Mortgage question please

[jamtart30]

Hi, we've had our mortgage allowance agreed but the house we want is a lot less than is needed. However, it needs some work doing. Can we get a larger mortgage than the current value to allow for improvements? (Low grade option - knocking stud wall, better option - kitchen extension). Thanks.

I would have thought so as you can remortgage for home improvements so its just the same.

No, you can't get a mortgage for more than the value of the property, because then the loan isn't secured against anything.

No, same reason as pp.
You would have to apply for a loan.

It depends on the loan to value %. If you are still within the Ltv parameters of the product then probably. If you are outside them, no. If the mortgage you want us higher than the value of the house, no.

What we did was reduced our deposit, so got a bigger loan to value, thereby freeing up the cash we had as deposit to use for renovations. You won't be able to borrow more than the maximum loan to value though, or more than the house is worth

Hope that makes sense, despite my lack of punctuation!

You can’t borrow more than the value of the house, if that is what you are asking. You can usually borrow up to 95% of your purchase price/value but be aware that the interest rates will be higher the higher your loan to value.

We have a 78% deposit from the sale of our house so 22% needed for the purchase, equivalent to £215k. We'd need circa £50k for work.

In that case, you put in a lower deposit (holding back £50k) and a higher mortgage.

It might mean a different mortgage depends on the LTV etc but you should be able to do it no problem with figures like yours

Are you asking about the affordability of monthly payments? If your mortgage is going to be £215k are you saying you want to borrow more like £265k to cover the cost of improvements?

Is the 'mortgage allowance' agreed as much as the £265k you want to borrow? If so why would you have a problem...you're not obliged to put every penny you own in as a deposit and sounds like you will still owning be borrowing 30% of the property price

@CannyLad we require £215k for the purchase so our LTV is 22%. We would need +£50k for some work to be done.

NB: totally guesstimating extension costs here!

We have up to £290k "allowance" of which we need £215k for the purchase.

Your figures don't make sense.

How much is the house?
How much is the mortgage you are taking?

Just put £50k less down for the deposit. You’re still well under LTV thresholds and and within affordability.

@nrpmum how so?

We could get a mortgage value of up to £290k. But we only need £215k of it.

Our house has sold for £765k, minus stamp duty, fees etc we have £710k deposit.

The house we want is £925k.

Ok. I misread the figures.

Then you would put down a lower deposit and keep the rest back for getting the works completed. Unlikely to cause an issue with LTV because most lenders lowest rates start at 60% LTV. You would need to tell your lender what you want to do so that they can amend your mortgage offer though.

Ok with the additional information, yes you can just but down a smaller deposit and borrow more. Shouldn't affect your interest rates because 60% is normally the lowest LTV anyway and you're well within that.

My parents did exactly what you're proposing when they bought their house btw.

If you're buying a £925k house, £50k on an extension isn't going to build you very much!!

@Daisydoesnt we haven't actually explored yet we're just guesstimating for a single storey kitchen extension. Could well be more, yes.

Why does the cost of the house affect the cost of an extension? 50K seems about right for a large extension on whatever house?

50k isn’t a lot for an extension. Builders put their prices up when they see an expensive house (I speak from bitter experience)

Ah I see what you mean. Although if theyre anywhere near London that's pretty much an average priced house.

We're in Surrey.

yeah so average priced family house, if not on the low end. Hopefully builders won't try and rip you off, especially if you get info from neighbours on what they paid.