Buying a council house - Advice needed

davida1992 · 10 September 2017 at 9:50PM

Hi everyone, was hoping to get some advice as I am coming to purchase my first house...It would help if I give you an idea of what is going on though, just so you understand.

So basically, at the moment me and my mother live in a council property in a nice enough cul-de-sac, it is one of few council properties remaining on the road now so we have applied to the council to purchase the property.

Here is where my concern comes in:

We applied to purchase the property many years ago but the council told us to hold off due to an ongoing dispute with neighbours behind us. We have had very little dealings with it ourselves, but the neighbours behind us have their ground level about 3ft (maybe a little more) lower than our ground level. They actually have some of our land which they use as flower beds etc. It was decided that they were concerned about subsidence and wanted works to be completed to stop it from happening. In the end after much discussion between the council and the joining properties, they decided to get their own surveyor to asses the situation and we have received paperwork that states that the boundary line is sufficient for its current purpose and no works need to be completed. We have received documents for this ourselves. It seems strange that the neighbours wanted the work doing in the first place, and then after using their own surveyor, concluded that no work needed to be done. I think this is because, if we decided to go ahead with the work then they would have lost the land that is technically ours, but they are using.

Regardless I am going to get my own building surveyor to check over the property, walls and documents to make sure that everything is legitimate. My slight concern is that the council have actually taken £20k off the asking price because of the above situation and basically said it is our responsibility if anything goes wrong.

As long as I have the documentation from their surveyor that says it is fit for its current purpose, and our surveyor gives me documents to say it is all OK, and we are fully insured, I am guessing that we should be OK?

With the above in mind, I think the house has been valued very generously at approx £120k (other houses in the area are between 140 and 160k), the discount applied to us for living in a council property for a long period of time means that the value has dropped to approx £50k.

So this means I need to pay £50k for the house, and the renovation work I wanted to do is going to cost approx £50k also - it is in need of modernisation and repair. In terms of getting a mortgage, knowing the full value of the house has been put at £120k, will I get a mortgage for the full £100k I am looking for? Or will I only get a mortgage for the £50k required.

Essentially at the end of it I would like £100k in total as I would like to add an extension - replace kitchen, refit bedrooms, bathrooms etc.

Thanks in advance

glosoli · 10 September 2017 at 10:07PM

You need to remember that the initial transaction is that of a purchase, and not that of a "re-mortgage / additional borrowing". However, there is a couple of caveats to this.

Firstly, as far as council right to buy is concerned, generally it is possible to borrow up to 100% of the purchase price, which is the £50,000. However the loan to value of the product will generally be calculated between the loan amount and the lenders survey (based on the figures above may be 41%). So the interest rate should be somewhat competitive.

Secondly, it may be possible to borrow additional funds during the initial transaction, however based on my own experience within my own organisation (which may not be reflective of the practices of other lenders), it is a notoriously difficult thing to do, as the works you intend on doing have the increase the value of the property by the equivalent amount. So for example, if someone wanted to borrow £5,000 for new windows, etc, then the valuer has to confirm that these works will increase the value of the property by an equivalent amount. I don't know whether effectively lending double the purchase price is going to be too much of an ask to be honest.

Never the less, it may be possible to borrow the initial £50,000, and then remortgaging at a later stage for the additional funds, subject to the lenders criteria and the councils limitations also. However it may be an idea to contact a mortgage broker specialising in CRTB for proper guidance.

Furthermore, if your mother is going to be named on the council right to buy offer, she will likely also have to be named on the mortgage. Just a heads up depending on her age/retirement age, it may reduce the length of loan that any lender may be able to consider.

somethingcorporate · 11 September 2017 at 2:29PM

£50k sounds like a huge amount of renovation work - have you priced it up correctly? We renovated my sisters new house from top to bottom and got a lot of change out of £10k and even with a rewire/re-plumbing and new boiler you would really struggle to spend more than £20-30k on a £120k house.

kingstreet · 11 September 2017 at 2:58PM

Expect a lot of 'push-back' from the council and the lender.

The council because you are borrowing into its equity. You will require written permission and will be required to submit detailed plans/estimates and receipts for the finished work.

The lender because similar controls will be exercised and the amount will probably be too great. In the good old days, RTB was used as a cash machine with money borrowed for cars, holidays, allsorts. That's a thing of the past.

You will not be able to borrow against the improved value, only the value at the point of purchase.

Buying a council house - Advice needed

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