Mortgage for House in need of Refurb

runner20k

Hi

My uncle recently passed away leaving his cottage to my mum.
The cottage is in need of serious refurbishment, as it is like stepping back to the dark ages the cottage doesnt even have a gas supply etc etc.
The cottage has been valued at £80,000 -- the cottage next door which is all upto date and modern is valued at £190,000.
I would like to but this property and build an extension and gut and update the place, changing the property from 2 bed to a 3 bed cottage etc etc
Refurb costs complete are £70,000
Estate agents estimate the final value once updated and with extension as being around £230,000

Therfore i would need to borrow £150,000 - can you get a mortgage for this kind of project or would they only lend based on its value now or do they actually look at the final picture once complete.
I have dosh for deposits etc but no more.
If you cant get this kind of mortgage how do people do it ???

Thrugelmir

runner20k wrote: »

Hi

My uncle recently passed away leaving his cottage to my mum.
The cottage is in need of serious refurbishment, as it is like stepping back to the dark ages the cottage doesnt even have a gas supply etc etc.
The cottage has been valued at £80,000 -- the cottage next door which is all upto date and modern is valued at £190,000.
I would like to but this property and build an extension and gut and update the place, changing the property from 2 bed to a 3 bed cottage etc etc
Refurb costs complete are £70,000
Estate agents estimate the final value once updated and with extension as being around £230,000

Therfore i would need to borrow £150,000 - can you get a mortgage for this kind of project or would they only lend based on its value now or do they actually look at the final picture once complete.
I have dosh for deposits etc but no more.
If you cant get this kind of mortgage how do people do it ???

How much capital do you have for the project?

No one will lend a 100% of the project costs.

runner20k

I have £15000 available which would cover a 10% deposit on the original purchase price plus the rest to cover fees etc

Thrugelmir

runner20k wrote: »

I have £15000 available which would cover a 10% deposit on the original purchase price plus the rest to cover fees etc

Unless you can provide security for at least part of the loan then its a non-starter unless you can find a partner to help provide funding.

runner20k

Not what i wanted to here.
Was banking on there being a refurb mortgage or similar

Thanks for your help,
Off to speak nicely to me mum and see what we can come up with

Dave_the_Ginger_Cat

runner20k wrote: »

Not what i wanted to here.
Was banking on there being a refurb mortgage or similar

Thanks for your help,
Off to speak nicely to me mum and see what we can come up with

Banks offer staged payments mortgages which were used for this type of project or self builds.

For example (and I'm not affiliated to any of these - I work for a major high street lender)

http://www.fancyamortgage.co.uk/SelfBuildMortgages/StagePayments.asp

Banks will also offer retentions based on certain works being completed.

http://www.shiredirect.com/mortgage-glossary/retention-mortgage.html

So in this, they might advance £70k at the outset, and then hold off the rest until you have completed the works, or even do this in stages.

With both of these, the difficulty is that you need to have enough capital to get yourself through the development, and confidence in your ability to complete.

Another way is to get a small mortgage now, borrow through another source (perhaps relatives as you suggest) and then remortgage once it is complete. This may be limited to a percentage of the new value whichi can be 75% say.

The reason why a bank won't lend at the outset, is that they have no guarantee that you'll complete the work - they'd be left with a debt much bigger than the house value and that would put neither of you in a good position.

I'd suggest seeing a mortgage broker, who may direct you to a specialist on this subject.

LittleMissAspie

Could you get a mortgage to buy it off your mum, then your mum lends you the same money back to do the refurb? Once complete you can withdraw equity to pay your mum back. I don't know if there would be any implications of any kind.

HOWMUCH

LittleMissAspie wrote: »

Could you get a mortgage to buy it off your mum, then your mum lends you the same money back to do the refurb? Once complete you can withdraw equity to pay your mum back. I don't know if there would be any implications of any kind.

I think he is intending doing it alone otherwise why does he need a £150,000 mortgage to do a £70,000 refurb. Well that's how I've read it.

Could you just not get a mortgage for the refurb? or are you wanting to have the property in your name? Little miss has given you the best solution do it as a joint venture with your mum

No one will give you a mortgage of £150,000 on a property only worth £80,000, you have to increase the value of the property and get staged releases

runner20k

thanks for the advise.. given me soemthing to think about,