Mortgage and Renovation Costs

Mcnage01

Hi All

I'm hoping someone here will be able to give me a bit of advice here, it would really be appreciated!

We're first time buyers both aged 28, and we are both in permanent jobs earning a gross total of €100k per annum between us.

We have mortgage approval from AIB for €350k (thats the amount we asked for) and a deposit of about €25k saved.

We've spotted a house we like for about €290k (thats the max we'd be willing to pay), but it's going to need €30k maybe a bit more just to get it to a liveable standard.

Does anyone know whether we could borrow this €30k as part of the mortgage from the bank considering the above or are they completely opposed to this in the current credit climate?

I understand the reasons why they don't do this like they did in the boom years, but am hoping we'd have a reasonably strong case for it.

ted1

I'm sure you thought about this but is it wise to base a mortgage on a double income especially if you plan to have kids in a few years.

Know to tackle the question at hand, when we needed extra to do our place up after purchasing last may we were told to take out a personal loan.

Mcnage01

Thanks for the reply Ted.

We've made plans for the kids scenario but thanks for flagging it.

As for the renovations did you look to make them at the same time as taking out the mortgage/buying the house, or after the house was already bought/mortgage drawndown?

ted1

Mcnage01 wrote: »

Thanks for the reply Ted.

We've made plans for the kids scenario but thanks for flagging it.

As for the renovations did you look to make them at the same time as taking out the mortgage/buying the house, or after the house was already bought/mortgage drawndown?

We wanted to make the ASAP. But when it can to the loan / mortgage
We asked but never actively pursued it to much as I prefer to take a short term hit with a personal loan and pay off the renovation loan before my kids started school etc.
so we could keep the mortgage down

murphaph

ted1 wrote: »

We wanted to make the ASAP. But when it can to the loan / mortgage
We asked but never actively pursued it to much as I prefer to take a short term hit with a personal loan and pay off the renovation loan before my kids started school etc.
so we could keep the mortgage down

If it had been an option and you were on a variable rate then it would have been cheaper to over pay the mortgage by the same amount as the personal loan in the same time frame. Even the worst variable rates are much cheaper money than personal loans. But I don't think it's an option many or any banks will entertain these days.

BryanF

Mcnage01 wrote: »

Hi All

I'm hoping someone here will be able to give me a bit of advice here, it would really be appreciated!

We're first time buyers both aged 28, and we are both in permanent jobs earning a gross total of €100k per annum between us.

We have mortgage approval from AIB for €350k (thats the amount we asked for) and a deposit of about €25k saved.

We've spotted a house we like for about €290k (thats the max we'd be willing to pay), but it's going to need €30k maybe a bit more just to get it to a liveable standard.

Does anyone know whether we could borrow this €30k as part of the mortgage from the bank considering the above or are they completely opposed to this in the current credit climate?

I understand the reasons why they don't do this like they did in the boom years, but am hoping we'd have a reasonably strong case for it.

In my experience new buyers frequently underestimate the amount and cost of renovation works.

Mcnage01

BryanF wrote: »

In my experience new buyers frequently underestimate the amount and cost of renovation works.

I wouldn't argue with you there but I think we've come up with a figure that'll leave plenty of room, and we'll get a builder in to estimate before we buy

killers1

Whether you can borrow additional monies on the mortgage will depend what value (if any) the Bank's Valuer thinks these works will add to the property. When you are getting the valuation done for the purchase you give the valuer details of the works to be carried out and they give an opinion on the value on completion. If the proposed will works add value to the property you will have scope to borrow a % of the costs involved.

Mcnage01

killers1 wrote: »

Whether you can borrow additional monies on the mortgage will depend what value (if any) the Bank's Valuer thinks these works will add to the property. When you are getting the valuation done for the purchase you give the valuer details of the works to be carried out and they give an opinion on the value on completion. If the proposed will works add value to the property you will have scope to borrow a % of the costs involved.

Great thanks, that's very helpful. It'll be things like a heating system and new windows so hopefully the bank will see it as adding value. Do you know if they would need to see a quotation for the work before agreeing to lend the additional sum?

killers1

Mcnage01 wrote: »

Great thanks, that's very helpful. It'll be things like a heating system and new windows so hopefully the bank will see it as adding value. Do you know if they would need to see a quotation for the work before agreeing to lend the additional sum?

