Mortgage on unfinished house

insanechicken

Quick question re mortgages. We were looking at buying an unfinished house and based on the cost of house plus works to finish it we could pull together the 10% roughly deposit and managing the repayments would be no bother at all for us.

The problem is BOI say they need 10% deposit on the house purchase cost but on the works to finish it would be 20% which puts us a good few grand in trouble. Does anyone know if the other banks are the same. We weren't focused on house buying but this house is a bargain but it's only possible if we can get the mortgage.

Any info would be really helpful! Ta

killers1

insanechicken wrote: »

Quick question re mortgages. We were looking at buying an unfinished house and based on the cost of house plus works to finish it we could pull together the 10% roughly deposit and managing the repayments would be no bother at all for us.

The problem is BOI say they need 10% deposit on the house purchase cost but on the works to finish it would be 20% which puts us a good few grand in trouble. Does anyone know if the other banks are the same. We weren't focused on house buying but this house is a bargain but it's only possible if we can get the mortgage.

Any info would be really helpful! Ta

All the banks will have a pretty similar view and will lend you 90-92% of the contract price and then look for you to put more towards finishing the property. The rationale is that not all the costs associated with completing the house will add to the overall value.

insanechicken

Thanks Killers. Bit of a bummer cos they don't mention that on their websites!! Kicker is we could well afford the repayments! oh well hope we come across a bargain house like this again! some chance.

user37

Insanechicken,

i was just wondering how you got on with getting a mortgage for an unfinished house as i am in a simular position myself?

thanks

insanechicken

HI User 37,

we didn't end up going with this house at all.

basically what we figured out along the way is that BOI will give you 92% of the purchase price as is plus 80% of the cost of work to finish the house and would also like to see that you had around 10k is what we were told for contingencies/overun.

AIB have a better rate for loans but have an even harsher system.

You take 92% of the purchase price and add it to 75% of the finishing costs and then you will be allowed to borrow up to 92% of that amount!!!

i can't remember who else i rang but the BOI set up seems standard enough. On top of that was that the quote we got for finishing a four bed house (bare finish now not painting and tiling finish) was exactly €27 grand cheaper than the what we are paying for the four bedroom house we have agreed on which is damn near finished (needs bathroom and kitchen installed but is painted and gardens finished) So unless your unfinished house is going for less than 10k i can tell you that a house that is finished or almost there will almost certainly be much more of a bargain as the banks are trying to get something back off builders etc whereas they know that a house that's not bear completion won't bring them in all that much

basically the builders are still looking for decent money for work to be done now whereas they're cutting their loses and taking what they can get for work they did in the past!

sad but true and means the country will stay littered with shells of houses that haven't gotten to the plastering stage as they just are not worth it unless you are in the trade yourself and can DIY it!

good luck and hope that helps

user37

Thanks for your reply

The bank are just making it so hard for anyone trying to buy, ts unreal! 80% of the finishing costs are a little rough.

Did you enquire about just getting a mortgage for the house as it it and fixing it up later.?

thanks again

insanechicken

Hiya,

i know where you're coming from and how you're feeling but after being through it i kind of get it a bit more now. They know that if they lend someone 100k for a house worth 100 k and the person defaults they will be fine. However, if they lend someone 50 to purchase and it costs 100k to finish the house that there is no way to be sure that the house will be worth 150k when its finished so if you default they could loose a lot of money. this comes from the fact that not every thing you do to a house is going to make people willing to pay more for it. for example on our house the builder spent big bucks on an indian sandstone front wall that i thing is horrid!!

looking at my own example the costs were about 50 to purchase 120 to finish and the house we have just agreed on is fairly similar for 147! Bit of a no brainer really!!

the thing is that at the moment houses that were built in the last decade are selling for tiny money as the builders are just looking to get something...anything back on work they have done in the past and will take what they can get. But if you're finishing a house the builder is still going to look for full whack to do the job now..you cant blame them - why would they do it if they're getting crap money.

Getting a mortgage and fixing it up later is only really an option if your mortgage is tiny and you are going to have enough free cash to pay your mortgage, finish the house and pay rent. I guess it's got a lot to do with the ratio of finishing costs to purchase price.

it's a sad situation that will mean that unless you are a builder or have all the cash yourself that building a substantially unfinished house isn't an option for most so get used to seeing bare block wall shells dotting the country!!

hope this helps!

bombadil

Just some words of advice to anyone seeking a mortgage on an unfinished property:

BOI are really not interested in lending on these properties, as other people have mentioned they will lend 92% of the purchase price but only aprox. 70-75% of the cost of finishing the house. This is fine if the house is nearly finished but not always that tempting given the extra work involved in financing and certs. etc required BOI rep on phone told me to try another bank!!!

AIB will ask you to have the house valued by an estate agent on their panel in its present condition and an estimate of value once the works have been completed. You will then need the services of a registered architect to cost the finishing of the house. I found AIB to be much more helpful and have heard of them lending up to 90% if the final valuation once works have been completed make sense. These mortgages are treated as 'self builds' and as such same rules apply

Hope this helps