Best way to secure funds for refurbishment after Mortgage

Hi

We are thinking about buying a house that needs a bit of work done to it.

Bank will give us the 92% mortgage we require to buy it. Should leave us about €10K to put into it.

Problem is that it probably needs about €30 in total put into it!

I spoke to my broker about the possibility of remortgaging for more after we buy it.

He said unfortunately the bank wont give us more than the 92% of the value even after we buy it. He said the market would either have to pick up after we buy it to secure the extra funds.

Will the bank not loan you extra funds if you have a 92% mortgage to refurb? The house is not habitable in its current state so surely the improvements would increase the value?

Anyone any ideas on how to best go about seeking the extra €20K?

Save?

Obvious answer is dont buy it if you cant afford it, which you cant.

only other suggestion,
Tell the seller you will go ahead with the purchase at the price agreed, but only if they give 20K back as a type of PC sum. In the current market and assuming the house is over 200k, you have a good chance of getting it.

Assuming you can afford the repayments,is a home improvement loan as opposed to a mortgage from another organisation(eg Credit union) an option

only other options are to buy, move in and do up as you go along and accept it will take far longer, negotiate down the price or walk away

If the works are going to increase the value of the property and the bank's valuer agrees this and your income supports the extra borrowing, you may be able to get approved for the additional amount, with retention on the extra until you've started the works. Final mortgage will need to be <92% of final value. Valuer will need to see clear estimates of what you're planning to do, in order to establish in advance if the property will be increased in value.

We can afford a higher mortgage, the only problem is that we dont have enough free equity to do the work.

We have gone for the maximum percent mortgage we can (92%) to allow us to have some of our saved deposit left over. We can afford to pay the mortgage if the price was even €30K or €40K higher. Problem is that this would be tied into the purchase price and not released as equity to do the work.

As it stands at the current price we have about 10K free to do some work. Even if the price was dropped it would still only give us a couple of grand because of the mortgage ratio.

We can afford the repayments, and think that it is a great long term opportunity and a place we could live for 10-20 years. Moving would incurr stamp duty etc so we are willing to take the chance.

just wondering if anyone else has experienced this. would be willing to do it up as we go along

rustbucket said:

The house is not habitable in its current state

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What exactly needs doing? roof/floors/walls? and how bad is it? If you are buying it you would have got a survey done I presume. What did the survey say

re-negotiate the deal with the vendor based on the amount\cost of work to be done

if they don't agree, walk away - chances are you'll get a better deal as the market continues its current direction irt supply and price

Liam is right. If you can give firm estimates of the price of the work to complete and this will add value (even at cost) and you can afford the additional mortgage amount, the bank could be able to give you 92% of the final valuation.
I'd have another word with the broker if I were you.

We are unsure exactly what needs doing. It is clear that it needs modernisation. We have only sale agreed on the basis that our survey report is satisfactory. The survey is being conducted tomorrow and we will know more then but I dont think there will be much wrong structurally.

The house is completely stripped and empty-it is an executor sale. there is not even a kitchen, a clean slate if you will and if all is ok structurally we will more than likely take it on

At first glance the inital things that need to be done to make it habitable are

1. Installation of Central Heating (Gas is up to the house but nothing was ever installed)
2. Installation of Kitchen
3. Attic Insulation (I can do this myself)
4. Painting Decorating (I can do this myself)

We have a budget at the moment of about €10-€15K to do above

This would make it liveable for us until we could get together the funds to do the internal structural work and design the house the way we want. (install bathroom downstairs, remodel upstairs bathroom, extend out the back etc)

I spoke to the broker and he says unless the proerty increases in value it is unlikely the bank will give us more money in re-mortgage but a short term loan may be an option?

I know the sale price is irrelavant as far as the bank is concerned. I know they will only give you a mortgage based on what they value the house at.

Previously they undervalued another house and would only give us 92% of that value.

If they over value it will they give us 92% of their value or only 92% of the sale value?