Renovation Mortgage

andrew_net82

Hi, I have seen a property that is valued at £154,000 that needs renovating, the potential valuation of the property upon completion could be £169,500 (value given by two local estate agents)

My partner and I have a combined annual income of £60,000 along with a deposit of £15,000.

We estimate the cost of renovation to be in the region of £17,500 and would take 6months. We would like to make an offer for the property of £145,000.

Could anyone please advise what mortgage we would require, plus how we would go about getting a mortgage for £162,500 when the property at present is worth less than the mortgage would be.

We are aware of Self-Build and Conversion mortgages that release money throughout the project but need some more advice on them and what criteria we need to meet to get one.

Any advice at this stage would be welcome. Thanks

Thrugelmir

You'll need to fund the renovation work yourselves.

jamesd

Cost: £145,000 + £17,500 + £2,000 or more for legal and other buying costs + £1700+ in selling costs = £166,200. Less anticipated selling price of £169,500 => £3,300 potential profit before mortgage interest. Mortgage interest at say 4% for six months on £162,500 = £3,250.

Anticipated profit for six months of work, before contingencies: £50.

Anticipated profit from putting the deposit money in a savings account for six months at 3%: £225.

Anticipated worsening of your position before contingencies: £175.

Find a worthwhile deal instead. Or get a buying price that makes more sense.

holly_hobby

The mge advance will be based on its CURRENT value as determined by a RICS surveyor on behalf of the lender.

Furthermore, depending upon the survey and any noted retentions* or downvalue, you may need a slightly more meaty deposit than 15k in any event !

* if you don't know, a retention is simply where the lender agrees the mge in principle on the purchase price e.g 145k or lower if downvalued, but only advances part of the loan in line with the valuers retention guide (which will be reflective of the remedial works reqd (which is nothing to do with upgrading such as updated kitchen etc), and can occassionally be a full retention for essential works such as re-wiring). The retained capital sum may be applied for and released, once the noted works are completed to reqd standards and have been re-inspected (usually reqd to have occurred within 6 mths of the pch).

Personally, I don't think this is a great plan, and unless the figs change drastically go along with James's post above.

Hope this helps

Holly

Trollfever

Get one of the TV Property !!!!!! shows to finance this speculation.

batina

I am having the exact problem (see my post) and a mortgage advisor is working on finding out what my options are. I will let you know once I've heard back from her (hopefully tomorrow)