Take a higher mortgage to improve an house

Luke451

ciderboy2009 said:

Something else to bear in mind - it's always worth living in a house for at least a few months before you make any major changes.  It will give you a better idea of what you would really like to change.

As an example of this, when we bought this house we were originally going to fit a new kitchen and bathroom before moving in.  We decided against it and, after living here 3-4 months realised that a) we wanted to knock through the kitchen into the dining room to make better use of the space and; b) the bathroom would be better in a different room altogether!

If we'd spent out the money at the outset sticking to original thoughts/plans it could have become very expensive.

That's something I considered, thanks, but I wanted to take more money because I have a fair amount of things to be done, some are repairs that need to be done soon and at least one upgrade is due, plus new appliances, possibly new kitchen too.

Luke451

caprikid1 said:

"I think I just need to apply, trash the previous one, maybe get some refund from the broker, then provide the proof to my solicitor, or is there any other step?"

Just go back to the broker, they can help you with the vast majority of the questions you are asking here, if not find another.

Your ability to borrow more money will very much depend on the deposit you are putting down.

You are most likely going to never be able to borrow more that 90 - 95% of the properties value in normal circumstances.

So if I put down 10% deposit, I may be able to ask 10% more in the mortgage and get that to use for upgrades and repairs?

Albermarle said:

I think I just need to apply, trash the previous one, maybe get some refund from the broker,

Mortgage rates generally have been coming down, so some adjustment to your current offer may be possible. Worth asking anyway.

This doesn't give me more cash in hand though.

GDB2222

Why don’t you start with some clear figures. How much is the house costing? How much is your present mortgage. How much money do you currently have?

eddddy

Luke451 said:

So if I put down 10% deposit, I may be able to ask 10% more in the mortgage and get that to use for upgrades and repairs?

It sounds like you might be confusing yourself again.

Start with the purchase price of the property (i.e. the amount you are paying to the seller)...
(and assume that a mortgage lender agrees that the property is worth what you are paying)

To reiterate...

• There are lots of mortgage lenders who will offer you a mortgage (i.e. loan)  of 90% of that purchase price

• There are a some mortgage lenders who will offer you a mortgage (i.e. loan) of 95% of that purchase price

• There seems to be one mortgage lender who will offer you a mortgage (i.e. loan) of 100% of that purchase price - Skipton - (but I suspect they will be very fussy about the property, and about you)

• No mortgage lender will lend you more than 100% of that purchase price

The fact that you plan to renovate the property is irrelevant to the mortgage lender. That won't change anything mentioned above.



The 10% deposit you pay on exchange of contracts is completely unrelated to your mortgage and/or how much you are borrowing. So forget about it when you're thinking about mortgages etc.

In simple terms, the deposit you pay at exchange of contracts is a 'security deposit'. If you do a runner and don't actually buy the property, you lose that deposit. (But if you actually buy the property, you don't lose that deposit.)

bex2012

If the house price is £150k and you are currently putting down a £50k deposit with a £100k mortgage, what you do to fund these works is decrease your deposit amount and increase your mortgage amount. So you put down a £30k deposit, borrow £120k on a mortgage, then use the £20k left from your deposit savings to fund the works. 

Or you take out a personal loan after you have bought the house to pay for the works, but that’s something you'll need to investigate yourself.

markin

The normal way is a personal loan, savings and or juggling credit cards, once the work is done you get a new valuation and remortgage.

But the costs of doing work is now so high you will be lucky if its adds anywhere near the value you spent, so that leaves you back to getting a good personal loan.

BobT36

I was told by Nationwide that they wouldn't increase or leave space in the mortgage for renovations, but they could follow-up the mortgage with a "bridging loan" x months (6, I think) later. 

On speaking to my parents though, it was easier and normal to "borrow more" for renovations. Seemed they structured mortgages very different back then, including "investment" type ones etc.

Luke451

EssexHebridean said:

 A week would be very optimistic for taking up a new mortgage offer, getting all the admin to do with that sorted out, and getting an offer to your solicitor. If time is of the essence then you may be better sticking with the offer you were already moving forward with. What does your broker say about the possibility of the existing lender being prepared to amend the rate? Some will let you do this - although again it causes a delay while the paperwork is done. 

As for the lending - the best route forward would be the one you have already had presented - to use some of the cash amount you have for any subsequent works and enable your mortgage to remain at a lower percentage. I’m not sure why you think this would leave you with less cash, unless you are saying that you only have the 5 or 10% deposit that lenders usually demand, and nothing else saved? That doesn’t seem to tie in with your comments made on previous threads though about your affordability position.

I do have savings, let's say 2.5x my deposit, which is not so much but what to say, the UK life cost became out of control...

I do have credit cards with 18 months free deal, enough to make a new kitchen of around 8k for example, but it's more risky to do in this way rather than with a mortgage, but I see what you mean, I probably need to workout my finances with less expectations...

I could use a loan, but who gives a loan after a mortgage?

I can certainly afford the monthly fee, but it's not easy to get it, plus the current interest rates don't help at all, maybe in a couple of years but I can't wait that long for certain repairs, so those will need to be paid in cash by me.

All comes from one point, I need to overpay my mortgage otherwise it doesn't make any sense to buy an house, so that plus the renovation will nullify my monthly cash for the next 1.5y, after that is up to me how much I overpay.

Obviously I came to the conclusion that I can't overpay with all the cash I have or my life won't be nice anymore, I'm just trying to make the most of it from the investment point of view.

So probably I'll need to accept that I'll spend around 10k more over the term of the mortgage if I overpay comfortably, renovating one thing at a time (more time wasted with all the things in place btw, that's why I wanted to do all now).

The additional cost is not an issue over decades, so I guess I'll just avoid that part of the overpayment that I can't easily afford.

Luke451

markin said:

The normal way is a personal loan, savings and or juggling credit cards, once the work is done you get a new valuation and remortgage.

But the costs of doing work is now so high you will be lucky if its adds anywhere near the value you spent, so that leaves you back to getting a good personal loan.

I can't remortgage if I need to take the mortgage just now for the first time, or is this something I didn't see before?

Anyway, I've seen that companies like IKEA offer finance, also interest free, but if I've just taken the mortgage, who's gonna lend anything??

In my humble experience with debts, I think could only rely on my credit card, and that doesn't solve much, it wouldn't cover the entire amount, but if I go with the free offer for 18 months I could make it, the problem is that it's always 18 months only, after that the credit card is very expensive, I can't keep it at the same rate as a possible loan, I would need to pay 600 per month to make it the same cost of interests of a loan for 5y...

I need to take around 15k to finance the things initially, without stressing my savings, I wonder if it makes sense to take a loan, or wait a bit, but for how long I should wait?

Luke451

The other question is if it's better to take a loan or rely on IKEA, 15k loan would be used for other things rather than only the kitchen, so I see a loan as a better option, even if it costs a bit of interests...