Releasing money to complete renovation - remortgage the way to go?

RickMoney

Hi People,

I've had some sterling advice on here in the recent past when I was going for this property and mortgage deal so I hope you can all help again.

Background - bought a house at auction that was a complete renovation job. It was valued at the exact amount we paid with no retentions put on by HSBC mortgage, they did say the garage needed replacing and the roof replacing (which we knew and planned to).

I kept back as much as I could from the deposit (got to be 10% at auction) to do the works. So LTV is 90%.

The renovation includes an extension which we have now got planning on which will turn it from a 3 bed (with bathroom through bed3) to a true 4 bed. Adding a new living room, downstairs toilet and utility room. It didn't have a proper central heating system which will be added.

Effectively, it is a material change to the property.

Due to some changes to expected cash flow, I might need some extra funds to do the finishing touches to the renovation - i.e fix out and deco.

If the bulk of the construction work is done, is there scope for me to get the property revalued by the mortgage company to release more money for the finishing touches?

I appreciate your thoughts/comments/experiences!!

Rick

Okydoky25

Friend of mine purchased a house that needed a lot of work. They got a short term loan of I believe £40k. Once the work was completed they had the house valued £100k more than they paid and remortgaged for the amount of the loan leaving £60k equity in the property.

RickMoney

Thats one of the options I was looking to do but I'm unsure where you can get short term loans for that sort of value.

The ones on banks/society sites seem to go up to ~£20k which should be enough but can you realistically get the banks to revalue easily?

Also, I'm worried about the early settlement charges and penalty payments. eg. HSBC does not state what ESC is and says a penalty of a months interest.

I'd hate to have to pay those together with a new arrangement fee on a mortgage to pay off the loan.

Any way around this or other options?

Thanks

Rick

kingstreet

A mortgage lender will only lend on the basis of the condition of the property now, not what it will be worth later.

It sounds like you are going to have to find an alternative source of finance in the short term and go back to HSBC for a further advance, or remortgage to a new lender to refinance after it's finished.