Paying money upfront

Suppliers are asking self-builders to pay larger deposits than they used to, asking for large amounts of money upfront. We look at timber frame companies and the market in general.

In this article we cover:

  • Self-builder being asked to pay large deposit for timber frame upfront
  • Which other type of companies are asking to pay money upfront
  • Advice on what to do

Q: I’ve been looking to build with timber frame and most companies are looking for 80 to 90 per cent prior to installation on site, which is broken up into staged payments to an extent.

The typical first stage mortgage drawdown from banks is at ground floor slab level. This still wouldn’t typically cover the amount required for the timber frame company to prefabricate structure. Hence the gap in financing, where one doesn’t have circa €100K cash flow available for example.

paying money upfront

We are due to start construction on our house via direct labour and I’ve received a number of quotes from timber frame suppliers which I’m interested in pursuing. One drawback is the upfront costs involved, i.e. around 90 to 95 per cent payment required prior to installation on site. I understand this is required given design, material and fabrication costs upfront.

The issue is financing this outlay cost upfront which will likely be €150K+. We will be mainly financing the build via mortgage, however the banks have a set stage payment / drawdown system based on certified work done to date i.e. to ground floor slab, wall plate, roof etc. Banks don’t seem to be flexible regrading upfront payments such as required for timber frame.

At issue is the banks’ stage payment/drawdown system which is designed for traditional build approaches with a main contractor. It’s not always suited for self-builders going direct build using prefabricated systems which require large lump sums upfront.

We’d like to go with timber frame for its speed of erection and other benefits but if it’s cost prohibitive we’d be forced to go a more traditional route, which all seems a bit mad in this day and age.

paying money upfront
paying money upfront

Les says: I do know that some of my clients have obtained self-build mortgages which are linked to an open bridging loan (i.e. one with no fixed repayment date). The idea is that the bank provides the money during the building work at stages as certified by the designer (or the registered contractor if there is one​). Then when the project has reached the final certification stage, the bridging loan terminates and the mortgage commences.

My advice to your reader is to consult a mortgage adviser or lender who understands self-build projects and is qualified to offer advice in accordance with the requirements of the relevant financial authorities.

Asking for money up front seems to be a new thing with some suppliers over the past few years. I have even known certain large window manufacturers to ask for 100 per cent before the windows are delivered on site.​

paying money upfront

Maybe it’s a way of them keeping their cash flow healthy, or perhaps there have been too many cases of non-payment for whatever reason, or maybe they are doing it simply because they are getting away with it. I just don’t know.

It certainly does not project a very good image of a company’s attitude towards their after-sales service or even reassuring a customer that they will still be around in years to come to fulfil any long-term warranty. There is probably a good case for customers to take a stand and engage only those suppliers who will offer sensible deposit and credit terms.

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Leslie O'Donnell

Written by Leslie O'Donnell

Les O’Donnell is a Chartered Architectural Technologist and structural engineer with over 30 years’ experience designing and supervising the construction of new builds. His practice, Landmark Designs, is based in Co Tyrone. All of the information contained in the guide is for information purposes only; professional guidance must be sought for your own specific project.

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