how do mortgages work if i need money for improvements

costaerer

say for example i want to buy a house for 200k
and we have 20k for deposit. so it would be 90% ltv

if for example we need another 20k for home improvements, can we take a mortgage for 220k and pay 22k deposit?

but then the original value of the house would only be 200k....maybe after the improvements it would be worth 220k but how is the mortgage company supposed to know this?

is there any way of this, or the only way being a secured loan on the property...or just raising an extra 20k for the improvements?

thanks

diable

In this day and age after improving the property by spending £20k you will most probably find its worth £170k and I don't think anyone will forward you any more money on top of what you already owe.

Yorkie1

The mortgage company will only lend on the basis of what the property is worth at the time of valuation, not on the basis of unguaranteed future works. If you need to do the works, I think you'll need to fund them from your own resources.

Senior_Paper_Monitor

Am currently trying to locate the same thing for a client remortgaging at 75% (to get a sensible rate as they just finish an 85% deal period at nearer 90% LTV) who then wants to spend £100K on an extension forecast to add £135 in value - expecting resulting of around 75% or less after build.

Even with a much better start and finish position (and ample affordability, excellent credit etc) it is proving impossible by bridging or mortage retention without introducing guarantees/charges on a second property throughout the build phase with another remortgage at the end.

Everything diable and Yorkie1 state is correct.

costaerer

ok. so i better start saving!

also, do mortgage companies over estimate and underestimate the value of the property?

i.e on the market for 200k, but buy for 180k. would they value it at 180, or 200?

Senior_Paper_Monitor

They will value at what it is sold for BUT only up to the value that they set on it (by independent valuers) and these are coming back lower and lower at the moment.

Your example ... £180K maximum