Asking for a revaluation to borrow more whilst in the middle of renovations

Swift_Fox

Hi, I’m new to the forum and have read through a lot of threads which all contain great wisdom. I wonder if anyone can give some advice to me. 

We sold our house and bought a ‘doer upper’ in Dec last year, we ported our existing mortgage and borrowed more at the same time to undertake the renovations, we did it this way as we were told that we would have to wait 6 months from porting before we could apply to borrow more, but we could borrow more at the same time as porting. 

We are now part way through a two storey extension and have realised that we will need more money to be able to complete the essential parts of the renovations. We are at 93% LTV on our additional borrowing as the house was a run down 2 bed so was valued as that. We are turning it into a 4 bed and considerably increasing the sq footage of the living area and changing the layout which will add considerable value to the house once complete. 

I would like to get the house re-valued so we can apply to borrow more to be able to finish it all, but I want some advice on when I can / should do this and will it matter if the house is still undergoing construction? What level of completion does it need to be in? 

We are living in the house with the kitchen still as it is (we will be ripping it out at the end as having a new one installed in the extension - ideally after we have borrowed more!) we have no bathroom at the moment and are using a portaloo and outdoor shower as we have to demolish the bathroom as it was on the footprint of the extension. We are going to prioritise getting the new extension part of the house water tight and could get the en-suite installed so we have a toilet if that is essential to getting it revalued but the main bathroom won’t be done, the floors and walls won’t be finished, but it will be double the size with the plumbing and electric in and watertight. Could we get a valuation done at this rough point to be able to apply to borrow more to finish the renovations? 

Any advice would be much appreciated!

MWT

From the sound of things you are not going to be successful with a revaluation as they will not consider what it will be like, only what it is like now and a building site with no bathroom is likely to trigger a 'zero' valuation...

How much more do you need to get the work completed?

Swift_Fox

Thank you for your quick reply. That was one of my concerns… so I wondered if I was to get the extension side of the house complete with en-suite (toilet, shower, and sink) and the plumbing first fix installed in the main family bathroom (currently a bedroom in the ‘old’ part of the house), but without the bathroom suite installed, do you think they would value that? Or would they still think that it not being complete would possibly result in a 0 valuation?

if I was to try for a revaluation, and they value it at 0, will that affect my current borrowing at all? My main mortgage is fixed and ported but the additional borrowing I have already is variable. I don’t mind trying and if it’s too soon then take it on the chin and carry on but at the same time I don’t want to try and end up shooting myself in the foot if that makes sense.

MWT

Can we assume that you notified the lender before you began the building work?

Swift_Fox

Yes, I made it clear that the additional borrowing was for major renovations when we ported the mortgage and took the additional borrowing out. I didn’t specifically say when we started the work but I was never informed that this was necessary? 

ACG

Generally speaking the house needs to be habitable - water tight, windows, hot running water, kitchen and bathroom. 
Without those, unless they do a desktop valuation which is unlikely it will not pass. 

If you put a bathroom in, even if it is a shoddy one that should help but it still needs to be watertight. 

As for your current mortgage, if they value the property at zero, they are not actually saying the property is worthless they are just saying it is not suitable for a mortgage. But in any event that would not affect your current mortgage. 

MWT

It depends which lender you are with, but generally, yes, you should have notified your lender and your home insurance provider of the scope of works before proceeding and they would then have the chance to respond with any concerns before commencement, especially when major works are contemplated which would significantly impact on the property value if not completed, as is the case for the work you are doing.

Swift_Fox said:

We are at 93% LTV on our additional borrowing as the house was a run down 2 bed so was valued as that. We are turning it into a 4 bed and considerably increasing the sq footage of the living area and changing the layout which will add considerable value to the house once complete.

At this point though it is hard to see any possibility of additional borrowing from your current lender, even if they do not get upset by the failure to notify them before commencing the work, as you are asking for a valuation on what is currently a building site, and they will not factor in the potential future value, only what it could be worth as an unfinished and difficult to sell incomplete project.

There are ways to do this kind of work using development finance where you can tie the cash advanced to the progress of the work, but these loans are more expensive of course.

Realistically, how much more cash do you need to complete the project?

If the number isn't too high then you may be able to find other ways to close the gap perhaps?

If you want to say which lender you are with, others may be able to comment on their general attitude to major development work and their notification requirements (should also be detailed in the T&C of your mortgage)...

Swift_Fox

Thank you for both of your responses to this. 

I did notify my insurers of the work before starting and when I applied for the additional borrowing with my mortgage company I did declare to them the work I intended on doing to the house and that I would be living in it whilst it was being done so they were made aware of this and they never told me to further inform them before the work started so I feel that I have declared what I needed to in that sense. I will look into the T&Cs in more detail to see if I have missed anything on that so thank you. 

I will take your advice on board, I will ensure that we are watertight with a bathroom (even if basic) is installed before going to them asking for a revaluation. If we can’t get more borrowing at that stage then perhaps we just do it in our own time as we, the work will be signed off from a building control perspective at that point so the rest will be cosmetic such as floors unfinished, no skirting etc, one bathroom with plumbing installed for future when we can afford to put in more. This is our forever home so I guess if it takes longer to finish then so be it. But on the flip side if the mortgage company does revalue it and allows more borrowing then that would be great. 

From reading both of your responses if I can get it to the point it needs to be at then there’s no harm in asking and see what happens… 

Thanks again - very helpful. 

Swift_Fox

Nationwide is the provider - sorry should have said

MWT

Swift_Fox said:

Nationwide is the provider - sorry should have said

They seem to be pretty relaxed about renovations, this is from their document regarding general mortgage conditions...

"Changes to your property

You must not change the structure of your property or extend it in a way that
reduces its value.

Any building work must be properly carried out and comply with all necessary consents
and regulations. You need to let us know immediately if you receive any notices
claiming that you have not complied with any relevant consents or regulations.
You must not change the use or occupation of the property without our written
consent. This includes leasing, letting, licensing or parting with possession of it, or
any part of it."

Check the T&C's anyway but doesn't look like you have an issue there.

Swift_Fox

Thank you