Purchasing a property that requires improvements

Fluffy_Donkey

Hello, looking for some advice. Apologies if this has been answered elsewhere but here is my situation:

Sold my house for 250k awaiting completion ( equity i take away around 37k)

Will be paying off debts of around 25k leaving around 10-12k to go with my parners 10k deposit

Interested in a property for sale at 250k (bank repossession) and could do the 10% deposit at 25k. Mortgage in principle obtained for upto 325k so that element isnt the issue.

I believe after around 20k-30k of improvements/repairs this property would be worth 300-315k (based on similar properties in the local area etc)

I understand the lender won't lend more than the purchase price even if their surveyor deems the house is worth more than 250k with or without improvements.

What are our options to raise the funds required (20-30k) for the renovations?

Bridging loan?

Re-mortgage after 6 months for the additional monies?

Look for a specialist renovation mortgage?

Obviously we will be doing a level 3 survey prior to commiting to the purchase but wanted to hear anyones thoughts or opinions on what the best option would be?

TIA

lincroft1710

Forget bridging loan!!


Are you looking to live in this house or just do it up and sell it on? Because if the former, you won't be too interested in its value once done up. As improvements can cost more than the immediate return on capital

AskAsk

do it up slowly when you have more money or take out a personal loan.

grumpy_codger

lincroft1710 said:

Are you looking to live in this house or just do it up and sell it on? Because if the former, you won't be too interested in its value once done up. As improvements can cost more than the immediate return on capital

I think they are interested because they hope to borrow more against the increased value.
It isn't uncommon to take more expensive loan for improvements, then remortgage to pay the loan back.

RHemmings

Fluffy_Donkey said:

Interested in a property for sale at 250k (bank repossession) and could do the 10% deposit at 25k. Mortgage in principle obtained for upto 325k so that element isnt the issue.

I believe after around 20k-30k of improvements/repairs this property would be worth 300-315k (based on similar properties in the local area etc)

Are the similar properties ones that are currently on sale with an asking price of 300-315k, or are those similar houses whch sold for 300-315k? 

Sapindus

It doesn't seem likely that you could buy a house "worth" £250k, spend £30k on it, and it's magically "worth" £35k more than you've spent in total.

Fluffy_Donkey

Hello thank you for the responses so far, would be moving in and living there long term. The house next door to this one (same house type) sold for 300k 5 years ago so i dont think 300-325 after all improvements/repairs is unreasonable. I think the bank have valued it based on the mortgage remaining from the owners it's been repossessed from. Im sure from the legal pack the bank can only take upto 250k which surprised me but im new to all this. 

Fluffy_Donkey

Sapindus said:

It doesn't seem likely that you could buy a house "worth" £250k, spend £30k on it, and it's magically "worth" £35k more than you've spent in total.

I don't think its unlikely expecially if its been valued to sell. Im also thinking of what a new lender would value you at for remortgage purposes not necessarily a buyer. In my experience a mortgage valuation is usually more than an actual sale value. Has anyone had any experience remortgaging 6-12 months after a mortgage completion?

FreeBear

Fluffy_Donkey said: Im sure from the legal pack the bank can only take upto 250k which surprised me but im new to all this. 

The bank will have a duty to get as much as possible. Anything over £250K would be passed to the original owner.

WellKnownSid

FreeBear said:

Fluffy_Donkey said: Im sure from the legal pack the bank can only take upto 250k which surprised me but im new to all this. 

The bank will have a duty to get as much as possible. Anything over £250K would be passed to the original owner.

And aren’t the bank not obliged to take higher offers right up until exchange?

FreeBear

WellKnownSid said:

FreeBear said:

Fluffy_Donkey said: Im sure from the legal pack the bank can only take upto 250k which surprised me but im new to all this. 

The bank will have a duty to get as much as possible. Anything over £250K would be passed to the original owner.

And aren’t the bank not obliged to take higher offers right up until exchange?

As I understand it, yes.