Posted on 16 May 2010 by sarah mann
We are thinking of moving house and have just sold ours for £157,000. We bought it 2 years ago for £174,000 and put down a 5% deposit. Our current mortgage amount is £167,000 so we would move with £10,000 negative equity.
We have seen a house which we would hope to purchase for around £150,000 but it needs about £30,000 spending on it to finish it off. We have had a mortgage approved from Nationwide for about £242,000 so feel our circumstances and finances could easily stretch to the £150,000 mortgage we would require.
Our problem is we would need cash to do the property up (we have deposit etc available but nothing left to do the work) and wondered what, if any, our borrowing options are? We are as certain as we can be (in these uncertain times!)that property done up would be worth much than the mortgage and loan, and that perhaps we could look to remortgage when the works had been completed? We are really interested in doing this as we feel it would be a good investment, but have no idea how to start or even if we can start at all!
Sarah & Simon
This is a common issue where improvements are required or refurbishment work is required. Lenders do not like to release any additional funds until the work has been completed and borrowers can't start the work until they have the money to pay for it.
The most common solution to this is to borrow the money for the refurbishments from another source. The problem with this is it tends to be expensive and all to often people do not have the facility arranged to repay the additional lending once the work has been completed.
I recommend that you put together a schedule of works, together with any building plans if you are considering any major works and give this to your Lender when you submit the mortgage application. They can then pass these to the Valuer ask him to give a current value and an improved valuation based on the work you are planning. Based on this information and an assessment of your personal circumstances they should be able to offer you a mortgage to complete the purchase and make a retention of further funds to be released on completion of the works. The benefit of this is that the additional funding will definitely be in place and it will probably be at the same product rate as the main body of your mortgage. You should check this.
How you raise the money for the short term, will depend on the equity available in the property and if there is sufficient for a Bridging provider to consider a secured second charge. It may be that you have to arrange an unsecured personal loan.
I recommend that you speak to an independent mortgage adviser about your situation and the options open to you.
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