before occupation or use.
• Eligible single-dwelling opt-out: for a new single dwelling on a single-unit development (one new house on its own site), the owner can submit a Declaration of Intention to Opt Out of Statutory Certification with the commencement notice. With a valid declaration on the public register, the statutory assigned-certifier and completion-certificate requirements do not apply. Building Regulations compliance and the remaining commencement requirements still do.

An opt-out is not permission to skip professional checks. Agree inspections and written evidence of compliance with your professional and solicitor, and ask your insurer and any prospective lender what they will accept before choosing. It does not guarantee later finance. Keep records as work proceeds: inspections missed before work is covered cannot reliably be recreated afterwards.

Help to Buy and other supports

Help to Buy for self-build is a refund of income tax and other taxes you have paid, and it is tied to a qualifying mortgage and a qualifying build. If you pay in cash with no mortgage, you should assume it is not available. If you might borrow later, read the Help to Buy guide now, and check Revenue’s claim and mortgage-drawdown timing before you budget for a refund. Grants for the energy performance of the house are separate, and the SEAI guide explains what applies to a new home.

Getting a mortgage or equity release afterwards

Equity release here means borrowing against the value of the finished house, rather than a particular loan product.

Borrowing on a finished house is often easier than borrowing to build it, because the lender can see what it is lending against. Expect it to ask for:

• a valuation of the finished house;
• title and planning documents from your solicitor;
• compliance and inspection evidence for your certification route, including the registered statutory completion certificate where applicable, and the BER certificate;
• evidence of buildings insurance; and
• your income and borrowing history, as for any mortgage.

Policies differ on how soon after completion they will lend, which certification routes and professional records they accept, and how they treat a house you built yourself. Ask two or three lenders before you start and write down their answers. The lenders comparison is a starting point for who to ask. If you need to bridge a gap during the build rather than after it, see funding a gap in the build.

Paying builders and suppliers when you hold the money

A lender’s stage payments act as a brake: money goes out when an inspector confirms the work is done. With your own money you need your own brake.

• Use a written contract. The builder and contracts guide explains what to put in it, including the payment schedule, the scope and what happens if the work is late or defective.
• Pay against completed work. Tie each payment to a stage your certifier or engineer has seen, not to a date or a request for cash up front.
• Hold back a retention. Agree a percentage of the payment to keep back in the contract until defects are fixed. Snagging is the final check for those defects; the snagging guide explains how to list them.
• Keep every invoice. Records for VAT, for insurance claims and for a later lender are easier to collect as you go than to reconstruct.

Cash or a mortgage: compare the whole cost

The saving from skipping interest is easy to see. The other costs are not, so list them before you decide.

• Interest saved is real, and is largest on a long build. The interest during build guide shows how it accumulates as the lender releases the loan in stages.
• Savings tied up cannot be used for an emergency, a delay or a cost overrun. Many people who build with cash keep a reserve, or arrange borrowing that they hope not to use.
• A slower build may cost more in rent, in storage and in rising prices, and an exposed shell can deteriorate.
• Borrowing later can still be on good terms, but rates and lending rules change over the years a build takes. Do not assume today’s terms will be there.

Neither route is better for everyone. If you plan to use cash to reach weathertight and then borrow to finish, speak to a prospective lender before starting. Ask whether it will accept a part-built house and what planning, insurance and compliance records it needs for the stages built before it joined. The mortgage guide shows what it normally asks for.

Keep a file for the day you sell or borrow

Some records are hard to replace after the builder has gone. Keep a single folder, on paper and in a cloud backup, with the planning decision and conditions, drawings showing what was built, commencement documents, professional inspection reports, the BER certificate, guarantees for the roof, windows, heating and wastewater system, and electrical and gas completion certificates where applicable. On the statutory route, retain the registered completion certificate and supporting records. For an opt-out, retain the registered declaration and the professional compliance evidence agreed with your solicitor, insurer and any prospective lender. Ask your solicitor to check the file before you offer the house for sale or apply for a loan.

Questions to settle before you start

• Your savings cover each phase, with a contingency and VAT included.
• You have decided what happens if the money runs out between phases.
• Insurance for the site is in place before work starts.
• Your certification route is agreed with your professional and solicitor, and insurer or prospective lender requirements are checked.
• The commencement notice and required documents are filed, including the assigned-certifier appointment on the statutory route or the declaration for an eligible opt-out.
• You know whether you might borrow later, and a lender has told you what it will need.
• You have checked how long your planning permission lasts.