Advice on purchase & mortgage...renovating an Edwardian house!

T-Sil

Hi Everyone,

I was hoping for some advice, just to sense check our plan really as we have had a lot to think about and getting it out and sense checking seems like a good idea

We have 220k in the bank from a recent sale. We have found a house we want to buy, it's an Edwardian semi, around 2630 sqft.

We don't have the survey results back yet, but we need to get a mortgage agreed in principal and we can't decide wether to put 5 or 10% down as a deposit. If we went for 5% it would free up another 30k to have as a contingency, but obviously the difference between 95% and 90% mortgages can be quite a bit each month.

However, our plan would be to get everything done pretty quickly, within a year ideally and then remortgage when the house is worth more. Does that make sense? has anyone done anything similar? Is there anything I have missed?!

Thank you

amnblog

Don’t assume you can get 95% of £600,000.

Lenders will make maximum lending for 95% mortgages which is likely to be under £500,000. (I can think of just four that may accommodate you).

Also a Lender may only offer 95% products for first time buyers.

poppy10_2

T-Sil wrote: »

However, our plan would be to get everything done pretty quickly, within a year ideally and then remortgage when the house is worth more. Does that make sense? has anyone done anything similar? Is there anything I have missed?!

With Brexit on the horizon I'd be wary about assuming your house price will be higher in a year's time, even with the renovation work

T-Sil

Thanks - definitely something to consider

T-Sil

poppy10 wrote: »

With Brexit on the horizon I'd be wary about assuming your house price will be higher in a year's time, even with the renovation work

True indeed...we are planning this to be our long term family home though and if needs be, we can afford the monthly payments without the house going up in value so I guess it depends whether we think it's worth the risk!

AnotherJoe

T-Sil wrote: »

Hi Everyone,

I was hoping for some advice, just to sense check our plan really as we have had a lot to think about and getting it out and sense checking seems like a good idea

We have 220k in the bank from a recent sale. We have found a house we want to buy, it's an Edwardian semi, around 2630 sqft.

We don't have the survey results back yet, but we need to get a mortgage agreed in principal and we can't decide whether to put 5 or 10% down as a deposit. If we went for 5% it would free up another 30k to have as a contingency, but obviously the difference between 95% and 90% mortgages can be quite a bit each month.

However, our plan would be to get everything done pretty quickly, within a year ideally and then remortgage when the house is worth more. Does that make sense? has anyone done anything similar? Is there anything I have missed?!

Thank you

You should first find out if that's an option you get to choose.

If you are looking at spend circa £150k (eg thats why you are only looking at max a £60k deposit though you have £220k cash) then maybe the lender is going to be quite cautious about the state of this property and 10% might be their bottom line.


As said with Brexit on the horizon everyone's being very cagey about house values and lenders wont be immune to that (nor will their valuer). If they think for example that 10% drop is on the cards as a possibilty, then a 90% mortgage on a place that apparently needs £150k spending on it doesnt give them much leeway.

getmore4less

Could you extend your time scales and fund some from cash flow with a longer term.

Look at what the real cost of keeping back each £30k is

if £30k is 5% that's a £600k house

Just taking one lender nationwide 2y fix £0/£999 fee rates(you need the fee versions) and amount borrowed

95% 3.64%/3.24% £570k (max £350k)
90% 2.29%/1.89% £540k (max £500k)
85% 2.09%/1.69% £510k
80% 2.09%/1.69% £480k
75% 1.99%/1.59% £450k
60% 1.94%/1.54% £360k


Now if you look at 2 years interest on each of those fee rates(will be a bit less for repayment.
95% £36,936
90% £20,412
85% £17,238
80% £16,224
75% £14,310
60% £11,088

That gives a rough cost of keeping back each £30k,

I think the sweet spot is 85% the extra cost to go to 90% is ~£3,200(10%) of the £30k to go to 95% it is ~£16,500(55%)

Now if we look at terms using 90% and 85%
cost per month and the amount owing after 2 years

90% £540k @ 1.89%

25y £2,260 £505,552
30y £1,966 £512,737
35y £1,759 £517,796

85% £510k @ 1.69%
25y £2,085 £476,661
30y £1,807 £483,442
35y £1,610 £488,248

With a lower rate and longer term you recover some of the extra deposit in cash flow and still end up with less debt.

look at
25y £2,260 £505,552
35y £1,610 £488,248

after 2 years that extra £30k deposit you have £15,600 back in the bank and £17300 smaller loan nearly £4k better off.