AIB have a specific costings template that they require be completed for every mortgage where works are being carried out and you're looking to drawdown in more than 1 tranche. You can ask them to email you a copy. The form needs to be completed by an Engineer, Architect or Building Surveyor. It includes a breakdown of the costs involved in the works you plan to carry out. It is helpful if you have a quote to back up these figures. On a side note, if the property isn't habitable in it's current state it's likely that the banks valuer will indicate that essential repairs are required to the property and will put an estimate of the costs of the work to bring it up to an acceptable level. If this is the case the bank will want to be satisfied that you have sufficient funds to do this. Remember €1 spent doesn't add €1 value.

Mcnage01

killers1 wrote: »

AIB have a specific costings template that they require be completed for every mortgage where works are being carried out and you're looking to drawdown in more than 1 tranche.

We would be looking draw down the sum for the house and the renovations at the same time, ie one tranch.

So if I understand you correctly we'd need to get a report or estimate of the costs and submit this to the bank for them to consider? Is that correct? Do you know if this has to be an engineer or architect or can a builder do this too?

I know what you mean about the €1 spent doesn't mean €1 value added, but the works we are looking to do are the basics such as a new heating system and rewiring, new doors and windows etc so I'd hope that would be classed as adding value to the property of at least 50-60% of cost.

Thanks again for your advice, it really is appreciated.

killers1

Mcnage01 wrote: »

We would be looking draw down the sum for the house and the renovations at the same time, ie one tranch.

So if I understand you correctly we'd need to get a report or estimate of the costs and submit this to the bank for them to consider? Is that correct? Do you know if this has to be an engineer or architect or can a builder do this too?

I know what you mean about the €1 spent doesn't mean €1 value added, but the works we are looking to do are the basics such as a new heating system and rewiring, new doors and windows etc so I'd hope that would be classed as adding value to the property of at least 50-60% of cost.

Thanks again for your advice, it really is appreciated.

It's not possible to drawdown the mortgage in one tranche if you are borrowing 92% of the purchase price as then you would be looking for the Bank to go outside their max loan to value ratio which can't be done. The way it works in practice is for example is as follows;

Purchase price €290,000 - Bank lend €266,800 for you to complete the purchase. Cost of works are €30k and Valuer indicates value on completion is €310k. Once you buy the property you get the works done. The Valuer comes back to the property to ensure the proposed works have been completed and confirms property is now worth €310k as per their initial inspection. You can then potentially drawdown a further €18,400 (max) to go towards paying towards the works. Total mortgage drawn is then €285,200 which is 92% of €310k and the absolute max they will let you borrow. You can see now why the 'Value on Completion' is so important in deciding whether enough funds will be available or not.. Yes, the builder can complete the costings template for you to get a decision from the Bank.

Mcnage01

Ah I see, so it's not straightforward by any means. Who is the valuer? Is that a bank official?

killers1

Mcnage01 wrote: »

Ah I see, so it's not straightforward by any means. Who is the valuer? Is that a bank official?

The Valuer is not a bank official. They are Professional Property Valuers & can be estate agents, auctioneers etc. The Bank have a Panel of Valuers and you can ask them to give you a list. A valuer who is located close to the property in question is the one who carries out the inspection. If you are dealing with the Bank directly for your mortgage they'll probably leave it up to you to organise yourself but can give you the list.

Mcnage01

Thanks for all the info killers. I'll post back when I get a decision

killers1

Mcnage01 wrote: »

Thanks for all the info killers. I'll post back when I get a decision

Best of luck!

Mcnage01

So I spoke to aib today and they are willing to lend 75% of the renovation costs based on the valuer reports. 65% up front and the remaining 10% after the valuer sees the finished work.

Killers1 I hate to annoy you, but I've seen you recommend a solicitor in tallaght on a couple of occasions, would you mind me pm'ing you for his details?

killers1

Mcnage01 wrote: »

So I spoke to aib today and they are willing to lend 75% of the renovation costs based on the valuer reports. 65% up front and the remaining 10% after the valuer sees the finished work.

Killers1 I hate to annoy you, but I've seen you recommend a solicitor in tallaght on a couple of occasions, would you mind me pm'ing you for his details?

Not at all.

They'll lend up to 75% of the renovation costs provided the value on completion comes in at a high enough level so ensure you have your sums done when you speak to the Valuer. They don't give you the 65% 'upfront', it's given to you when you produce invoices for the work carried out. The 10% is the standard retention until the Valuer goes back out to the property to confirm all works have been completed and the value is now as per their initial 'Value on Completion' estimate.

Pj60

Im also in a similar situation where im buying a property for 135000 but it needs 50000 to renovate it.we have 45000 in savings but dont want to spend every penny we have.its our second property so we have to come up with 20 percent deposit.did you get the amount you needed to renovate aswell as the mortage as were in the same situation as ye