Query regards mortgage based on property valuation after renovations...

JulietK_2

Hoping to buy a property at 40k which needs renovation work...have been told by mortgage advisor at bank that I can have the property assessed by a contractor, and if they state that after renovations the property value will be (for example) 55k, I can get a mortgage based on this value (i.e. pay 10% deposit and borrow 50k)

My question is - if I buy the house at 40k and get the 50k mortgage, does the 10k which will go towards renovations go to the contractor making the renovations/myself and then I need to show proof of the work/another means...?

Any advice appreciated! The mortgage will be through Ulsterbank also, Northern Ireland

JulietK :money:

Yorkie1

Sorry I don't think your bank advisor is correct, though wait for more experienced posters on here to confirm.

A lender will base their valuation on the existing state of the property and not on the post-renovation work. So, if the property is only worth £40K at present, they will only lend on that value - or the price you pay, if lower.

This is assuming that the property is of mortgageable condition (habitable, working kitchen and bathroom) and doesn't need any money to be retained by the lender pending specified works.

Even if you do get a standard residential mortgage, you should also be aware that many lenders won't do a remortgage until 6 months after the initial purchase, so don't necessarily bank on being able to remortgage after only 2-3 months.

kingstreet

I don't know a lender which will lend 100% of the property value at the moment, never mind more than 100%.

JulietK_2

Thanks guys - I do believe I have picked her up wrong - however thanks again for the info!

monty-doggy

Perhaps she means you can re mortgage at the higher valuation AFTER the works have been completed?