Borrowing More than Property Price to Renovate?

stringvest

Hi,

I've received some great advice on here recently in relation to a BTL mortgage and I hoped that somebody might be able to help me with another query...

We'd like to buy a particular property that is very much in need of renovation. The property is well priced, accounting for the renovation work required, however I wondered whether it is in any way possible to borrow more than the property sale price with a view to carrying out the renovation work in order to bring the value to a point much higher than the mortgage?

I am aware that the likes of a 120% mortgage simply doesnt exist any more but are there any other options that can be tied into a mortgage as opposed to seperate borrowing which would bring with it higher interest rates...?

Background:
We own a property which was purchased for £150k 5 years ago. The property has recently been valued at £160k-£162k however we intend to let out this property. Based on this valuation we would have around 19% equity.

The property we wish to purchase is available for £145k and we have costed the renovation work at £21k. Identical properties in this area, finished to the standard that we would accomplish with the budget noted, realistically sell for £190k-£200k.

So basically what I suppose I'm asking is whether it is possible to acquire a mortgage of around £170k for a property purchased at £145k, that would within 6 months, following renovation, have a value of £190k+?

Thrugelmir

stringvest wrote: »

So basically what I suppose I'm asking is whether it is possible to acquire a mortgage of around £170k for a property purchased at £145k, that would within 6 months, following renovation, have a value of £190k+?

Answer is no.

No mortgage valuation takes into account potential future worth.

kingstreet

... and what might be worse is if the surveyor recommends a retention. In those circumstances, you'd need to be able to increase your deposit to bridge the shortfall in the mortgage money needed to buy the place.

stringvest

thanks for the responses - I thought that may be the case - i.e. future value not acccounted for - but what are your thoughts on the likes of buildstore's accelerator mortgage?

Alternatively another option might be for us to borrow additional funds privately (from family) for a 6 month period in order to fund the renovation (assuming we can get a mortgage) and then re-mortgage when the value increases in 6 months by £50K and repay the private loan...? Does that make sense?

Thrugelmir

What do you classify as renovation? Considerable difference between borrowing from Buildstore and a mortgage from a High Street lender.

stringvest

well the house is completely gutted, although it has a working bathroom. In all honesty it's not in a particularly bad state but will need rewiring, possible attention to the roof (but not a complete re-roofing job) and the kitchen has been ripped out.

We want to extend and rework some of the living space.

I hear scare stories of high street lenders not approving a mortgage if the property doesnt have a kitchen sink - even through this could be rectified in half a day(!?).

The house could be habitable within a couple of weeks.

dimbo61

You are right about the kitchen sink as lenders wont lend you the money so you need a deposit and money to do the work.
You only have £19K equity in you current property YES ? and have a £150K mortgage on that
Have you asked your existing lender for "consent to let" before you buy another property then you need about £40/50K as deposit and refurb money

stringvest

thanks for your help - we're going to get some advice from a financial advisor - they were very positive and are confident that 'there's always a way'