Halifax remortgaging to pull equity out

[Grainne84]

Hi Mums 😊

We've just bought a house which we thought was a 3bed then realised the loft conversion has no paperwork,so we are buying what can only now be classed as a 2bed & having to do the work to bring it up to standard ourselves (which we don't have)

We're on a 2yr fixed term mortgage with Halifax, & wondering if we can remortgage after the 2year fix to pull equity out to do the works?

Does anyone have any experience or tips on pulling equity out? The house we are buying was valued at £17.5k higher than we have paid for it since the loft issue as the seller wants a quick sale. So could we pull that & any other equity out in 2 years?

Would that still keep us in the same LTV & crap rate bracket?

Any info most appreciated xx

You can't take all the equity out as that would effectively leave you with a 100% mortgage.

I guess how much you would be able to take our would depend on how much the value of your house increased in the 2 years and how much mortgage brokers was still owing.

Ignore the word 'brokers', I have no idea where that came from!

As long as the room is useable for what you intended why spend money you don’t have just to get it legally recognised as a bedroom?
Your LTV will change if you take equity out unless the house has risen in value since you purchased it.
In your situation I would leave things as they are and try to save up for the work required even if it takes quite a few years to save.

Questions:

did any professional person screw up to put you in this position? If so, find out if you have a case for professional misconduct against them. What level of survey did you pay for? When we bought we got a homebuyer's report (the middle level) which included paragraphs noting where improvement work had been done, specified whether or not it appeared to conform to building regs and told us to check that paperwork exists for the mods. The solicitor then followed this up with the vendor to obtain the paperwork. If you weren't alerted then you may have a case and can get someone's professional indemnity insurer to cough up the funds needed. If you were warned but went ahead anyway then probably no joy here.

Have you "been found out" and are being compelled to rectify or is this off your own bat? If you haven't been found out then doing nothing is also an option. If the building regs people at the council find out the property doesn't conform they can compel you to either bring it up to meeting the regs or put it back how it was. If this situation had been discovered before purchase then one option offered is to basically buy an insurance policy against being found out. I don't know if this would still be available but it is worth checking.

Do you know when the work was done? Your building does not have to conform to the current level of building regs to be legal, only to the level of regs that were in force at the time the work was done. If the work was done eg in the early 80s then it might have been done before any legislation restricting what could be done came into force.

Be cautious with how you proceed. If you have paid a 3-bed price for a 2-bed property then effectively your ltv ratio is already significantly less than it should be. Your mortgage lender may move you into a higher interest band as their risk is now higher and may also refuse to let you remortgage. Check your terms and conditions too - they may have been written to give themselves the option to foreclose (ie require you to give them their money back) in the event of something like this.

Remortgaging is one option (we are currently going through this process to release some equity but house has been valued over 50k more than we paid for it so ltv not too bad) however another would be to borrow more.

We did this after being in the house for a year and borrowed an extra 12k to finish home improvements. The mortgage company liked it because we were effectively adding value to the house and our payments only went up by about 80 a month.

Best thing is to speak to a good (free) broker who can advise you on the best course.

Agree with last poster this should have come up during the conveyancing process.

Your solicitor had a duty to inform your mortgage provider of any relevant information and this would definitely include that this could only be classed as a 2 bed. They would likely have valued your property at a lower value and this may have effected your LTV.

How did you find out about the 2/3 bed issue post purchase?

I’d be going back to my conveyancing solicitor because this shouldn’t have happened.

Hi all 😊

Thanks for all your responses! We had a mid range survey too, both this surveyor & the lender (Halifax) valued the house at £190k even though it is covered in textured wall paper, some of which was peeling from an old damp issue, had a pink bathroom suite & the 3rd bedroom in the loft which didn't 'appear' to be to building regs (although the mid ranger survey did no invasive checks) the house had lead piping & an over grown garden with two dilapidated out buildings one of which had an Asbestos roof 👌😅. It was us that asked the solicitor to check with council for planning permission for the loft & building regs cert, which there was none, so the vendor then reduced the price by £17.5k and said that was it, they were doing no more.

We are due to complete next week, so haven't signed yet, but think we will proceed as it's a good area with prices rising rapidly, so it will probably be a good buy, providing what needs doing doesnt bankrupt us before we can actually make the improvements we want to!

I've no idea where to start! To ensure the loft floor was reinforced as it should have been to take the weight (when using it as a room) we'd need to pull the floor up, which will cost & may effect the first floor ceilings right? Although the loft was done over 12 years ago & is still standing so should be fine?? There is a bath tub up there as well so it has taken all that weight!

To replace the lead pipes the drive way has to come up 😐 before we can even think of decorating we need to ensure it's safe. Would you guys say the Asbestos in the out building needs to go ASAP?

