Money to re-decorate.

tails009

Hi there,

First off this query is regards to Scottish property. whether this makes a difference I dont know?

My girlfriend and I have found a property we love - small village, sea views, secluded beaches etc. We both have reasonably good jobs and could get a mortgage for a lot more than what the house we have found will cost.

The house in question is valued at £240k and has been on the market for a long time (May 2010) and the asking price has subsequently dropped to offers over £215k. We have been unofficially been told that we could get the house if we offer £215k which is substantially under value. From plugging in some numbers online it would appear we could get up to around £300k if we so wished.

The thing is for all the good points of the house, it badly needs re-decorated. While I can live with the decour itself in the living areas, the bathroom and kitchen are in need of replacment. My girlfriend and I both have personal loans of around £13k that we are paying back and ideally dont want to ask for any more. We dont have much in the way of a deposit as we weren't looking to buy right now but this seems like a perfect investment.

Is there a way that if we were able to secure the house at £10k undervalue, we can free up some equity from it? I had thought that being called "LTV" meant that we would be borrowing against the valuation of the property rather than what we would pay and therefore could use what we do have as a deposit to make these initial changes..... I was being quite naive i guess!

Thanks in advance for your advice.

ViolaLass

What you pay for a property = its value. Something is worth only what someone will pay for it.

tails009

Yea i realise it makes sense now. I just dont have a firm grip on legal things and got carried away initially!

poppysarah

You should clear your debts and save a deposit and then start looking at houses.

maninthestreet

So how much deposit do you have??

ViolaLass

Also, even if you get the house for £215k, you still need a minimum 10% deposit so the £10k you theorise you could use wouldn't even be half the amount you'd need (and that's without taking your debts into consideration).

tails009

We have a 10% deposit by chance - like i say we werent looking to buy. Where I typed £10k in the initial post i meant 10%. i.e. my initial thinking was if we get the house 10% under then we didn't need the 10% we happen to have and could use that on kitchen / bathroom.

I now relise this isn't the case but was wondering if we were to buy the house and it's been valued over what we were paying, whether such a system exists where you can borrow back money from the value of the house? essentially re-mortgaging based on a vluation? I'm not sure?

If we couldn't get anyway of doing up these rooms initially we wouldn't buy the property. Like I say, we earn enough to pay off the mortgage and save at the same time. but these rooms would need to be re-done before we could live there. We're only at the very early stage (went to see the house last week), and unfortunately I will be out of the country until Wednesday next week. At which point I will be able to speak face to face with lenders etc. I'm asking here to find out whether my thinking is logical.

Thanks.

johnthebar

You set the value of the house by what you are willing to pay for it, the value is set by the market and you would be determining that market by purchasing it. To the market if the house was worth more, then it would have sold for more. What all this means is that if you paid £215k for the house it is likely that any further valuations in the near future would be around £215k as you would have just set that benchmark.

Also something to factor in is that lenders will take off the amount owing in unsecured loans from the amount you can borrow.

Sounds like a lovely place, but it also sounds like you need some more cash for the renovations.

tails009

Thanks for that John, pretty much answers my question. I still had it in my head that if I paid less the value stayed the same (with the expetion of what I could borrow against). i.e. I could borrow against the price i pay but any subsequent valuation would still be close to the original.

It makes sense though that this would set the benchmark as you put it.

birkee

If you don't have the money to decorate, you are buying a house above your financial capabilities.
I can accept that, if you can manage it within reason.
You'll just have to wait until you CAN afford to decorate it if you blow it all on the purchase of the house. Or, more debt.

BitterAndTwisted

Good Lord! How much does paint cost in Scotland? If you can't afford a few pots of paint then you are almost certainly not in a position to buy any property let alone this one. Also, I cannot imagine how the lack of a few coats of paint would render a house uninhabitable even if it was the whole place rather than a few rooms.

As an aside I really don't think it makes sense at all to have any savings whatsoever with £13k's-worth of debt around your necks. This will also be taken into consideration by your lender and their offer reduced by this amount. Why have you chosen not to pay this off already?