Can You Borrow Money Against Your House Straight After Buying?

anotheruser

So as I understand, the rules of mortgages today is that you can only borrow as much as the house is worth.

However, if a house needed some work, say for an extension, can this money be borrowed against the cost of the house and simply added to the mortgage?

Basically, can you take out a loan and pay it back by adding slightly more to the mortgage?

Thanks

Caz3121

your mortgage will be based on a specific maximum LTV %
If you take a 95% mortgage and the property price increases, you may be able to borrow more whilst keeping at 95% LTV
e.g. bought for £200k mortgage £190k
new value = £220k 95% = £209k so you may be able to borrow the difference depending on affordability calculations and whether your lender has any restrictions on how long you need to hold the mortgage for before additional lending
Your title mentions..."straight after buying" but your post talks about getting a loan first
Do you mean you want to take a loan, do the work, increase the value and then look to change the borrowing to mortgage after the work is complete? or get the money from the mortgage lender and then do the work?
the second option will be more challenging as you are relying on releasing equity and there may not be any to release before you do the work

If you have a larger % deposit it may be worth considering a higher LTV and keeping some deposit back for the works
e.g. if buying at £200k and have £40k deposit you would be looking at a 80% LTV
If you go for a 90% mortgage you will likely pay a higher rate but will have £20k for the work

AnotherJoe

anotheruser wrote: »

Basically, can you take out a loan and pay it back by adding slightly more to the mortgage?

Thanks

"it depends"

.. upon how much equity there is in the property (eg value of house minus your mortgage), your salary, the affordability of the extra loan.

Do you already have a mortgage on this property, or are you looking to buy one and get a mortgage which will include cash you spend on an extension?

anotheruser

Well I'm looking to buy a new house. It's already over our budget at £170k but we'd hopefully knock them down a bit.

But the kitchen is useable but tiny. We'd want to extend it and build an extension to extend the kitchen and build a dining room.

But we'd want to build it near on straight after buying. We simply don't have enough cash for that so looks like the house is out for us

leveller2911

What size single storey extension would you be looking to build and How much have you been quoted for the extension and kitchen?.

Debtslayer

anotheruser wrote: »

Well I'm looking to buy a new house. It's already over our budget at £170k but we'd hopefully knock them down a bit.

But the kitchen is useable but tiny. We'd want to extend it and build an extension to extend the kitchen and build a dining room.

But we'd want to build it near on straight after buying. We simply don't have enough cash for that so looks like the house is out for us

I would say the house is out anyway if you're already stretching yourself to buy in the first place and you'd need to make big changes to it to make it big enough. I'd carry on looking for other properties

System

Because of extra interest I'd put off upgrading it till a time you really need to or are selling

ViolaLass

You might as well borrow the money before you buy, rather than immediately after. That simplifies the question.