Can my mortgage cover renovation costs?

charlesgrady

Hi!

So, SO hard to figure out from reading about it online and there’s like a million opinions. Basically:

We’re first time buyers. Found a property for £160,000. Will put down 10% deposit. Bank has agreed to lend a 95% mortgage in principle. This before deciding this place needs about £20,000 in renovation before we move in. Unfortunately
i don’t have 20,000 lying around. I’ve heard some banks cover this, but having very little luck trying to figure it all out. Any expert advice here? Many thanks!!!  

SMR710

Maybe in years gone by, I know my dad told me many years ago that in say the 70s or 80s a bank would lend more so people would buy cars and holidays with the extra mortgage money (essentially a cheaper loan!) But these days they don't do that!! If it's a renovation project that isn't habitable (No kitchen) then you might get money released in stages but I would be very surprised if you managed to get a bank to lend you 95% if you have a 10% deposit. They are probably saying they'll lend you up to 95% but if you e got 10% then they'll lend you 90%.

How about putting 5% down and taking 95% mortgage, and keeping 5% for improvements. Either that or take out a loan to do home improvements. Or live with it until you can afford to do the work. Or find a different property!

diggingdude

Google northern rock and mortgage prisoners to see why it's not going to happen 

Cakeguts

Don't buy a house like this as a first time buyer unless you have the £20k in savings.  You need to buy a house that needs very few repairs or a house that you can save up to do the repairs spread over several years. 

The point is that if you buy a  house that needs a lot of repairs you can guarantee that you will find other problems when you start to do the work. What you might think is going to cost £20k could easily cost £40k once you start the work and find other problems that you can't see now.

If your budget is £160k you need to find a house that costs that much without needing a lot of repairs before you move in. That will probably mean finding a smaller house or a house in not quite such a good area.

Basically you can't afford to buy this one it is too expensive for you. If you have had your offer accepted you will need to withdraw it and look for somewhere else.

[Deleted User]

charlesgrady said:

Hi!

So, SO hard to figure out from reading about it online and there’s like a million opinions. Basically:

We’re first time buyers. Found a property for £160,000. Will put down 10% deposit. Bank has agreed to lend a 95% mortgage in principle. This before deciding this place needs about £20,000 in renovation before we move in. Unfortunately
i don’t have 20,000 lying around. I’ve heard some banks cover this, but having very little luck trying to figure it all out. Any expert advice here? Many thanks!!!  

These days a 95% LTV mortgage is as high as lenders are prepared to go unless you look at something like the Barclay's Springboard mortgage which would require family members to lock away savings for 3 years but even then you'd be capped at 100% LTV and still be 4k short.

You have 16k in savings.  The absolute minimum deposit is 8k leaving you 12k short.  How have you determined that 20k of renovations will be required before you move in?  Is the property habitable because if it isn't you won't get any kind of mortgage for it.  

[Deleted User]

Renovation mortgages do exist that allows this to a certain extent but your deposit isn't big enough to start with.

I think they do up to 85% as an initial loan and then will agree stage payments as long as the end property still sits under 85% ltv of improved value once the money has been spent

https://www.buildstore.co.uk/mortgages-finance/project-types/renovation-and-conversion-mortgages/how-renovation-and-conversion-mortgages-work