Do any lenders let you borrow more than house value?

Foxy-Stoat_3

Good luck, but I hope for your sake you are unsuccessful unless you can afford £500 each per month comfertably without breaking yourself. If you can fix your mortgage term for 5 years that will give you your payment certainty.

Look at the planning portal for the size extension you can build without planning....you DO need building regs thou so do research.

matt8787

Yes, we'll be looking to ensure that any improvement work we do add's to the value of the house - e.g. adding bedrooms, etc - though even if it doesn't, as the loans wouldn't be secured against the value of the house we could just pay them off separately and take the hit if necessary.

We think the general top price for properties on the street is around £320-£330k region, so we'll be looking to join that banding.

In terms of affordability, I think we should be okay. I read somewhere that your monthly mortgage shouldn't exceed 35-40% of your monthly income.

On the basis of our house being £275k (and a 90% LTV) mortgage, the monthly payments are going to be about £1,200 a month - which works out to be about 22% of our monthly income. So if we were to also have about £800 extra to pay back in monthly loan repayments, our mortgage+loan outgoings would be approx 40% of our monthly income.

(thanks for the note re building regs)

Daniel54

You appear to have good earnings but not much cash ( not sure how you would have funded the deposit and costs for a £425k mortgage).It really does make sense to wait some time,not only to salt some savings away to help pay for the house improvements,but also because it really pays to live somewhere before you make big decisions on how you want it to look and to plan the additional space.

You seem confident you could both get £25k of unsecured loans,but even if £1200 a month is 22% of your post tax incomes,you might find that difficult at terms which make sense.

in my opinion ,you are stretching yourselves hugely unless you have savings elsewhere to act as a safety net.

Forgive me for saying,but you seem to be focussing on the value of the house,not on the fact it will be your home for several years hence,unless you are planning to renovate and flip in which case you are taking a large highly leveraged bet that could go horribly wrong

matt8787

No, not really - I think its more other posters focusing on increasing the value - our main priority is to build an extension to make the house nice to live in. But I do agree that its worth taking a long term view and look to make improvements that are going to add to the value.

Building_Surveyor

matt8787 wrote: »

I think what we're going to try and do is just get the mortgage as normal and then look to take out 2 x £25k unsecured loans (one each) and pay for the extension that way.

We're reluctant to wait, because the kitchen and bathroom are in a pretty dire state. Plus we'd be concerned about spending money to do the place up (new carpets etc) and then get it all messed up during the building work.

Surely if your earnings are that high to be offered £400k plus mortgage then it won't take you long to save that sort of money...

If your planning on making this home your own then clearly you can see yourself staying put for a while. As this is a Money saving site do it the cheapest way, save...

matt8787

Building_Surveyor wrote: »

Surely if your earnings are that high to be offered £400k plus mortgage then it won't take you long to save that sort of money...

If your planning on making this home your own then clearly you can see yourself staying put for a while. As this is a Money saving site do it the cheapest way, save...

Yes, that's how we would go about things ordinarily - the issue is that the current facilities (kitchen / bathroom) are in a pretty dire state - so we're keen to get it sorted asap (even if it costs us a little more in interest payments)

Wallhart

Why are people still in the mind set the banks will lend you money unsecured for mortgage level interest rates. You say you want to borrow to improve home value but how does the bank know you will do this or know that costs won't spiral out of control and your project will be a nightmare.

People moaned about the banks and the cause of the recession yet want them to carry on with wreckless lending.

Either buy a property in a better state or understand that you will need to save for the improvements.

Yorkie1

OP, what is your plan B if you can't get unsecured lending for some or all of the £50K?

Ferrisb

Speak to an advisor at buildstore - they do financing for self-build and renovation / extension projects.

We were planning an extension and talked through their model with them - from memory, they lend you a proportion of the future value (at a higher rate during the works) and release funds during the work - they work in conjunction with one of the smaller lenders (it may even be Chelsea BS). once finished you port the whole amount onto a more conventional mortgage.

We didn't proceed in the end but it made sense at the time, and would be worth at least talking through with them - sorry my detail recollection isn't great but maybe others can add experiences or knowledge of these products.

hcb42

opinions4u wrote: »

Northern Rock used to.

And look what that caused....! Irresponsible lending/borrowing, a bit like the story here I fear.