Mortgaging to extend house
Discussion
Hi, I am buying a house which needs substantial modernisation and I would also like to put an extension on at the same time. Will the mortgage company (Santander) lend against what the house will be worth after the work has been completed if I get a surveyor to provide an estimate of the final valuation?
Loan is arranged at 75% LTV and Santander have agreed they will lend another 10%. Problem is that this would only pay for about half the work the plans are drawn up for. Based on what similar properties are selling for the loan would drop to comfortably below 75% LTV at the completion of the project and someone mentioned to me that with the plans a valuer might be able to give an "as improved" valution that the mortgage company would lend against.
Just had the same dilemma...Barclays (Woolwich) would only lend the purchase price, I will get a valuation at the time of completion as the valuer will only value it as and when he see's it on the day. They would not take into account what it will look like, I have had to borrow the money from parents to complete the work and will now hope that they valuation will cover the borrowing. Fairly certain that it will be the case but you never know..
maddernj said:
Just had the same dilemma...Barclays (Woolwich) would only lend the purchase price, I will get a valuation at the time of completion as the valuer will only value it as and when he see's it on the day. They would not take into account what it will look like, I have had to borrow the money from parents to complete the work and will now hope that they valuation will cover the borrowing. Fairly certain that it will be the case but you never know..
Very similar situation! Can borrow the money to do the work from family but need to repay it. Bank said they can only lend money to do something, not to repay someone, so it's a bit of a vicious circle.duckers26 said:
Very similar situation! Can borrow the money to do the work from family but need to repay it. Bank said they can only lend money to do something, not to repay someone, so it's a bit of a vicious circle.
So borrow the money the money from family, complete the works, remortgage the house for home improvements and pay off the family?duckers26 said:
Hi, I am buying a house which needs substantial modernisation and I would also like to put an extension on at the same time. Will the mortgage company (Santander) lend against what the house will be worth after the work has been completed if I get a surveyor to provide an estimate of the final valuation?
Ive been trying to do this for the last 3 years and the answer is absolutely not.No way on earth.
We had an offer approved to do this and the week Northern Rock went bust (which was coincidentally the week our planning permission was approved) the offer was withdrawn and nobody in the market will do it.
There is a company called "Buildstore" that do this, but the maximum total value cannot exceed £250k which is pretty useless.
FOr further details there is a chap on here called Scotal (broker) who has been looking into this for me and drawm a blank other than the above.
Worth emailing him
How do all the wannabe property developers do this then? I assume they don't all have £150k sitting around waiting, at least at first. I suppose they must use specialist lenders.
Looks like I managed to get it sorted but I would prefer not to have done (and lucky to be able to) have my parents fund the project and then repay with an equity withdrawl.
Looks like I managed to get it sorted but I would prefer not to have done (and lucky to be able to) have my parents fund the project and then repay with an equity withdrawl.
duckers26 said:
How do all the wannabe property developers do this then? I assume they don't all have £150k sitting around waiting, at least at first. I suppose they must use specialist lenders.
Looks like I managed to get it sorted but I would prefer not to have done (and lucky to be able to) have my parents fund the project and then repay with an equity withdrawl.
Years ago and nowadays - yes developers did and do need a big pot of cash. That was the Barrier to Entry that made it quite a profitable market. During the boom all sensible lending criteria went out the window and every man and his dog could borrow 125% LTV making it a boom industry. Many people made money not because they any good at it, but because of the market.Looks like I managed to get it sorted but I would prefer not to have done (and lucky to be able to) have my parents fund the project and then repay with an equity withdrawl.
It's only now that the banks are tending to their wounds and realising providing open cheque books to developers was not a great idea as many of the newest ones spent the cash on flash new motors rather than on developing properties, or doing wholey inappropriate developments.
Developing property is a risky business, we're currently back to the old days where the developer takes on that risk with their own cash, rather than the bank taking all the risk. Give it 15 years and no doubt once everyone's memories have faded, we'll be back to 125% LTV's.
duckers26 said:
How do all the wannabe property developers do this then? I assume they don't all have £150k sitting around waiting, at least at first. I suppose they must use specialist lenders.
.
In the past it was easy to borrow money for this..
SInce the recession, the answer to your question is simply; they don't.
Property developers have been totally f
ked up by this borrowing crippling that has occured unless they already have the money or the equity in another property that they can release.We are in a similar situation, we are buying a house that needs about £80k spending on it, we cannot get the cash now so will have to do it over a few years time. Deeply, deeply annoying. We are able to get £20k more than the purchase price which will let us make it livable but the rest is going to take a while..
davidd said:
We are in a similar situation, we are buying a house that needs about £80k spending on it, we cannot get the cash now so will have to do it over a few years time. Deeply, deeply annoying. We are able to get £20k more than the purchase price which will let us make it livable but the rest is going to take a while..
It seems a bit like shooting themselves in the foot. On one hand they will lend me enough money to do half the project which if I spent and did some of the work would result in me handing them back a house worth less than it started as it has half finished structural work. If they lend me the full amount I can finish and can easily demonstrate to them that given local prices for similar property they will be in a much better postion re LTV than they started.They are not shooting themselves in the foot, it's simple risk management on their part. Easiest thing is as mentioned before - borrow from family, get the works completed and then remortgage based on the actual final state of the property. Risk to you is the market drops and/or the bank won't increase your mortgage by enough to pay back the debt to your family.
If I am honest it is sort of our own fault as I don't want to borrow more than 70% LTV as they are giving us a good rate on the new money (.79% over base on a tracker). They might let us have a bit more cash but at a much higher rate which I don't want to do at the moment. The house should be worth a fair bit more when we have finished the initial load of works so we might be able to release more funds whilst easily maintaining the LTV....
Or thats the theory
Or thats the theory
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