Finance available after taking out a mortgage?

[Deleted User]

Hello,

My wife and I are first time buyers and have spent the last 3 years or so saving up a large deposit inorder to secure a better rate on a 85% mortgage rather than 95% or 90%. We have spoken to our mortgage advisor who has given us an upper figure of what we would be able to borrow and we set this as our 'budget' when searching for a house.

We have now found a house we really like that is ~£25k under the upper end of the budget; however it will need some work doing over the next few years, which will also increase the value of the house. From rough estimates, we will spend approx £20k doing the improvements we need. My question is how to finance the work?

Will a lender be willing to give us an unsecured loan considering we will have just taken out our first mortgage? or will we need to reduce to a 95% mortgage to give us the extra change from our savings? Would I be likely to get the difference on a 0% credit card for 36months, then remortgage from the new (hopefuly) improved value of the house? Or is there another solution all together?

We often see on the property programs on telly, couples who underspend on the budget with the intention of doing work to improve the house to what they want; but I've no idea how they do this? Basically, I'm just looking some advice for someone who has done this before?

Thabks for any help anyone can give.

G!

Cakeguts

Depends what needs doing to the house. Some people think that a house with a usuable but not in the latest fashion needs money spent on it immediately. Other people buy something that hasn't been touched for 50 years and needs an immediate rewire just to be safe.

[Deleted User]

Work I think needs done fairly quickly;
-replace all the windows at the rear of the house (all single glazing and some showing signs of water ingress)
-Rewire the house (home report highlighted this as an issue)
-Demolished unsafe and deploptated garage.

Things I'd like to do over the next 1-10 years:
-Rebuild modern larger double garage, with photovoltelic roof
-Install underfloor insulation (suspended wooden floor)
-Install lots of loft insulation (there's approx 1inch in there at the moment)
-Redecoration throughout
-Furnish the house (when moving from furnished accommodation provided by my employer, to a four bed house this is a significant cost)

We would also like to start a family in the next few years, hence buying a family home, and I am aware that too is a costly endeavour.

SMR710

We needed to do all these jobs when we bought ours back in 2011. The bank would only lend a mortgage for the house price but what we did do was take the mortgage then a £15k loan to do the work. When the mortgage was up for renewal at the end of the term, the house was revalued so we remortgaged at a higher price, effectively pulling some money out and then repaid the loan. It's much better to have the extra money you pull out on the mortgage rate than a personal loan rate. Does this make sense???

tlc678910

Hi,
How much different is the mortgage payment at 85% or 90% rates? If you look at this you can work out how the extra interest charged (on the whole mortgage amount) compares to a personal loan. There are very low rate personal loans advertised but an added complication is you don't know if you will be able to get a loan or get one at the most competitive rates.

Borrowing extra on your mortgage costs you every year for the full term of the mortgage unless you resolve to over pay to ensure this is not the case. You can usually overpay 10% each year without penalty but would need to check.

If you decide to get a loan don't apply until your mortgage is complete and you have the keys.

When furnishing your house don't rule out getting some furniture second hand from charity furniture shops or eBay local collection etc. I wanted a chest of draws for our baby's clothes and got a large solid wood one bidding on eBay local collection for 70 odd pounds. It would have cost hundreds when new and if I had bought new with the same budget I would only have got a lightweight flat pack item. Being open to second hand - perhaps except for a few special items - will really keep your budget under control.

You mention "furnishing a four bedroom house" but as you also mention you don't have children yet what you need at the moment will be the same washing machine, fridge, freezer, sofa, bed etc as for most houses and other space filling furniture you can source over time.

Looking at your list of things you would like to do to the house you could borrow extra for the first three that you think are pretty urgent but I wouldn't borrow for the second section of the list except for a modest amount for essential furniture as this list (with the exception of rebuild the garage) it looks like stuff you would do over time from your ordinary income.

The rebuild of the garage I would treat as a separate project to save or borrow for in the future once the house buying finances have settled down and you know you can afford it. Even the demolition of the garage could be something you could do yourself over time with a few skips assuming it is one of those garages with walls made of concrete panels and a corrugated roof. You might prefer someone to remove the roof for you if it is aspestos.

Would you be able to get through most of your first three items in the first year from income? Or will your finances be too stretched for that?

steampowered

What you are doing is borrowing money to fund these works.

When you borrow money, you should borrow it in the cheapest way possible.

The cheapest way possible to borrow at the moment is a 0% credit card. So it might be a good idea to get one when you are ready to fund the works. The risk you would take with this is that lenders may no longer be offering 0% deals in a few years time.

The next cheapest way possible is to borrow on the mortgage.

The most expensive way to borrow by far is to borrow with general unsecured debt. I would suggest that this should be avoided - people should never take on expensive debt to fund improvement works IMHO.

Personally, I would borrow the maximum amount possible within the 'band' of mortgage I could afford. You could put that in a savings account until you are ready to do the work.

For example, a common mortgage rate drop point is 85%. So you pay the same rate borrowing 89% as borrowing 85%. But you'd pay less borrowing 84% than borrowing 85%.