Equity release for home improvements

DoubleNugget

My brother and I are fortunate to own a house gifted to us by our father we want to do up as a furnished holiday let.

What is the easiest / most cost effective way of borrowing to put in a new kitchen, bathroom, and other works up to £25k?

We both have our own mortgages to pay and no savings and our father has stipulated that the house must not be sold while he is still alive.

How straightforward is it to borrow £25k against the £180k value of the house. My brother has a meeting with a lender but they want to see quotes for everything totalling up to the £25k. Is that usual for a home improvement mortgage?

thanks for any advice.

eddddy

You might find it easier and cheaper to remortgage your current house (where you live) to raise the extra £25k.

Otherwise you can google 'holiday let mortgages' for some general info, or talk to a mortgage broker.


Before making too many plans, get some pre-application advice from the local authority planning department about planning consent for change of use to Holiday Letting.

Maybe even get full planning consent for change of use, before spending any other money on the project.

DoubleNugget

Thanks Eddy I'm in touch with planning and the council are aware we are decorating house for business let.

I'm not in a position to borrow against my own house joint with my husband as we've just borrowed to do our own house improvements and my brother has a good job but is currently in a probationary period so that could stall things a lot. I'm not working at the moment (i'm a contractor).

It was a grand gesture buying us a house but the cost of doing it up wasn't considered. If we could get the £25k we could pay it back within a couple of years with the revenue.

xylophone

Your father bought a run down property and then made you a gift of it and then told you that it couldn't be sold in his lifetime? Why not?

If this is a gift, he cannot enforce this condition?

Did he ask you if you wanted a house?

If he is flush with cash, can you borrow the £25,000 from him?

DoubleNugget

You got it xylophone. He's a bit of a control freak. Said he has life rent, I questioned that and he said he didn't have life rent. I don't think he does because neither of us have been to the solicitor to sign anything saying that. He just wants us to have this holiday house for whatever reason (avoiding inheritance tax / prestige of having a holiday home) but he didn't bargain on the cost of setting up (beds, linen, curtains, new bathroom, improved kitchen, new windows). It's not run down but i needs to be brought up to standard.

I don't want to sound ungrateful because he's given us £75k value of a house each but we are not in a position to borrow that much.

I have already spent £5k on electrician, carpets and beds and other items using my credit card so I'm not spending any more until I know we have money.

My dad has more than enough to lend us the £25k but get is very unwilling to let go of it. He keeps saying he will go guarantor if we get a mortgage but I'm not sure we can do that.

He's age 72 and still earning a salary plus an income of around £4k a month in pensions and he has about £400k equity himself so he probably would be able to be guarantor.

Feel trapped but it's family so the most important thing is that it doesn't come between me and my brother who i have a good relationship with.

xylophone

Said he has life rent, I questioned that and he said he didn't have life rent. I don't think he does because neither of us have been to the solicitor to sign anything saying that. He just wants us to have this holiday house for whatever reason (avoiding inheritance tax / prestige of having a holiday home

But it's not a holiday home, it's a business? Or is he reserving a benefit of a free room by the seaside whenever he wants it?

Are you and your brother the legal and beneficial owners of this property?

DoubleNugget

Yes we are, I havent seen the paperwork yet but the solicitor has been in touch asking for my NI number as joint owner so I believe it is in order but yet to see paperwork.

The intention is to run it as a joint business - a furnished holiday let. I believe my dad likes the idea of having a holiday home in the Highlands but has no intention of ever living in it or moving here and he can stay with me when he's holiday up here. We are all in agreement that it should be run as a furnished holiday let. Both my brother and I could do with the money and would much rather have the cash but it's what he wants.

xylophone

It seems to me you need to make it clear to your father that if he expects the place to be run as a holiday let, it needs to be renovated to an acceptable standard.

Would he not prefer that you pay him (rather than a bank) interest on a loan?

Or he makes you another gift as a PET?