Risk of a fixer upper or buy the 'done' one

laydee_carmelade

Hi, newbie here, looking for some advice. We've had an offer on our house, expecting to get £50,000 equity out of it, we've seen a house today which is on the market at 155,000- it was an open viewing and there were two other couples there. It needed a lot more work than we expected- possibly a rewire, but at least a fixing of some terrible wiring in various rooms, a new boiler and some superficial works. The price seems fair-ish for the area, but with the work that needs doing we'd have to keep back some of the equity we're expecting which I'm guessing would affect the mortgage we been offered in principle? We've been offered £130,000 based on us putting in £50,000, but I would want to keep back £20,000 now, just to be on the safe side...will they be accepting of this, does anyone have any experience of similar? I don't want to get a loan- paying a loan off at the same time as a mortgage would be difficult. To make it a little more complicated- in a 'heart, not head' way we've seen another property- no work needs doing at all, for £175,000...but it's not what we want...it's probably the sensible choice, but the kitchen isn't big, which is what I want, and the parking isn't ideal. So it's a risky, cheaper property that needs work but could be perfect- funding dependant! or a well presented, more expensive ok house- but there'd be no cash for decorating and furniture. Help!

Annisele

Well, a deposit of £50k on a £155k house gives you a loan to value (LTV) of 68%. A deposit of £30k on a £155k house gives you an LTV of 81%.

So, is the £130k off based on an LTV below 70%? If it is, you wouldn't be able to have that product and borrow 81%.

Sedge123

If you've been offered 130,000 mortgage then this is what they have agreed with your 50k deposit then on top of this ie £180,000 so unless I'm mstaken then it's perfectly fine to keep some back. This is exactly what we've done, bought our forever home and kept some back but we are already finding little extra jobs we knew nothing about. It doesn't matter, it's a long term job for us and I'm excited about making our home perfect for us.

Definitely go with your heart unless you can look on the house as purely a house and not s long term home.

Keely_lewis

The loan to value does make a difference. We had a similar situation and changed our figures based on keeping below a 75% ltv. Because we did this it went through ok, no new application was needed even though we were about to have survey done on first house. There is a calculator on here play around and see what you can come up with.

laydee_carmelade

Thanks guys, all very useful! I will have to wait and see what the lender says on Monday, but I will have a play with the calculator on here tonight, I've worked out the different ltvs and I guess that's all I can do for now. damn the weekend!

eddddy

To summarise hat others have said:

You need to find out the LTV limit for the mortgage product that you have an offer in principle for.

As far as the lender is concerned, the 'Value' is the lower of: what they value it at, and what you are paying.

So, let's say:
- The max LTV for your chosen mortgage product is 70%
- You offer £155k for a property
- The bank's valuer values the property at £155k

... the most the lender will lend is £108.5k


But if the bank's valuer values the property at £145k (even though you're paying £155k)

... the most the lender will lend is £101.5k


The valuer will value the property in it's current condition (i.e. he/she will take account of the condition of the wiring etc)


If you want to borrow more, you have to look for a different mortgage product with a higher LTV (say 80%). But you would normally expect to pay higher fees and/or interest for that.

laydee_carmelade

Thank you for all your responses. We decided against the house in the end, and then when we discussed it with our broker on Tuesday he said we wouldn't have got a mortgage anyway as the sink was missing in the bathroom! We have put an offer in on the one that is completely finished, needs no work doing and it's bigger than the fixer upper anyway. So it's full steam ahead with that one. Thanks again.

lincroft1710

laydee_carmelade wrote: »

he said we wouldn't have got a mortgage anyway as the sink was missing in the bathroom!

How pathetic!!