If I do some home improvements, how is this factored into the remortgage valuation?

Oakeshott

I'm new to this because I just bought my first home, so apologies for the simple question, but basically I'm thinking of converting our small pantry and under stairs cupboard into a downstairs toilet, partly for the utility and partly because I read it's good 'bang for buck' when it comes to adding value. I'm also fully redecorating the house (again, just because, but also to add value). However, I also keep reading that most valuations are automatic, based on market fluctuations. In that case, how do you get mortgage providers to factor in your home improvements? Do you have to insist on an in-person valuation? 

dimbo61

Redecorating won't add value, changing a small downstairs room into a ground floor WC and basin won't add much value.
When your current deal is nearing its end then if you go to a new lender they might do a full survey.

Oakeshott

dimbo61 said:

Redecorating won't add value, changing a small downstairs room into a ground floor WC and basin won't add much value.
When your current deal is nearing its end then if you go to a new lender they might do a full survey.

Thanks for the info. So that would imply it's all just based on market trends and there'd be no point doing improvements (except for their utility to you) if I was sticking with the same lender, or if there was no survey?

Regarding adding value, I wouldn't expect these things to make a big difference but I've read in lots of places that they are the two most effective cheap ways of adding value. Is that not the case? Btw, I'm talking redecorating a house that hasn't had any significant redecorating work done since probably the '80s. 

MalMonroe

I don't think it will make much difference either way.

If you do the renovations it will cost you and you may or may not reap the benefits when you sell, depending on the market.

People will like the fact that there's a downstairs loo but most people want to decorate themselves since we don't all have the same tastes/preferences. When we first moved into our current property one wall was covered in red flock wallpaper - the kind you used to see in pubs. Definitely NOT to our taste!

For me - I've lived in quite a few properties both here and overseas - decor has never been an important factor at all because it's all going to be redone anyway!

If you don't do the renovations then the property may be valued at a lower price. But you won't have paid for any improvements. Swings and roundabouts. 

So you don't really stand to gain a lot either way. If you're thinking of selling you may as well not bother with refurbishments.

Why not just do whatever you please for yourselves, while you're living there and not as a money making venture. Unless, of course, you are developers. But you say you just bought your first home. For now you could just enjoy it and make it right for you, not for any future buyers. You may decide to stay, after all. 

*My qualifications: long-time 'Homes under the Hammer' fan. 

K_S

K_S said:

@hero9989 No specific advice to give but from a lender valuation point of view, it's important to make the distinction between adding living space to the property (eg: rear/side extension, loft extension, etc.) and updating the property (new kitchen, bathroom, flooring, etc) or converting space (eg: garage conversion).

As far as a lender valuation is concerned, the former is much more likely to materially add value than the latter. I hope that makes sense.

@oakeshott Things can have value to the home-owner without necessarily adding substantially to the value of the house, so don't be put off from doing what makes the home more usable/valuable/liveable to you!

Oakeshott

MalMonroe said:

I don't think it will make much difference either way.

If you do the renovations it will cost you and you may or may not reap the benefits when you sell, depending on the market.

People will like the fact that there's a downstairs loo but most people want to decorate themselves since we don't all have the same tastes/preferences. When we first moved into our current property one wall was covered in red flock wallpaper - the kind you used to see in pubs. Definitely NOT to our taste!

For me - I've lived in quite a few properties both here and overseas - decor has never been an important factor at all because it's all going to be redone anyway!

If you don't do the renovations then the property may be valued at a lower price. But you won't have paid for any improvements. Swings and roundabouts. 

So you don't really stand to gain a lot either way. If you're thinking of selling you may as well not bother with refurbishments.

Why not just do whatever you please for yourselves, while you're living there and not as a money making venture. Unless, of course, you are developers. But you say you just bought your first home. For now you could just enjoy it and make it right for you, not for any future buyers. You may decide to stay, after all. 

*My qualifications: long-time 'Homes under the Hammer' fan. 

We’re not actually thinking of selling. It’s more an attempt to avoid negative equity so we’re not stuck on a variable rate in a couple of years when our fix ends. I’m picturing applying to remortgage and wondering if the improvements we’ve made will be factored in at all, and how. 

pramsay13

We did some fairly serious work when we first moved in to allow us to remortgage from a 125% mortgage (remember them 😱) down to a 90% mortgage.
The surveyor told us what improvements he recommended and the value it would put on the house. 
If you can speak to whoever did the valuation and ask but I wouldn't expect the work you've mentioned to increase the value by much.
When it comes to remortgage time if you speak to a broker they will tell you what rates you can get and sometimes there can be a bit of negotiation with the surveyor if work has been done.  
You may well be better overpaying the mortgage aggressively to allow you to remortgage at a better rate. 

Oakeshott

pramsay13 said:

We did some fairly serious work when we first moved in to allow us to remortgage from a 125% mortgage (remember them 😱) down to a 90% mortgage.
The surveyor told us what improvements he recommended and the value it would put on the house. 
If you can speak to whoever did the valuation and ask but I wouldn't expect the work you've mentioned to increase the value by much.
When it comes to remortgage time if you speak to a broker they will tell you what rates you can get and sometimes there can be a bit of negotiation with the surveyor if work has been done.  
You may well be better overpaying the mortgage aggressively to allow you to remortgage at a better rate. 

Ah I see. So you would basically decide what you think your house is worth based on an estate agent valuation or online tool, apply for a remortgage on that basis, and then query the bank’s valuation of you thought it was off (although in my circumstances it’s probably not worth it)? 

Oakeshott

Rather than start a new thread, hopefully I can ask this here:

We also want to demolish our decrepit old freestanding garage. Would that reduce the value of the property come remortgage time? 

user1977

Oakeshott said:

We also want to demolish our decrepit old freestanding garage. Would that reduce the value of the property come remortgage time? 

I very much doubt it. Having an off-road parking space (where a garage could be built) is the important thing.