Mortgage to cover small remedial work?

Colin297

Simple question really,

If, for example I'm buying a property for 40k which needs about 2k of work to it (for small remedial work / furnishing), can i get a mortgage for 42k to cover the purchase and the work?

I'd imagine the "valuation" of the property that the mortgage company will get pre-mortgage will in fact be more than what i'll be asking for. (Eg. valuation for 45k but im buying for 40k but asking for 42k).

Thoughts / advice?

BlueC

In this climate you won't get a 100% mortgage, nevermind a 105% one.

Colin297

Yes, i know that.

Mortgage is 90%, 10% deposit.

Take that out of the equation...

BlueC

AFAIK the banks won't mortgage a house for more than you pay for it. So you'll need to keep 2k of your deposit for the work which would harm your LTV ratio, or finance the work some other way.

kingstreet

... and if the work is considered essential, there may well be a retention of the amount needed to pay for the repairs.

For example, you agree to pay £40K, put down 10% deposit asking for a £36k mortgage. The surveyor goes out and values the property at £38k in its present condition, £40k after essential repairs.

You renegotiate with the vendor who agrees to reduce the price by £2k to £38k. The lender will then lend you 90% of £38k, but takes a £2k retention.

On completion day, your solicitor then gets £32,200 (90% of £38k - £2k) and you have to increase your deposit by £2k to £5,800 to bridge the retention.

You then have six months to get the repairs done to get the retention lifted and the balance of the mortgage money drawn-down.

So, not only do you not get enough to carry out the repairs, you also have to increase your deposit to cover the retention and find someone to do the work who'll wait for the mortgage money to come through so you can pay them.