Using a Mortgage for Renovations

ZanderMJW

Hello all,

This is my first post here, I've tried to use the search before posting this so apologies if it's a repeat!

My fianc! and I are looking at a house (first time buyers) currently however there is currently no central heating and the costs for this are going to roughly be around the £4.5K mark.
All of our actual cash will be going into the deposit (it will be under 10% so the more we have the better) so we're wanting to know if it's possible to take the full amount that the lenders are offering us and use our cash for the deposit meaning that we'll have more than we need to buy the house (the house is £165K and in total with the mortgage and deposit £171K) so can we use the extra £6K towards the central heating installation?

Apologies it I've worded this badly! Thank you so much in advance for any help!

ZanderMJW

ViolaLass

That would mean you have no deposit, so no.

alchemist.1

No, unless you can find 100% mortgages (which i understand lenders stopped doing after the last crash). You will need a few thousand for stamp duty and legal fees aswell).

Edit
You can look at lenders who provide a mortgage with a 5% deposit and use the balance (earmarked for the deposit) leftover for the renovations.

Caz3121

ZanderMJW wrote: »

so we're wanting to know if it's possible to take the full amount that the lenders are offering us and use our cash for the deposit meaning that we'll have more than we need to buy the house (the house is £165K and in total with the mortgage and deposit £171K) so can we use the extra £6K towards the central heating installation?

your mortgage will be calculated on the purchase price or the valuation whichever is the lowest
If you purchase the property for £165k and it is valued at £180k your mortgage would be a % of the £165k with the remainder being your deposit
If you purchase the property for £165k and it is valued at £150k, your mortgage would be a % of the £150k and you would need both a deposit and the difference
If you can, as suggested, find a 95% mortgage and the property values at £165k..your mortgage will be £156,750 and you will need to find the £8,250 deposit, fees etc and money for the improvements

ZanderMJW

Hi guys,

Thank you so much for your quick replies - Apologies as I'm new to this so please bear with me

I can see that it was indeed a stupid question! So do you think that a better idea would be to do this?:

Put down the minimum 5% deposit of £8,250 for the £165,000 house leaving us with £5,750 in our pot (we also have an extra £4,000 earmarked for all the expenses like stamp duty, survey etc. so we're good on that front) and then use the £5,750 for the renovations needed?

Again, thank you so much for all of the replies and apologies for the stupid question!

alchemist.1

ZanderMJW wrote: »

Hi guys,

Thank you so much for your quick replies - Apologies as I'm new to this so please bear with me

I can see that it was indeed a stupid question! So do you think that a better idea would be to do this?:

Put down the minimum 5% deposit of £8,250 for the £165,000 house leaving us with £5,750 in our pot (we also have an extra £4,000 earmarked for all the expenses like stamp duty, survey etc. so we're good on that front) and then use the £5,750 for the renovations needed?

Again, thank you so much for all of the replies and apologies for the stupid question!

In your situation, probably the only way of doing it ( as long as you have a very good credit rating required for a 5% mortgage).

ZanderMJW

alchemist.1 wrote: »

In your situation, probably the only way of doing it ( as long as you have a very good credit rating required for a 5% mortgage).

We already have an agreement in principle with a bank (Nationwide) for a 92% LTV, can they change their decision if we lower the amount we put forward for the deposit because we're raising the LTV?

alchemist.1

ZanderMJW wrote: »

We already have an agreement in principle with a bank (Nationwide) for a 92% LTV, can they change their decision if we lower the amount we put forward for the deposit because we're raising the LTV?

I believe they can but whether it is likely, I'm not sure. It all depends on your circumstances.

Remember the Decision in Principle isn't a guarantee of an offer of a mortgage.

Thrugelmir

ZanderMJW wrote: »

We already have an agreement in principle with a bank (Nationwide) for a 92% LTV, can they change their decision if we lower the amount we put forward for the deposit because we're raising the LTV?

An AIP is not a formal mortgage offer. Until you make a mortgage full application on a particular property there is no certainty.

Are you using the NW's Save to Buy scheme?

ZanderMJW

alchemist.1 wrote: »

I believe they can but whether it is likely, I'm not sure. It all depends on your circumstances.

Remember the Decision in Principle isn't a guarantee of an offer of a mortgage.

That's a point to be fair, it may be possible to bring down the asking price due to the work needed meaning the LTV doesn't go up as much when taking out the chunk of the deposit

Thrugelmir wrote: »

An AIP is not a formal mortgage offer. Until you make a mortgage full application on a particular property there is no certainty.

Are you using the NW's Save to Buy scheme?

Thank you for pointing that out And yes we are

pinkteapot

Does the work NEED to be done straight away? What form of heating does the house have at the moment?

What I'm getting at is whether you could move in and then save up to have the heating work done...

Also bear in mind that if you're talking about installing new radiators etc then damage will be done to the walls and possibly floor coverings, so make sure that £4.5k cost includes all redecoration afterwards, unless you're prepared to live with the mess until you can afford to tidy it up.