FTB Advice needed on rennovation work!!!!

MrWhite_4

Hi All,

I'm a FTB and looking to buy a house in the S.Yorks area. I currently earn just over 17k a year so would be looking to buy at a maximum of 68k which up here gets you a typical two bedroom terrace house needing some moderate attention..

Last week I went to view a house that the estate agent had told me had just come on to the market and that I was the first to view it. The asking price is £62,500 and the sales pitch stated it needed a little refurbishment/rennovation.

After inspecting the property with my farther-in-law to be it's quite apparent that it requires some serious work, rewiring, new heating system, everything plastering, a new kitchen, damp proofing and other items of concern. We also learned that the property has been on the market for over 6 months.

Now despite all the faults I really like it. My father in law to be is a builder/electrician and basically he reckons it would cost no more £10k to get it to an excellent standard(as the work would be carried out by ourselves). From what the EA was saying I'm pretty sure the seller would accept between £52k - £55k. Would it be possible to borrow £65k from the bank (I have no deposit) to pay the £55k mortgage and to fund the renovation. Bearing in mind the house next door just sold for £79k...?? Are the're any pitfalls? I know there's negative equatity when borrowing more than the house value but would this apply since renovated the cost of the property would so much higher?

I'm a complete novice to this so I apologise if my questions seems silly!

david29dpo

your questions are not silly at all. someone better than me will come alone soon but i think there are a number of lenders that will borrow 125% of there value.

maryjane01

This is a better question for the mortgage board. Northern Rock are one of the most common lenders for this type of product, but there are others so you should see a broker. Whether you can get this type of mortgage usually depends on your credit history, it will have to be squeaky clean. The interest rate will probably be a bit higher than if you had a deposit. If for example you buy at £55k,and borrow £65K, but after you complete modernisation and decoration work it will be worth £75K you will have approx 13% equity.Get your initial mortgage for the shortest tie in possible (prob 2 years), so that at the end of that you can remortgage to a better product because you will effectively have over 10% deposit.

Debt_Free_Chick

I might be inclined to separate out the cost of the renovation and consider an unsecured personal loan instead. By adding the renovation costs to the mortgage, you are effectively taking 25 years (or whatever the term of the mortgage is) to pay for them. That's 25 years of interest to pay for what ought to be short term borrowing :eek:

You really need to think long and hard about this. You have no deposit and no money to renovate. Do you have some cash for all the other incidental costs of buying your first home?

MrWhite_4

Thanks for your replies.

For legal fees and such I've just over £2,000 in my savings account I don't have any debt although last year I got hit with a CCJ for a water bill I didn't know about about after moving out of my rented home. It was only £180 and is now satisfied but unfortunately it still lingers on my credit file. I guess that puts me out of the running for the type of mortgage I'm looking at.

DebtFreeChick, what you suggest makes sense but I've been refused credit in the past (even from the seediest lenders) so I'd be worried about buying the house only to find I was unable to borrow the £10k to renovate...