Mortgage include renovation costs?

gosplan

Hi,

Just wondering if mortgages are fixed to house value at the moment or if banks will let you spend on renovation costs.

For example if I'm approved for 375k but find a nice house that needs work for 325?

I heard a while back that banks wouldn't allow this.

Thanks.

NinjaTruncs

gosplan wrote: »

Hi,

Just wondering if mortgages are fixed to house value at the moment or if banks will let you spend on renovation costs.

For example if I'm approved for 375k but find a nice house that needs work for 325?

I heard a while back that banks wouldn't allow this.

Thanks.

No won't allow this anymore. I would imagine with the new rules houses that need work will struggle to sell, see there value dropping a lot or only cash buyer will be able to buy them.

gosplan

NinjaTruncs wrote: »

No won't allow this anymore. I would imagine with the new rules houses that need work will struggle to sell, see there value dropping a lot or only cash buyer will be able to buy them.

Is there any way to go about this?

Like get a 325k mortgage and then a smaller loan for 50k?

bren2002

You could, but its heavily dependent on personal circumstances. Are you stretching to buy the house? Whats the LTV? Etc.

Can do worse than ask.

Raised Eyebrow

gosplan wrote: »

Is there any way to go about this?

Like get a 325k mortgage and then a smaller loan for 50k?

In theory yes but you would have to go through a loan approval process for the balance. As you would only get a shorter term for a loan rather than a mortgage, the monthly repayments will be higher and you may not get approval for €50K

Pawwed Rig

gosplan wrote: »

Like get a 325k mortgage and then a smaller loan for 50k?

The interest on the €50K maybe prohibitive though. You could of course reduce the amount of the deposit you're paying and keep the cash for the renovations if you had any room to manoeuvre there?

gosplan

Pawwed Rig wrote: »

The interest on the €50K maybe prohibitive though. You could of course reduce the amount of the deposit you're paying and keep the cash for the renovations if you had any room to manoeuvre there?

Yeah, a viable option. Keep the 10/15k I don't need for a basic makeover as then worry about the extension plans down the road.

lovehathi

Hi,

We were approved for 300 we got house for 220 and then we wanted to renovate BOI said we have to wait for an year to apply for top up loan on mortgage or take 30000 for renovation under their scheme which we took for 5 years and got our kitchen extension done.

Trix

gosplan wrote: »

Hi,

Just wondering if mortgages are fixed to house value at the moment or if banks will let you spend on renovation costs.

For example if I'm approved for 375k but find a nice house that needs work for 325?

I heard a while back that banks wouldn't allow this.

Thanks.

we were given a mortgage of 160,000 in March. we bought the house for 100,000 so mortgage 90,000 + 10% deposit. we had to completely gut the house so are currently drawing down the 70,000 to do this.

ste

AIB and BOI both offered this as option when I enquired. They described it as modernisation costs and it would not include extensions (or generally anything requiring planning permission).
I haven't followed through (yet) but AIB even sent me the costings document that a surveyor would need to complete.
Release of funds would be staggered and a pre and post valuation required.

Just ask your bankers
FYI my query was for additional funding about 30k

CantGetNoSleep

I was approved for 140k + 25k renovations earlier this year. 140k was a 20 year fixed rate, with the 25k a 10 year personal loan. When I broke it down, my monthly payments to the bank (for the first 10 years at least) were working out more or less the same as a 200k mortgage loan without renovation (and the ensuing hassle) so I pulled out of it in the end.

murt101

Is this possible nowadays? We're looking at a couple of houses needing work but wouldn't have enough cash for all the renovation. . Are there any options available from the banks?

Frankie19

murt101 wrote: »

Is this possible nowadays? We're looking at a couple of houses needing work but wouldn't have enough cash for all the renovation. . Are there any options available from the banks?

Unlikely. If the house doesnt have fitted kitchens or bathrooms the house is deemed unhabitable and a risk for the bank. We were recently looking to purchase a builder finish house. We were using equity to fund the additional works needed. The bank said they would hold back the cost of the kitchen and bathroom at drawdown till the work was finished and inspected by them even though we weren't using mortgage monies to pay for it. If happy they would release the remaining mortgage amount. We walked away in the end....mostly due to us needing an exemption and they wouldn't give us one on that property as it was deemed unhabitable.

Cows Go µ

I recently bought a house and got extra money on the mortgage to cover the cost of putting in a heating system. All I needed was a quote from a plumber for the works, a valuation that stated that the work done would increase by the amount I was requested and that was it. It might depend on the work being carried out.

Out of curiousity, why would a bank not allow you a few euro to update the house?

Surely its more cash for the bank (interest) in the long term? Plus it's a secured loan, so if they have to take the house back and kick you out, you've renovated it for them? I'm not seeing what the bank's fear is here?

