Getting a mortgage to cover refurb on a new home

Jonnafun123

I've tried looking all over the internet for an answer but can't seem to get anywhere. I've even spoken to 2 mortgage brokers and my current mortgage lender who only advised a face to face contact after an initial Agreement in Principle, which is useless.

Basically we've seen a house that is below our budget but needs a fair bit of work, though it is livable. The kitchen needs replacing and the bathroom at the very least (it used to be a house share sort of like student accomodation, so the bathroom is split into seperate washrooms), but there are also modernisation touch ups and possibly some rebuild work to make some rooms bigger. Essentially we could put in an offer and get a 90% LTV mortgage and be left with £10k from our current house sale, but that's nothing really, so we're looking for an extra £20-30k to get the majority of work done - all providing nothing major needs doing like re-wiring or plumbing.

Is there a way to get a loan alongside your mortgage, or get a mortgage that would cover the purchase and the refurb stuff? I'd heard somewhere of a way the bank will lend money towards the cost of refurbishment but only pay out on receipt of bills from contractors, but I'm not sure how it all works.

I'm a bit hesitant to go ahead with a purchase and then apply for a loan, just in case something doesn't work out and we're stuck with a grotty house we can't renovate and make a profit on.

Any thoughts?

Pixie5740

You're not going to get a mortgage with a 100%+ LTV.

Are you planning on doing this house up to be your home or to flip it? It makes a difference as to the kind of financing you'd need.

glasgowdan

Consider credit cards for some of the work, and saving hard plus DIY for the rest? Sorry I can't be of much help with accessing funds from the start.

sulphate

The type of mortgage you are referring to has not been available since the credit crunch - Google 125% mortgages for some horror stories. Banks need to be sure they will get their money back and there is no guarantee for them that you will spend the extra money on refurbishing the house and not on a holiday, new car etc. Spending £30k on refurbishing a house doesn't necessarily mean your house will be £30k more nor that you will make a profit.

If the house is liveable why don't you just move in as is and spend money on it as and when you can afford to? Consider 0% credit cards but don't apply for them before completion.