How do you get a loan for property improvement?

RubyShoes

I know this might seem like a really silly question, but no one else seems to be able to answer this, so thought I would try here.

I have been looking for my ideal house for a while now, and just dont seem to find what I am after. So, after thinking this wouldnt be possible - im wondering, is it?

If I bought a house for say £80,000 and wanted to spend £15,000 on improvements, how do you get the money for improvements?

My total budget is £650 per month, and can obtain a mortgage for up to £105,000 plus I have a £5,000 deposit.

Can you get a loan at the same time as getting a mortgage? Wouldnt one affect the other? If I got a mortgage, and this was then on my credit file, would I have to wait for 6 months before obtaining a loan for home improvements?

Or does it not affect anything?

I dont have a perfect credit file (a couple of late payments in the last 3 years) but its not bad really. I have had one mortgage agreed in principle (after a credit search) about a month ago but pulled out of the move for various reasons.

Can anyone offer me any advice? I know it seems a bit of a daft question, but no one else seems to be able to offer me any advice other than, 'we did a bit at a time and saved up for it'. Which isnt what I was asking for! :rolleyes:

RubyShoes

Just bumping up, as I really need some advice!

sparvar

Have you tried remortgaging? It's what I did, or save and do the work which will bump up the price of your property the most first then remortgage.

RubyShoes

Hi, thanks for replying.

I am a first time buyer, so I assume remortgaging isnt something I could do straight away.

In a nut shell, how do you get funds to turn a house that needs modernisation into a liveable environment?? As soon as possible. Like in the first month of your mortgage!!

Im stumped. People do it all the time, but other than saving (which isnt an option for me - time is running out for me to get a mortgage) I can't see another way.

There must be something though? Surely?

mandalay_2

rubyshoes

cheapest way to do house up would be through company whom you have your mtg with as a 'top up/homeowner loan'

we don't do this for customers until they have had their mtg running smoothly for at least 6 months

i had same thing when i got my last house and bought the house anyway, lived in it (it was clean but needed loads of work doing) and took my time doing it up when i had the money, i left it a few years before topping up, to ensure i had sufficient equity in the property.

there are still a few companies who will do what the old northern rock did and lend you up to 125% of the value but my advice would be never to do this for obvious reasons

Can you take your mtg out over a longer term so you have extra disposable income left for the repairs/modernisation - i am doing 35/40 yr mtgs more than any other term at the moment so people can use their disp income in this way (obvioulsy the longer the term, the more you pay back) but it depends how much modernisation is required for it to be habitable and feel like a decent home that your paying a lot of money each month for

mandalay_2

other thing is, DO use your £5k as a deposit (you will get a much better rate which will help keep the mtg payments as low as poss)
Don't even think about a 100% mtg and using the £5k for these repairs
Hope this helps a bit

sparvar

All I would say is speak to your mortgage provider, bearing in mind than doing works to your place will add more than the value you spend you will add more equity, you really don't want another loan unless there is no alternative. You'd be surprised hwat you can live with for a few months, don't lose sight of the long term goal for a short term fix.

Rafter

A few providers do something called a 'together' mortgage which is a combined mortgage and loan that might get you what you are after. It will be a nasty rate though and you will theoretically be in 'negative equity' from day one.

So you basically take out a mortgage for £80k with a £15k loan on top.

The 'loan to value' ratio will be 119% though which means a high interest rate.

Once you have finished the works, the house will hopefully be worth more, so you can remortgage onto a more traditional and better value mortgage.

Be very careful though - it is easy to underestimate how much repairs will cost and with only £5k in savings you could end up in difficulty.

Might be better to keep renting for 6 months and see if property comes down naturally to more affordable levels.

R.

Coupon-mad

When I worked for a Bank's central lending dept, we used to sometimes approve a further advance at the same time as granting the main mortgage, but making the further advance 'subject to a reinspection after the work has been completed'. So the buyer knew they had got the money agreed for the work and - providing property prices did not greatly fall in the meantime(!) - they would be getting it back once they had completed it and had it reinspected (but not half way through the work or anything).

At the time the further advance was not at a higher rate than the mortgage and the cost of the revaluation (which was a 5 min job in many cases) was minimal (?£50 or so at the time but that was a few years ago). And at no point was the mortgage in excess of the current valuation.

You could ask a lender whether a further advance subject to a reinspection of the work would be possible to agree in principle at the same time as the mortgage. There is no need to wait the 6 months if a lender can do this for you, would depend on your income/credit score covering both amounts though.