Mortgage, Remortgage, Spaghetti

DanielStallion

Hello,

I'm trying to understand the general rules regarding remortgaging in order to renovate.

My understanding is that lenders, in general, will not take in to account the likely increase in value of the property when making the various lending calculations. Is this accurate? Is there a 'special' form of borrowing designed to fund investments in primary (only) residence?

I've looked through the forum but don't see an answer, I've also asked my mortgage advisor that doesn't seem able to give me an answer.

Thrugelmir

Lenders will advance money only against the current equity in your property. Nothing speculative is considered. Spending money does not in itself always result in a direct increase in value £ for £.

DanielStallion

Thanks. That's what I thought.

I'm always confused how some folks seem to get access to money. A few folks I know have managed to get capital to renovate even though it bust LTV on current equity. I'm convinced there is a parallel finance industry some of us don't have a membership card for.

ACG

When you say renovate are we talking decorating, new kitchen/bathroom or are we talking gutting the place and starting from a shell?

You could look at bridging finance, easy to obtain in the main but quite expensive. Once the work is complete you remortgage away fromt he bridge and that will take account of the new value.

Or you can arrange a mortgage, do the work and then remortgage once the work is complete (assuming you get a mortgage with no erc's).

DanielStallion

Thanks ACG.

I am doing a number of things. 2nd floor extension that will result in another bedroom ensuite, the conversion of a garage that will result in a kitchen-diner.

If I fund by mortgage extension / remortgage it will result in LTV going from 63% to 85%. I can easily service the debt.

I am also considering a home improvement loan. My thinking is fund either all or some of the renovation through home improvement loan, then remortgage (so that the new value of the post improved home can be considered in the LTV calculations).

kingstreet

There are lenders who offer specialist renovation products, along the self-build lines.

You need a better independent broker.