We have been advised because the council are 'on notice' of the works we cant get indemnity insurance & the vendor wont get building control out. So it's a blind buy I guess, as we can't apply for building control to come out before we are the homeowners 🙈

To run.. Or proceed?! with the reduction in price we're now only on a 90% LTV & halifax will only lend to 85% so we couldnt pull equity out for about 2years, when we'll be in this bracket.. but it may have risen more then?

Such a project & I'm still so on the fence in my head but my heart is saying do iiittttt ❤

Any thoughts welcome xx

My solicitor didn't inform the lender, I did 😕

The loft not appearing to be to standard is the an assumption of the mid range surveyor & our builder, no invasive checks were done.. But we found this out pre- purchase as haven't signed yet. Our solicitor was saying its the vendors job to do the works in the loft & have the certificate issues but she wasn't in a position to do so & said no. So we kinda had the same idea, we can survive with a 2bed for now & so the works eventually. Would you brher decorating downstairs before doing the work on loft though?

OK if you haven't bought it yet I would honestly walk away - that sounds like a nightmare waiting to happen.

That is a lot more than £17.5k worth of work, plus all the nightmare of getting the work done.

What area are you looking at here - the prices you mention would be dirt cheap in some places and expensive in others.

If your original offer of £190k would get you a 3 bed house without all these problems then run away and don't look back. You aren't committed yet and so far have only lost solicitor & survey fees. You stand to lose a hell of a lot more if you proceed.

If you haven’t exchanged run like the wind.

You say the council are on notice. If that’s the case they can start enforcement proceedings to require you to rectify the work in the loft and bring up to building regulations. You wouldn’t be able to say, “we are waiting several years to remortgage”. You would have to do it straight away. That’s why if the Council aren’t aware people get indemnity policies to fund enforcement work.

Oh God really? I'm petrified now, should I ring the council and ask outright if they will enforce proceedings on this house? You're right there is so much work that needs doing before even doing what we want.

My mortgage offer expires in August though, would I even have time to persue another house? 😭 £190k would buy us a 3bed yes, even £185 would, but not with the same plot/look of this house.. It could be really special with some money spent on it, it's just really unloved

The area is Northenden south Manchester, it's sandwiched in between Didsbury, Chorlton and Sale which are all up & came / unaffordable areas now which is why Northenden / Northern Moor is rapidly rising. The house is Ex Council & end of terrace but a good plot. 20mins on the tram to town & on the airport line so trams run all night.. Lots of pluses to the area & it's the most affordable way to live in that area except going for a mid terrace with smaller outside space I think. I'm going to ring the council & my solicitor today & try make a decision 🙈

I would walk away from it, particularly as the council now know about it and you can't get an indemnity.

As an aside you don't have to get a driveway taken up to replace lead pipes. When ours were replaced under the lead replacement scheme they used a mole to bore under the drive.

It sounds as though you have already exchanged contracts. Is this correct?

Hi thanks for the info guys!

I Rang building control today and spoke to one of their surveyors. He was great & gave me his email to contact him when I want to get the work done. He said doing the work isn't essential & there will be no enforcement proceedings. It's just better to bring it to standard so there are no problems when I want to sell & it would add value too. He said a loft conversion from scratch costs around £10-15k to do & to repair an already made one, would only cost £3-5k so given what we've had knocked off the price already he said it's a really good deal.

He said as soon as I put the application in I'll have 3years to complete the work or would have to pay surveyor to come out again, but that's no biggie. As the works need to be exposed for the surveyor to assess them, he said I'm better not putting the application in until I can afford to do the work then just do it all in one go.

Such a load off! It's a 1 off fee for building control to come out, do the checks & again to issue the certificate after the work is done so I'm just going to leave it & save up. the cost is between £800-1000 so again all sounds totally doable.

I'm going to go for it 😃🎉

Thanks again girls! xx

No the contract exchange is tomorrow Lunde

Imchlibob the Surveyor from building control said the works would cost no where near the £17.5k we had knocked off..Phew!

Depends. The guesstimate from building control might be feasible for a house where there is enough room for all the features building regs requires without any special adaptations. I've also seen houses (often ex-council as it happens) where literally the only way to get a building-regs compliant loft extension would be to lower all the ceilings on the first floor, otherwise there would be no room for the required amounts of insulation plus the minimum ceiling heights - even using modern slimline materials. Plus the limits on the amount of space needed for a building-regs compliant staircase might mean you have to lose half a bedroom on the first floor.

But hey it's no skin off my nose if you go ahead. Good luck.

Hi Imchlibob

There is a proper staircase already in which our builder said is fine, the head height was fine too, we just don't know about the insulation or floor joists as we need to expose them to find that out, so that's where we are expecting to spend money. Also on fire doors all over the house, they said they are required in every room except the bathroom!

But otherwise we've been advised it's a great buy in a growing area.. So fingers crossed 😊 xx

Thanks for the tip Trixymalixy! will certainly enquire about boring under the driveway rather than having it pulled up 👍