Borrowing for renovation- how does it work?

kingstreet

So, £265k purchase price.

£50k deposit = £215k mortgage (81% LTV)

85% = £225k mortgage, £40k deposit.

So, keep back £10k and you'll still get the same mortgage product. Borrowing £10k more means you'll pay around £60 per month more, assuming a 25 year term.

firsttimeforeverything_2

kingstreet wrote: »

So, £265k purchase price.

£50k deposit = £215k mortgage (81% LTV)

85% = £225k mortgage, £40k deposit.

So, keep back £10k and you'll still get the same mortgage product. Borrowing £10k more means you'll pay around £60 per month more, assuming a 25 year term.

Is that assuming that the rates between 81% and 85% will be the same, or are they usually the same within this band? I hear that they jump up around 90%, is that right?

Thank you.

kingstreet

Bands tend to move in 5s.

If you're at 81 and move to 85 it's within the same band. If you went from 80 to 85 that would be a different band and probably a different product.

Perelandra

However, coming back to the retention:

Take the second scenario in Kingstreet's scenario, where you're borrowing £185k, using a £40k deposit and holding £10k back for the roof.

The lender might decide that the value of the property, once the roof is fixed, is £265k, in which case they'll only lend you the £185k once the work has been done. In this case, they might hold back £10k of the loan until you have had the roof repaired, and they have come out to inspect it.

Short term:
Loan £175k, £50k deposit needed, £10k needed to repair the roof.

This means you need access to £60k cash in the short term. You would need access to this additional £10k in the short term. After the repairs, the lender will then release the remaining £10k on the loan, so you'd then be fine.

This is a worst-case scenario, and will depend on how urgently the roof needs to be repaired. Would the house be livable-in, in its current state?

firsttimeforeverything_2

Perelandra wrote: »

However, coming back to the retention:

Take the second scenario in Kingstreet's scenario, where you're borrowing £185k, using a £40k deposit and holding £10k back for the roof.

The lender might decide that the value of the property, once the roof is fixed, is £265k, in which case they'll only lend you the £185k once the work has been done. In this case, they might hold back £10k of the loan until you have had the roof repaired, and they have come out to inspect it.

Short term:
Loan £175k, £50k deposit needed, £10k needed to repair the roof.

This means you need access to £60k cash in the short term. You would need access to this additional £10k in the short term. After the repairs, the lender will then release the remaining £10k on the loan, so you'd then be fine.

This is a worst-case scenario, and will depend on how urgently the roof needs to be repaired. Would the house be livable-in, in its current state?

Where has the £185k come from?..
The house is livable now, and I'm taking a roofer with me next week to make sure.
I spoke to my broker today and you guys are absolutely right- we'll have to withhold whatever funds we need from the deposit. This shouldn't make a difference to our rates as we'll stay within the 80-85% bracket. If we need to we can take a longer mortgage term to keep our payments down for the first year or so while we do the repairs, then we can shorten the term and/or overpay once we have the money.

I feel like I've learned a lot in the past few days! Thanks to all of you.

Perelandra

firsttimeforeverything wrote: »

Where has the £185k come from?..
The house is livable now, and I'm taking a roofer with me next week to make sure.
I spoke to my broker today and you guys are absolutely right- we'll have to withhold whatever funds we need from the deposit. This shouldn't make a difference to our rates as we'll stay within the 80-85% bracket. If we need to we can take a longer mortgage term to keep our payments down for the first year or so while we do the repairs, then we can shorten the term and/or overpay once we have the money.

I feel like I've learned a lot in the past few days! Thanks to all of you.

£185k-

Sorry, misread the numbers above. Repost of what I typed earlier, with the right numbers this time!

However, coming back to the retention:

Take the second scenario in Kingstreet's scenario, where you're borrowing £225k, using a £40k deposit and holding £10k back for the roof.

The lender might decide that the value of the property, once the roof is fixed, is £265k, in which case they'll only lend you the £225k once the work has been done. In this case, they might hold back £10k of the loan until you have had the roof repaired, and they have come out to inspect it.

Short term:
Loan £215k, £50k deposit needed, £10k needed to repair the roof.

This means you need access to £60k cash in the short term. You would need access to this additional £10k in the short term. After the repairs, the lender will then release the remaining £10k on the loan, so you'd then be fine.

This is a worst-case scenario, and will depend on how urgently the roof needs to be repaired.

As long as the house is livable in it probably won't happen.

firsttimeforeverything_2

Ok thanks, I'll be aware of that.
We put in an offer today- if it goes through I'll let you know.