Can't get mortgage if I'm going to renovate house? (First Direct)

YorkshireJames

Hi

Maybe this is normal, but I've been told by First Direct that they won't give you a mortgage if you are going to renovate the house.

Apparently they need to know what they are mortgaging and if you are going to 'change' the property they won't give you a mortgage?

Has anyone else had this problem? Is this normal?

What do I do now? The house needs a new bathroom and a couple of plasterboard walls removing to make the lounge open plan? I would have thought they'd want me to do that as it will increase the value of the house?

Any advice would be great, are there certain mortgage providers for properties that need work doing on them? Where should I go?

Chopio

That does sound kind of weird - its not as if you are knocking down the place and rebuilding it or anything. The kind of improvements you listed would be pretty common I'd have thought. I'd understand it more if you were planning to knock the place down and build something else in its place.

dimbo61

" it will increase the value" is a bold statement in todays market who is to say that making 2 rooms into one wont devalue the property ?
First Direct are one of the best lenders at the moment BUT how much deposit are you putting down and do you have the cash to pay for the refurb out of your own pocket!
Putting in a £5K bathroom might not add £5K to the value so the days of buying a place cheap and doing it up to sell at a profit are long gone

GMS

Several lenders will want to see the plan of works, regulations, permissions etc, and refer them to their surveyor to ensure that the works will improve the value by at least the amount of the funds.

If it is a purchase the lender could be wary as straight away their security could be compromised.

If it is a remortgage they may advance funds subject to criteria.

There is also an issue with there being no way to ensure works are carried out. Monies could be used for any purpose, some which the lender would not allow such as business purposes or repaying gambling debts.

YorkshireJames

First Direct are one of the best lenders at the moment BUT how much deposit are you putting down and do you have the cash to pay for the refurb out of your own pocket!

40% deposit and we're paying for 100% of the refurb in cash.

YorkshireJames

GMS wrote: »

Several lenders will want to see the plan of works, regulations, permissions etc, and refer them to their surveyor to ensure that the works will improve the value by at least the amount of the funds.

But we aren't borrowing to do the work, we're buying the house with the mortgage and using cash for the refurb, does that still apply?

This whole situation seems crazy, if I just got the mortgage and didn't tell them about the new kitchen, then paid for it in cash and had the work done, could they revoke the mortgage?

GMS

From a lender point of view it is not difficult for a 200k security to be turned into a 100k security with poor work.

I agree with you for what it is worth. Unfortunately what I think does not alter the way lenders choose to lend.

Their argument would be that they are funding the work as you could borrow less if you used the cash you have as part of the purchase rather than on improvements.

If you had not told them and did the work anyway then they could do nothing, which makes it all the more frustrating.

YorkshireJames

GMS wrote: »

If you had not told them and did the work anyway then they could do nothing, which makes it all the more frustrating.

That is rather annoying. Oh well, learnt the lesson the hard way. Will have to try another mortgage company.

JQ.

How on earth are they going to know? We've done lots of work to lots of houses and have never informed the mortgage company. Just buy the house and do the work.

lellow_lorry

Had several mortgages with First Direct and done a damn sight more than opening a lounge up and replacing bathroom. I have never had any issues with them. With regard to re-furb this would be gutting a place IMO. Have you explained your plan of a new bathroom. Cancel the wall change and do once moved in, but make sure it complies with building regs. No bank should be bothered by this.

YorkshireJames

lellow_lorry wrote: »

Cancel the wall change and do once moved in, but make sure it complies with building regs. No bank should be bothered by this.

Thanks, let's hope so, will try again and see if we can get one agreed.