Frankie19

Deleted User wrote: »

Out of curiousity, why would a bank not allow you a few euro to update the house?

Surely its more cash for the bank (interest) in the long term? Plus it's a secured loan, so if they have to take the house back and kick you out, you've renovated it for them? I'm not seeing what the bank's fear is here?

We questioned this. Bank told us the risk is you don't do the renovations and they are stuck with a property hard to sell.

Happened a lot in the boom times. Instead of doing the renovations people bought cars and went on holidays

murt101

I've put in a call to our bank so I'll hopefully get a response next week.

davo10

murt101 wrote: »

I've put in a call to our bank so I'll hopefully get a response next week.

Yes and no. No if you have limited cash on deposit and the value of the project when complete is close to the amount you are borrowing, yes if you have a large cash deposit and the value is likley to be far above what you borrow.

4ensic15

Deleted User wrote: »

Surely its more cash for the bank (interest) in the long term? Plus it's a secured loan, so if they have to take the house back and kick you out, you've renovated it for them? I'm not seeing what the bank's fear is here?

The bank have to go to court to get the house back. It takes years and they have to pay their legal costs for the case while it is ongoing. They will not be getting repayments and may well end up with a run down house which has to be sold under-market value as a repossession. The security of a private house is not much comfort to a bank these days.

sightband

Deleted User wrote: »

Out of curiousity, why would a bank not allow you a few euro to update the house?

Surely its more cash for the bank (interest) in the long term? Plus it's a secured loan, so if they have to take the house back and kick you out, you've renovated it for them? I'm not seeing what the bank's fear is here?

If a bank lends you x amount for a house they want to be sure that it’s worth at least that amount at the time of issuing funds, hence the valuation process just before they release funds. There’s no guarantee that after the renovation the value of the house will match the value of the mortgage, could run into difficulties, builder could make a balls of it etc.

The_Conductor

4ensic15 wrote: »

The bank have to go to court to get the house back. It takes years and they have to pay their legal costs for the case while it is ongoing. They will not be getting repayments and may well end up with a run down house which has to be sold under-market value as a repossession. The security of a private house is not much comfort to a bank these days.

This is also one of the reasons stated as to why mortgage interest rates are over double the Eurozone averages in Ireland- effectively lenders have extremely poor security over an asset- its better than an unsecured loan- but its significantly worse than a properly secured loan- which is what lenders in other Eurozone markets have........... Its also why 8 Eurozone lenders who had approval to operate in the Irish market- changed their mind and decided not to.

TheChizler

I've been told by a couple of banks that this is only possible if the renovations significantly increase the value of the house, i.e. are for an extension or something, heating and windows won't count. They're also much more reluctant to do this for first time buyers as well, don't know if this applies to you.

Cows Go µ

TheChizler wrote: »

I've been told by a couple of banks that this is only possible if the renovations significantly increase the value of the house, i.e. are for an extension or something, heating and windows won't count. They're also much more reluctant to do this for first time buyers as well, don't know if this applies to you.

That's exactly what I got mine for. There was no heating system so they gave me the money to put it in. The only the was that they wouldn't give it to me until the works were complete. And I'm a first time buyer - single applicant.

TheChizler

Cows Go µ wrote: »

That's exactly what I got mine for. There was no heating system so they gave me the money to put it in. The only the was that they wouldn't give it to me until the works were complete. And I'm a first time buyer - single applicant.

I should have said replace, of course adding a heating system when there was none before is adding value.

herbalplants

I know this is an old thread but I have the same question regarding a house that complete refurbishment.

It would be deemed unhabitable, no heating, no kitchen no bathroom, no electrics. The house is very old.

Would this type of property only for cash buyers? Would bank lend on this type of property lately?

I wonder if any of you had bought recently a property like this?

Drog79

Your survey will show these issues and then I guess the bank will want to know plans, insurance etc.

Do you have any equity from previous sale, if so I would hold some of that to do the repairs as we fell foul of BOIs 12 month top up rule too.

herbalplants

https://www.boards.ie/discussion/comment/121430155#Comment_121430155

I agree. Yes I do have a good percentage equity from previous sale.

TheChizler

https://www.boards.ie/discussion/comment/121429402#Comment_121429402

Look into the vacant homes grant

https://vacanthomes.ie/new-croi-conaithe-towns-fund-scheme/

herbalplants

https://www.boards.ie/discussion/comment/121430580#Comment_121430580

It doesn't qualify for it because it is someone was attempting to live there a year ago I understand.

TheChizler

Surely that someone tried to live there and failed cause it was uninhabitable is more reason to get the grant. Worth applying anyway if you're considering going for it.