FTB - Mortgage larger than property value

Tan_ya

Hi all,

What with first time buyers needing quite a hefty chunk of money for a deposit now, it makes it quite impossible to have anything left over to refurbish the property being purchased.

Are there mortgage providers that will allow first time buyers to take out a mortgage that is higher than the property value, to release a small chunk of money to use once moved in?

This has been playing on my mind for a while, so really appreciate any answers! Thanks.

dimbo61

NO is the simple answer
Northern Rock did 125% LTV but that is now history
save a deposit of at least 10/15%

beecher2

It is only very recently that people have felt they have to redo everything in a house as soon as they move in. Just 15 years ago people still made do with 2nd half sofas and bought things as and when they could afford them by saving up. You need to save up a deposit and build up savings too.

Tan_ya

We have a 10% deposit, just enough to buy a house that needs a lot of work.
Of course we could go ahead and buy something like that, but would make sense to refit the kitchen / bathroom before we get settled if possible.
That's all I was asking :-)

sophievenusdoom

beecher2 wrote: »

It is only very recently that people have felt they have to redo everything in a house as soon as they move in. Just 15 years ago people still made do with 2nd half sofas and bought things as and when they could afford them by saving up. You need to save up a deposit and build up savings too.

This is certainly not a thing of the past - a lot of our stuff is 2nd hand and will do us til we can afford to buy new stuff!

jw2003

very true Beecher - we renovated our house, it looks great but the sofas are that tatty I'd have trouble freecycling them and the tv unit legs have been glued back on more times than I can remember :rotfl: (flooring was a priority over new sofas, plus I begrudge spending that amount of money on one)

Op - no chance

GMS

Tan_ya wrote: »

We have a 10% deposit, just enough to buy a house that needs a lot of work.
Of course we could go ahead and buy something like that, but would make sense to refit the kitchen / bathroom before we get settled if possible.
That's all I was asking :-)

Have you not considered looking for a property which does not require work? What about a slightly different area maybe?

If you buy a house which requires work you need to be sure it is only cosmetic. Any major work could result in a mortgage decline or a retention of funds which would require you to rectify any problems with yoru own funds before the mortgage company released all of the cash.

Could you not put up with a dated but functioning bathroom and kitchen for a short time?

sophievenusdoom

jw2003 wrote: »

very true Beecher - we renovated our house, it looks great but the sofas are that tatty I'd have trouble freecycling them and the tv unit legs have been glued back on more times than I can remember :rotfl: (flooring was a priority over new sofas, plus I begrudge spending that amount of money on one)

Op - no chance

We were extremely fortunate with regards to our sofa (a lovely chocolate colour corner one!) as we bartered it into the price of the house hehe!

jw2003

sophievenusdoom wrote: »

We were extremely fortunate with regards to our sofa (a lovely chocolate colour corner one!) as we bartered it into the price of the house hehe!

Bonus - we've bartered in a lovely big wardrobe, a tv and a dishwasher with ours

opinions4u

If you have specific improvements to the property in mind, and these will add to the value, you could get estimates for the work that needs doing and provide these for the lender's valuer. Check that the lender would consider this in advance though. Many won't.

The improvements have to be for fixtures and fittings, not freestanding furniture.

The valuer will state what he thinks the work will add to the value of the property and the lender may release funds for the work once it is complete.

There are many problems with this approach though.

1) How will you fund the work prior to completion?
2) If you are spending £20k on the work and it only adds £10k to the value, the lender will only advance £9k. How would you fund the difference?

Personally I think you should find a property that doesn't need as much work and make do while you save up to improve it.

jamesd

It's possibly easy enough to do if you buy a property that leaves you the money to do the refurbishment. That could mean a smaller place, perhaps a flat or a house in poor condition in a worse area.

I'm buying a place well below my affordability. Then I'll upgrade it and seek an additional advance from my lender based on the increased property value. The work I'm doing has been discussed with the surveyor who did the valuation for them so I can be fairly confident that I'll get much of my money back. Work I'm getting done includes adding double glazing and central heating, as well as refurbishing bathroom and kitchen and redecorating throughout.

Check that your proposed lender is willing to offer additional advances after the upgrade work and don't count on getting back the full cost of the work. Make sure that you know that you'll still be within their affordability limits at the higher value. What this does do is let you use short term financing like credit cards or borrowing from family or friends to fund the initial work, then do the further advance to get the money out of the property and repay.

If you're willing to do this a few times you may be able to profit from the increase in property values to increase your deposit for the property you'd really want, if the market doesn't move against you.