Mortgaging a home over agreed purchase price

[90CHPAXL]

I believe this is the correct forum, but happy for it to be moved, if required.

Ill cut it short.

A house is up for sale for 270. It is in need of major internal work, and possibly chimney/roof work too.

Houses in the area (in good working order) are valued 300-350 depending.

Is it possible to do the following;
Offer 250 for the property, and if it is accepted, still request to borrow 270 for the mortgage in order to leave us a +20 to complete some works to go with some remaining of our own money?

It is a dead certain that any renovation works would put the property value over the 270 original borrowed fee.

Conflicting google answers.
Yes - but on a very pricey repayment fee.
Yes - but have to prove renovations prior to agreement (which could be tricky)
No - Full stop absolutely not.

Thanks in advance!

[Edible Roadkill]

What’s the deposit?

Possibly better would be to remortgage it once the work is complete to a better LTV and lower rate!?

[Abc321]

Almost certainly no as the bank has no guarantee you aren't gonna p*** that extra £20k up against a wall.

Shirley just put £20k less deposit down and do it like that?

[fat80b]

90CHPAXL said:

Ill cut it short.

A house is up for sale for 270. It is in need of major internal work, and possibly chimney/roof work too.

Houses in the area (in good working order) are valued 300-350 depending.

Is it possible to do the following;
Offer 250 for the property, and if it is accepted, still request to borrow 270 for the mortgage in order to leave us a +20 to complete some works to go with some remaining of our own money?

It is a dead certain that any renovation works would put the property value over the 270 original borrowed fee.

I'm not exactly sure what you are asking.

If you are asking - can the valuation for mortgage purposes be different to the sale price, so that you can release some cash to do the works, then I believe the answer is "yes" depending on mortgage provider. We did something a bit like this with Santander a few years ago. In our case, the valuation was higher than the sale price for mortgage purposes, but were only borrowing 80% (I think) of the total amount so the total amount borrowed was still less than the sale price.

But are you effectively trying to borrow >100% of today's property value. i.e. property worth 250, mortgage borrowing wants to be 270? - meaning the property is effectively in negative equity until the works are done - in which case, this sounds trickier to me. And might be better done with a standard mortgage, some extra borrowing (e.g. bank loan / credit cards) and remortgage at the end of the build at the higher value ?

[Panamax]

90CHPAXL said:

In need of major internal work, and possibly chimney/roof work too.

The first question is whether you'd be able to get even a small mortgage on it, let alone a big or oversize one. That's very often the issue when you see a "cheap" house. Their natural route to sale often ends up through an auction.

[90CHPAXL]

So to try and answer a few questions;

It would be an absolute stretch for a few years if we put less down on the house to free up the money we currently have. We aim to put 25% down, which would leave us with approx. 15 left over for work. We estimate that's about 15-20 shy of what we would require to finish the reno.

The property is currently valued at 270, the properties on the same street in the last 2 years have all sold for 300+, these are the properties without a garage. This one has a garage, so I would assume fetch similar or greater value in the right condition.

My hope was that it would be possible to agree with the seller a price of c~ 250, but still request a mortgage of 270 from a lender. I would use the 15 we have along with the +20 from the purchase of the property to complete renovations.

Then the aim would be to re-mortgage on the final property value?

[Dadof2]

Simplest way is a 10% deposit if you can get that on a short term fix or variable, adjust the length to suit your monthly payments. Do the work then remortgage at £300k value at which you should be at 25+% deposit.
There’s risk in this but that’s the point, it’s your risk not the banks, which is what they will want

[90CHPAXL]

Dadof2 said:

Simplest way is a 10% deposit if you can get that on a short term fix or variable, adjust the length to suit your monthly payments. Do the work then remortgage at £300k value at which you should be at 25+% deposit.
There s risk in this but that s the point, it s your risk not the banks, which is what they will want

I didn't know short term fixed deals were available, so that could indeed be an avenue. Thank you!

[ARHarh]

Unless its something special, just buy one that is already done, that way there will be no surprises (probably )

[Sarnie]

90CHPAXL said:

So to try and answer a few questions;

It would be an absolute stretch for a few years if we put less down on the house to free up the money we currently have. We aim to put 25% down, which would leave us with approx. 15 left over for work. We estimate that's about 15-20 shy of what we would require to finish the reno.

The property is currently valued at 270, the properties on the same street in the last 2 years have all sold for 300+, these are the properties without a garage. This one has a garage, so I would assume fetch similar or greater value in the right condition.

My hope was that it would be possible to agree with the seller a price of c~ 250, but still request a mortgage of 270 from a lender. I would use the 15 we have along with the +20 from the purchase of the property to complete renovations.

