Mortgage dilema, whats the safest way

MissMessy_2

We have seen a house we love :T and are just trying to do some figures.

The house is £210000 and we have £34600 in savings. Now the house will need to be extended immediately by way of an extension or conservatory and would set aside £10000. I am aware it may cost slightly more than this.

Now where the dilema lies is-

Do we go for a 90% mortgage and keep back £10000 to do the work and then re mortgage in 2 years in the hope that the LTV will have increased (should mention that because of the condition of the property it is currently being sold between 20-30k below market value)

OR

Do we go for a better rate 85% mortgage and then take out a loan of £10k to do the work ?



Would appreciate any advice

dimbo61

Why are you looking at a property that needs money you dont have spending on it straight away!
Conservatories have a habit of being boiling hot in the summer and too cold in the winter
Extension for £10K you must be dreaming unless your OH is a builder as it will cost £10K for the materials.
Have a look on the YBS ( yorkshire building society ) to see what difference a 90%LTV and 85%ltv makes.

MissMessy_2

I did say that I was aware that it may cost more should we go down the extension route and as we have family/friends in various trades, so intend to draw on them, it will not be a large one but an essential space. No offence but I was looking for advice on the question not an opinion on whether we should be going for the house.

I was asking what people thought the pros and cons were of the two option, I am aware of roughly the difference between the 85 and 90% mortgage and the difference is roughly £200 a month. We will be able to pay the 10k back by the end of the first year

firstaspect

I'd personally go for a 85% mortgage. Over the long term this will safe you considerable money and if you could pay off a 10k loan within a year then do that.

MissMessy_2

Thank you very much for your advice.

After further investigation the house requires more work than we had anticipated, however we have reduced our offer accordingly. We have actually made an offer of £184000... it will prob be declined but we arent prepared to go above 190k as it needs new boiler,rads and some new electrics.. on top of new kitchen and bathroom!!

dimbo61

Having just paid £3500 for a complete rewire including burgular alarm and security lighting and £3300 for a new valliant combi boiler ( which best buy) plus 8 radiators might give you some idea of the costs.
Well done on saving £35K as a deposit and putting down 15% deposit gets you much better deals.
Could you live in a building site for 3/4 months ?
Its a buyers market so dont be pushed by the vendor or the estate agent (they are acting for the seller not you!)

MissMessy_2

Hi there,

Many thanks for the advice. our first offer was declined, naturally and we have now placed a significant second offer to show were serious but have made it clear we do not intend to go any higher. We have made a new offer of 191k. We shall wait and see.

Just refurbed (ie boiler, kitchen, bathroom and some new window panes here and there) this house would have no prob reaching 250k and with an extension and further polishing 280k and over a few years we would expect it to hit 300k.

Its amazing how so many people over look a house because of its cosmetic appearence. Granted my feet stuck to the carpet but who cares when your going to gut it.

We have no problem living on a building site and having done some research ive realised you can almost halve the cost of an extension if you get involved. Hubby is an ex labourer, bf is one of the best electricians I know and my father a great plumber, father in law an architect, cousin a landscape designer/gardener and even I can tile pretty darn good.... so between us all I think we could put in alot :j

Thrugelmir

MissMessy wrote: »

Just refurbed (ie boiler, kitchen, bathroom and some new window panes here and there) this house would have no prob reaching 250k and with an extension and further polishing 280k and over a few years we would expect it to hit 300k.

I feel your optimism is somewhat misguided. The days of property renovation adding value have gone. In reality better profits could have been made by doing nothing. As the cost of renovation wasn't actually recovered in the resale price.

MissMessy_2

I completely understnad where your coming from, but think either you have misunderstood or I havent explained properly.

The property has been let for many years and it has been allowed to get in a terrible state. The house is in a close of 20 other houses all of which are lovely and have sold for far more than this one over the last 3 years. This property is being sold below market value and therefore once it is brought up to regular standard, will be worth the same.

The extension would be primarily for our benefit in order for it to be our perfect family home and it is standard that extension, not conservatories typically make back double ie if it cost 20k to do it will add 40k in value. As we are in no hurry I see us riding through any double dip very well and we will enjoy the property fully. I do not think that I am misguided as the house a few doors down in good nick is on at over 100k more.

PasturesNew

Conservatories usually cost more than any value they 'add'.
If you're developing, you leave a conservatory off the agenda.

MissMessy_2

We have however changed our thoughts re finances and have thought the following;

Plough as much into mortgage as possible and retain approx 5k for boiler and rads

Start from the top of house down (cheaper end) and then blitz the mortgage and overpay as much as possible for first 2 years

In mean time put cheap kitchen in (as it will be ripped out again when ext is done)



In 2 years time re-evaluate finances and market and how were coping without et and go from there??


Does that sound like a responsible plan?