Increasing mortgage to fund improvements

moxster

Please excuse my ignorance on this issue but as a first time buyer I'm looking at buying a bit of a project. I'm wondering how easy it will be and what the penalties are (in terms of arrangement fee and interest rate), if I get a mortgage for a greater value to pay for the improvements.

I'm looking at a property at £122k and want to get a mortgage for £130k (actual value at £104k as I'll pay 20% deposit).

Can anyone more informed shed some light on this?

harvey115

The LTV (Loan to Value) will always work on the price you buy your house. So if you paying £18K as a deposit for a house price of £122K you are just a little bit below the 85% LTV.

So you have a bit of a way in this.

Apply with 10% deposit = £12.2K
- Will have a higher Interest rate
- Not all lenders would be happy to lend on this rate

Apply with 15% deposit = £21.6K
- Better rate then the above
- More lenders available to choose from

The_J

You cannot get a mortgage greater than the value of the house even if you intend to do work on the property to increase it's value.

You have to buy at 90% LTV, do the work, then remortgage.