Then the aim would be to re-mortgage on the final property value?

Lenders will base the application and LTV on the agreed purchase price or the valuation figure the valuer returns, whichever is lower. You can buy it at 95% LTV if required, to retain as much funds as you can, carry out the work and remortgage it at a later date to reflect the new value.

Also, it sounds like it needs a lot of work, it may not be a satisfactory mortgageable condition currently.........which may be why is so much cheaper than other propertys in the area.

[fat80b]

Sarnie said:

it may not be a satisfactory mortgageable condition currently.........which may be why is so much cheaper than other propertys in the area.

The habitable standards are not that hard to meet though are they? - I have heard of someone (the old mate of a mate) in a similar position that "took a chance" and offered to "install" a kitchen and bathroom into a place they wanted to buy with a mortgage (which technically wasn't habitable due to not having a kitchen and bathroom fitted).

Freebies off Facebook and a day's bodgery resulted in it then meeting any needs of his mortgage provider. I guess the risk was the vendor let him do it for free and then stiffed him, but he was apparently OK.

[Mr Overheads]

So you have 25% deposit. Is that 25% of 250?

So 62.5k cash available plus 15k you're holding back so you've got 77.5k

If you take out a 90% loan-to-value mortgage on 270k valuation (if banks surveyor agrees with that value), then your mortgage is 243k
Your deposit is 27k (10% of valuation)
leaving you 50.5k to do the work.

[darreni]

I'm reading that OP hopes to buy for 250, but wants to mortgage for 270, like the good old days of Northern Rock?

Edited by darreni on Tuesday 3rd June 17:59

[Sarnie]

fat80b said:

The habitable standards are not that hard to meet though are they? - I have heard of someone (the old mate of a mate) in a similar position that "took a chance" and offered to "install" a kitchen and bathroom into a place they wanted to buy with a mortgage (which technically wasn't habitable due to not having a kitchen and bathroom fitted).

Freebies off Facebook and a day's bodgery resulted in it then meeting any needs of his mortgage provider. I guess the risk was the vendor let him do it for free and then stiffed him, but he was apparently OK.

"It is in need of major internal work, and possibly chimney/roof work too"

It sounds like it need more than a new sink and bath....

[Sarnie]

darreni said:

I'm reading that OP hopes to but for 250, but wants to mortgage for 270, like the good old days of Northern Rock?

Yep, not possible....

[90CHPAXL]

Mr Overheads said:

So you have 25% deposit. Is that 25% of 250?

So 62.5k cash available plus 15k you're holding back so you've got 77.5k

If you take out a 90% loan-to-value mortgage on 270k valuation (if banks surveyor agrees with that value), then your mortgage is 243k
Your deposit is 27k (10% of valuation)
leaving you 50.5k to do the work.

I think this is the route.

I was blind to the blaringly obvious route. Tracker option on no fixed term seems to be the best option currently with them seemingly trending down, too.

Definitely needs 40k worth of work asap.

Not familiar with the northern rock analogy, but as a Newcastle fan I remember the sponsor and I remember it changing under dubious circumstances!

[Mr Overheads]

90CHPAXL said:

Mr Overheads said:

So you have 25% deposit. Is that 25% of 250?

So 62.5k cash available plus 15k you're holding back so you've got 77.5k

If you take out a 90% loan-to-value mortgage on 270k valuation (if banks surveyor agrees with that value), then your mortgage is 243k
Your deposit is 27k (10% of valuation)
leaving you 50.5k to do the work.

I think this is the route.

I was blind to the blaringly obvious route. Tracker option on no fixed term seems to be the best option currently with them seemingly trending down, too.

Definitely needs 40k worth of work asap.

Not familiar with the northern rock analogy, but as a Newcastle fan I remember the sponsor and I remember it changing under dubious circumstances!

Or re-worked if surveyor only agrees 250k value:
225k mortgage
25k deposit
52.5k to do the work.
Just go for 250k valuation not worth the argument with a banks surveyor. They might even come in lower than 250k meaning you'll need to stump up more cash to get to 90% LTV.

[ooid]

90CHPAXL said:

A house is up for sale for 270. It is in need of major internal work, and possibly chimney/roof work too.

Houses in the area (in good working order) are valued 300-350 depending.

Is it possible to do the following;
Offer 250 for the property, and if it is accepted, still request to borrow 270 for the mortgage in order to leave us a +20 to complete some works to go with some remaining of our own money?

It is a dead certain that any renovation works would put the property value over the 270 original borrowed fee.

if you put 270k and will be valued at 325k in a year, that's really roughly over 20% value gain. (Except transaction costs)

I would offer 5% less than the asking price and see what's up.