Financing Renovations

GGGuitar

Hi, first post!

We are first time buyers and want to buy a house which needs work done. We (my wife and I) would like to buy it for 200k with a 20k deposit, leaving us 20k of savings. We would like to extend and renovate the house which would cost a total of around 60-70k. To do this we would therefore need to borrow about 40-50k. The house would probably be worth about 300k after this work, at which point we would like to remortgage to around 75% loan to value (i.e. 225k) and repay any debt used for the extension work.

In terms of mortgage multiples 225k would be less than 3 times our joint earnings.

The issue we have is how best to finance this. Options seem to be:

1) personal loans for the extension, but I'm not sure how easy it would be to borrow 40-50k for this purpose. If we are already mortgaged to 90% would they lend?

2) A mortgage from a bank prepared to release money in stages to fund the work. I have no idea who offers a mortgage product like this and any enquiries I have made don't come to much.

I would be very grateful if anyone has experience of financing a project like this and can provide guidance?

G_M

Last time I did (something like) this I used 0% credit cards. But a) it's now harder to get high credit card limits; b) even 0% they now charge a fee; c) you have to be sure you can pay them off when the 0% deal ends.

I'd discuss this with an IFA to see which banks might offer which mortgage deals.

Fire_Fox

That is a big project for an FTB. How confident are you about the cost? How confident about the value of the property afterwards? Are you intending to live in the house whilst it is renovated? Have you ever lived on a building site before? Who is going to project manage?

GGGuitar

Fire_Fox wrote: »

That is a big project for an FTB. How confident are you about the cost? How confident about the value of the property afterwards? Are you intending to live in the house whilst it is renovated? Have you ever lived on a building site before? Who is going to project manage?

I describe myself as a FTB but I have owned property before, just don't own a house at the moment as I was waiting for prices to drop. As they have now dropped 40-50% here in Northern Ireland I am happy to re-enter the market.

I'm very confident on the cost as I have had a quote from a reputable builder who has been recommended to me and who has carried out similar work previously. He will project manage. I have also had my brother look at the costs as he works in the construction industry and agrees with the costs.

We are renting at present and will continue to rent in the meantime while the work is done to minimise disruption as we have a newborn baby and no desire to live on a building site.

Paying the mortgage and paying rent at the same time is expensive but money well spent in my opinion. We usually save 2k per month so paying both for 6-9 months is not a big issue.

So far I have been able to find that Ecology building society, Norwich and Peterborough and Buildstore provide suitable financing. Does anyone know if the highstreet banks provide similar financing?