Best way to minimise repayments while renovating?

satchef1

Rather that go in to minute detail, me and my partner are moving back to our parents' houses to allow us to save more money, with a view to buying a house next year. However, I've just spotted a place I really like. It needs a lot of work, but it's priced really keenly and I can see a lot of potential in the layout. In good condition, it would be way out of our budget.

I'm off to view it tomorrow, and we may put in an offer. The big question on my mind is on minimising costs while renovation is taking place. Are there any specialist mortgage products that maybe give us a break (either a complete break on all payments, or a break on capital repayments while work is taking place)? Anyone got any other tips? The house would be uninhabited for the duration of any work. Servicing the mortgage at 90% LTV, the council tax, and water rates, will be costing us just under 1/3rd of our combined monthly income. Any savings could have a significant impact on the pace of renovation.

ACG

Im not sure this is achievable.
The idea of a residential mortgage is that you move in to it on completion.
There are other options such as bridging finance but they typically need 25-30% deposit and that could be done on interest only, but your deposit is lacking and the rates are typically around 1% per month.

jackomdj

Uninhabitable because you wouldn't want to live there or unmortgegable? Does it have a kitchen/bathroom?

How old are you? Could you get a long mortgage? This would mean in the short term you could pay less (pay what you should on the long mortgage), but then when you have the extra money because works are complete you could overpay back in line with a standard mortgage.

satchef1

The place isn't uninhabitable. Sorry if I've given that impression. The condition could be pretty accurately described as "OAP - no investment for a few decades". So new kitchen, new bathroom, double glazong, new carpets, possibly replastering, possibly some electrical work. Heating might need some work as it's described as 'Gas Air Heating' (so quite probably from the same era as everything else - the 70's). Might be one or two surprises given the price, but I'll know for sure tomorrow.

Curious as to why I can't just buy the property normally and then move in 6-12 months down the line once all the work is finished? I remember seeing a mortgage product a couple of years ago that was interest-only for the first 6 or 12 months. Something like that would be ideal, as that's another £300-400/month I could use.

Contemptuous

satchef1 wrote: »

Curious as to why I can't just buy the property normally and then move in 6-12 months down the line once all the work is finished?.

You can do this, but where will you be living while renovating? If you're renting you'll have to demonstrate affordability for both the rent and mortgage payments.
I didn't move into my home until I'd owned it for four months as I spent time making the property suitable for my family, but I was living rent free for that period.

ACG

Those products are there to help first time buyers get used to the bills that come with buying a house that are maybe a little unexpected or a marketing ploy.

It is part of the terms and conditions of the mortgage that you move in. Some lenders allow a 30 day grace period I believe, not something I have looked in to so im not 100% on that.

Mr.Generous

couple of things to consider, I renovate property just like you describe.
1. Water are really good - for a one off fee of about £25 you dont have to pay any water charges throughout renovation until someone moves in.
2. Council tax can be an ar3e, if its been uninhabited for 6 months before you buy it YOU get charged 150% council tax while doing it up. Only way round this is for one of you to move in and claim single person discount 25% off, so you pay 75% - half as much as the penalty level.
3. Insurance for an unoccupied house during renovation can be steep, depends on the area but dont expect your tools to be covered unless you pay top rates.
4. It costs more than you think to fix up unless you can sort electrics, plumbing, roofing, damp, garden, decorating, windows, doors and flooring.
5. It takes months to renovate a property like this doing it full time. I work with a business partner full time and they typically take 4 months. Not too bad can be done in 3, awful take 5. First one we did worked 7 days long hours and did it in 3 months. Not sustainable unless death through hard work is a desired outcome! Trying to do a bit after work and weekends is going to take forever.

If you have the help and support of family and friends it will be a bit easier. Family wise we have 1 son in law electrician, 1 son in law window fitter, 1 brother in law roofer, 1 brother in law plasterer. All have been called on to help from time to time.

ACG

Mr.Generous wrote: »

2. Council tax can be an ar3e, if its been uninhabited for 6 months before you buy it YOU get charged 150% council tax while doing it up. Only way round this is for one of you to move in and claim single person discount 25% off, so you pay 75% - half as much as the penalty level.

I think this may differ from council to council. I have done a couple of properties up myself and one of them I paid 50% council tax and the other I just paid the going rate - 2 different councils.