Mortgage LTV and home improvement

We have our house up for sale and have been looking around in Stillorgan which is where we want to move to. Alot of the houses that are coming up for sale are in need of refurbishment, typically it seems after an older person living there has passed away.

We have started approaching some banks in relation to getting a mortgage, but it appears that there is a difficulty in buying a house in need of refurbishment as they will only lend based on the LTV of the house's purchase price as opposed to the potential value after refurbishment. For instance NIB will only lend 70% of the purchase value. For a house that doesn't need refurbishment that isn't a problem, but buying a cheaper house that needs work done to it doesn't seem to be an option.

For example:
Purchase price €450K. Max. mortgage of 70%= €315K
Purhcase price €400 plus 50K refurb required = total €450, but max. mortgage = 280K

Is it a matter of
(a) being forced to go with the bank that will lend the highest % of the purchase value
(b) only considering houses that don't need work done to them?

I have done a search in this forum and from other answers there doesn't seem to be any way around it? The girl I am dealing with at NIB said that getting a home improvement loan after the mortgage would be an option but that we would have to be able to prove that the refurbishment would increase the value of the house. I wouldn't be prepared to go ahead with a house purchase with that kind of uncertainty.

Any advice?
Also, so far we have approached Bank of Ireland and NIB. Can anyone tell me what other banks (if any) would be worth approaching?

I reckon if you had spare cash you could probably get a very good deal on a doer upper because of the current situation.

It's probably not a runner unless you have the spare cash though.

You could consider refurbishing one room at a time (do more of the work yourself and control the budget better) so long as there was no major structural repairs required.

Even in the good ole days of the banks flinging money at people for mortgages they could barely afford, the maximum amount available was a percentage of the current value of the house.

So, your only option is to go with the bank who are willing to lend you the largest mortgage or as you put it

"(a) being forced to go with the bank that will lend the highest % of the purchase value"

huskerdu said:

Even in the good ole days of the banks flinging money at people for mortgages they could barely afford, the maximum amount available was a percentage of the current value of the house.

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Not strictly true, up to a couple of years ago you could get a mortgage for more than the value of your home once the lender was happy that the improvements would add value to your home.

At the moment home improvements rarely increase the value of the property, they just negate the simultaneous drop in the value of the property.

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(c) Do the work over a period of time. Most of these houses are perfectly habitable as they stand. I am sure you can live with a 70's Avocado green bathroom and dark brown large print carpet for a few years.

In the middle of a refurb in south Dublin at the moment. Got house at good price (I think!) and doing as much of the work as we can ourselves. Also, salvage places, Ikea etc. will all reduce your costs. Find a DIY/handware shop and buy lots of stuff from them thereby negotiating a good discount.

Main thing is - it takes time & a lot of hard work but if you're prepared to do it and rough it for a while you'll get the house you want.

Doer uppers

Thanks for all the replies.

We have a two year old and a baby on the way, so although we're not afraid of a bit of hard work, I'm not sure how much roughing it we can do. The houses we have been looking at need new windows, insulation, re-wiring, probably replumbing and new kitchens.

But at least we know where we stand now. Of coruses, we still have to sell our own house first.........

C

(c) Do the work over a period of time. Most of these houses are perfectly habitable as they stand. I am sure you can live with a 70's Avocado green bathroom and dark brown large print carpet for a few years.


We had these exact thing in our house when we moved in first.