Financing home renovations?

[jdwoodbury]

Hi Folks,

Currently in the process of buying a new place which needs a bit of work to turn it into our perfect home. We intend to take a mortgage to purchase but use savings to start some of the renovation. We intend to add footprint (SPP) via a couple of extensions and remodel bathrooms and kitchen. We expect we can complete most of the building work on savings but we won't be able to finish.

My question is what level of 'completeness' does the renovation work need to be before we can have it revalued and remortgage the house to complete it? Ideally we would use a lower deposit to secure the home and raise capital that way, however this would push us into a higher LTV and change the mortgage rates. We are expecting the renovation to cost £250k (we can use about £100k of savings) and maybe add the same value to the house (we are not doing it to add value but to make it more liveable for us). My concerns is that the house would be valued less that it is today while renovations are underway, but I am not sure if the lenders look at the completed value rather than shell value.

Any advice welcome

JD

[jdwoodbury]

I was under the impression that there were products on the market to support renovations, I was looking to see if anyone had experience of using them. Having watched all this 'Grand Design' programs they always appear to re-finance during the build process so it must be possible.

[jdwoodbury]

Claude455 said:

Can you borrow enough to fund the purchase plus enough to build and finish? If so, you could take a product with no ERC, which, combined with the high LTV would obviously be at a high %, but when the works are complete you could re-mortgage without penalty, at a more favourable LTV and secure a better long-term rate.

Without figures I couldn’t tell whether you’d rather not do the above, or it’s an impossibility.

Yes I was thinking a tracker with no ERC would be a possible route, I was hoping to keep LTV under 75% to get the better rates but moving to a higher rate (I think it would be about 2%) may work out cheaper than short term finance. My concern was that the building work is still going to be a year away at least, after agreeing the plans with an architect and gaining planning permission. I didn't fancy holding onto that cash and paying a higher rate while waiting for that to happen.

[jdwoodbury]

I take your point on having builders aligned, I am expecting to wait a year for the guy I use to become available to me (that's what it stands at currently).