Loan options for £60,000

Help1234

I am wondering if it would be possible for me to take out a loan in a few months time for home improvements costing £60,000 (loft conversion, move bathroom upstairs, kitchen, garden etc). The mortgage is £396,000 and our deposit was £80,000 (total house cost £475,000). We don’t have any further equity. Our joint income is £88,000, we have no other debts or dependents to pay for and good credit score. We intend to pay the loan off for a bit and then sell and clear it in one big money dump from the house sale. 

Having a look online it seems we would not get approved?

[Deleted User]

You'd be looking either at multiple unsecured loans or a secured loan, but you don't have the equity and I doubt affordability will stack up for unsecured 

Get saving and do the work in stages. As your current borrowing reduces and the amount you need to borrow stops, you should have some options later on.

JGB1955

What was the house valued at for mortgage purposes? You can only ask... but I wouldn't want to loan you that - you've suddenly changed your LTV from 83% to 96%.....

Help1234

There’s no way I can save up £60,000 we want to be out of the house in a few years and the plan was is to just borrow now and pay back when we sell in 2 years. We could maybe save up £10,000 but that’s it!

DrEskimo

If you're going to struggle to save more than £10k in that time frame how do you expect to service a £60k loan?

Save, get smaller loans and use 0% purchase credit cards. Likely need to scale back the amount of work, as getting into shed loads of debt is not without risk. 

macman

If you plan to sell in little more than a year from the completion of the works, then how much do you expect them to add to the value of the property, given the expenditure of £60K?

Grumpy_chap

Help1234 said:

I am wondering if it would be possible for me to take out a loan in a few months time for home improvements costing £60,000 (loft conversion, move bathroom upstairs, kitchen, garden etc). The mortgage is £396,000 and our deposit was £80,000 (total house cost £475,000). We don’t have any further equity. Our joint income is £88,000, we have no other debts or dependents to pay for and good credit score. We intend to pay the loan off for a bit and then sell and clear it in one big money dump from the house sale. 

Having a look online it seems we would not get approved?

What is your reason for doing all these works to the house?

If you plan to do the work and then move, it is clearly not to improve your own enjoyment and use of the property.

If it is to add more value to the property than the works cost, that is far from guaranteed and IMO unlikely.
The extent of work you describe is significant and I suspect will cost more than £60k.

You are already at 4.5 times salary borrowing and if you borrow another £60k, you will be taking the LTV to 95%.

It may be worth reviewing the plans and considering what your plan would be if anything went awry, either with the construction work, with planning / party wall agreements, total external factors (inflation / mortgage rate increases), or local / personal external factors (job security / illness).

The worst case scenario here would be that you borrow, get half way through the property work and then have to abort the project for any reason.  You would then have a house in a state of disrepair worth less than the equity (after the additional loans are considered) plus a very high debt to service.

Of course, and we all hope, it is possible that nothing goes wrong, but you need to have considered the worst case scenario and recovery plan from there.

Dave_5150

Help1234 said:

There’s no way I can save up £60,000 we want to be out of the house in a few years and the plan was is to just borrow now and pay back when we sell in 2 years. We could maybe save up £10,000 but that’s it!

Repayments on a five year £60k loan at 3% APR would be over £25,000 in the first two years!

[Deleted User]

An attic conversion is not going to add anything like the money you want to spend on doing the house, if you plan to move in a few years and only just got a mortgage don't bother spending £60k, only do the essentials

Help1234

My house was bought for £475,000. An identical house a few doors down with the above works sold for £600,000.

I can afford the repayments for a couple of years (I.e get a loan over 25 years and pay £300-500 per month), which is what I have seen the cost would be with a loan calculator. But instead of paying this back over 25 years, I would pay back say approx £10,000 in 1-2 years and then sell and then pay the outstanding balance in one go.

Vinknut

You're very unlikely to get an unsecured loan over 25 years for anywhere near £60k.  Maximum term is usually 4-5 years and a limit in the region of £25k.  Unless you can put up some collateral.