Financing renovations through mortgage (first time buyer)

RojaStar

Just wondering if anyone has experience of financing renovation work through their initial mortgage.

I'm a first time buyer bidding on a house that needs a good bit of work (heating, re-wiring, new kitchen/bathroom extension). Other renovated houses in the area sell for approx €80k more than the asking price so I'm imagining a valuer would take this into consideration.

I've been outbid on other houses like this in the past (beyond my budget) but my mortgage advisor (BOI) had told me before that there is the possibility of financing the renovations through the mortgage, the only thing is that they will only give you 85% of the approved amount and you have to make up the rest.

Has anyone else done this? I guess I want to know how likely it is that the bank would allow me to do this.

Ri_Nollaig

I tried to do this over two years ago at the time with Ulster bank. Similar situation, FTB etc.
A lot more paper work obviously but I wasn't exactly told an outright "no" either.
May be very different now obviously due to the latest rules.

But at the time, they wanted a full costings report signed by a certified engineer, QS, architect, etc and would only approve 80% of the total amount [cost to buy + cost to renovate].
In the end the deal fail through as the engineer found a lot more things wrong with the house then I initially thought [would have been €50k more then I was expecting] so I let it go.

I guess it really depends as the term 'renovation' includes a lot. Like will you need stage payments for the various contractors etc? Is the place structural sound?

I went for a self-build in the end and to be honest I am glad I did. While its obviously possible to do what you are trying to do here, you are left with a lot of unknowns. Like I was very lucky the engineer found the problems before it went any further but you hear stories of people who are not and if the goal of this is a cheaper house then its a big risk. It really is the domain of 'cash buyers' who are willing to take the risk.

Trix

Yes myself and husband did this. We were buying a house that was in my family and needed to be completely gutted.
we got our mortgage with boi and really there was never any hassle.
We got 90% of the purchase price and then 100% of renovation costs but bank held back 15000 until after everything was finished and we had the house valued.

RojaStar

Thanks so much both for the replies. I suppose I'll just have to wait and see how far the bidding goes. It's in an area of Dublin that's in pretty high demand so it's dog eat dog really! I've emailed the mortgage advisor, she usually takes a few days to get back to me.

Just hoping that one of these days by some fluke all the planets will align for me and everything will just fall into place!

Ri_Nollaig

I hope it works out for you but just a heads up there will be a lot more stress with a project like this over say a turn-key or new development.
The biggest risk will be the fact that they wont really know the full level of work until they start at which point you have already committed. Just watch any of those home renovation shows to see this unfold.

Obviously I say this not knowing what kinda level of renovation you are talking here, to some it could mean just a coat of paint to others it means completely gutting a house to the point where they almost rebuild it again. Either way its something you want to bare in mind before starting and to consider why others are ignoring the place (even when its €80k cheaper).

RojaStar

Yeah I can imagine it would be a headache, unfortunately nothing in my budget in the areas I want to live in is in turn-key condition! The house appears to be structurally sound, but it's old so the crappy little extension at the back would probably have to come down and be rebuilt. Anyway, the underbidders have come back with another offer this morning, I can afford to make about one more and then I'm done.

So over it all at this stage!