Council Home Improvement Loan - Good value or not?

Suzkin

The Council are offering me a home improvement loan of £40,833 (net), although with 10% contractors fees, and then VAT at 17.5%, the grand figure is £52,776.00. (I qualify for their LOAN - not a grant - as I've so little savings).

The grand total (£52,776) would be charged against my property via Land Registry.

(1) Do these figures appear reasonable?

Council say they will take their money either when I sell my house, or I can save up the £52,776 and pay them in one installment.

(2) My slight problem, is that 3 Estate Agents have valued my property in its curent state at approx £125,000. They reckon I'd be financially better off by about £110,000 by selling it and then using this as a deposit for another property, rather than sinking council money into it.

They told me the ceiling price in my road for properties like mine is approx. £140,000; so that if I got the council work done and sold for say, £140k, then I'd only pocket approx. £87,300 (as the Council would take their £53k) - and this is less than the £110k scenario above.

What do people think? Does this make sense? I need to ask to get perspective on this - I've almost lost the wood for the trees here.

HappyMJ

I gather the loan is interest free? Depends how long you'll stay there then doesn't it. Selling up straight away isn't worth it but selling in 20 years time is well worth it.

Mankysteve

Sounds like an extensive amount of work being done for 40k

Suzkin

Well, in terms of 'interest free': they are adding 10% of the value of the works, to it. And then there is 17.5% on top of that as well. Would this constitute 'interest'?

The works are: moving bathroom downstairs, rebuilding and extending a small utility room (so a small bathroom will fit, thus freeing the upstairs bathroom to become a second bedroom), patio outside, rendering outside front elevation (the property is single-skinned..), double-glazing.

The down side is silly price for bathroom furniture e.g. net price £500 for a bath, which is ridiculous - especially as I cannot negotiate on prices with the council: it's a matter of all or nothing. I am not allowed to chose the builder, either. The builder did say to me that if I were to look through the yellow pages, I could probably get the work done at much a cheaper price - however, then I'd have hassle, plus I'd need to pay up-front (which I cannot, or it would take years).

The most serious part of the house is the utility room, which is completely damp and houses the boiler and sockets (i.e. electrics against damp wall), which is dangerous.

Suzkin

HappyMJ wrote: »

I gather the loan is interest free? Depends how long you'll stay there then doesn't it. Selling up straight away isn't worth it but selling in 20 years time is well worth it.

I don't quite understand how in 20 years time, it would be worth it: are you thinking of increased house prices? As I say, it has been suggested that due to the ceiling price of houses in my road, I could only get £140k for it.

Would waiting 20 years make such a big difference? Please advise.

HappyMJ

Only that the value of 53k in 20 years is much lower but again it depends on your council if they charge interest or not. The 10% plus vat is not interest.

Suzkin

No - it's a fixed price i.e the £53k does not change over the years, and is registered in the Land Registry entry as £53k against the house.

Some of the items are really overpriced though: e.g. installation of a sola basin 510mm £306.79, plus 10%, plus 17.5%VAT.

macman

So in effect it's a lifetime interest free loan of £53K? If you've no plans for moving then how can you lose?
However if your circumstances change and you have to move in a few years then you'll presumably lose a huge chunk of the equity you will have built up in the property by having to pay the whole lot back when you move.

Clark80

Just my opinion and maybe worth you getting some professionl advice...

If you want to stay and live better then go for it.

If you are not sure about staying then better to get a smaller loan (much smaller than 40k!) and fix the damp and decorate slightly to live better until you move and also achieve your best selling price.

I myself would not be taking a loan for 40 - 50K