Allocation of mortgage for renovations

JohnCleary

Hi all,
I have emailed the bank and waiting on a response, but would like to hear from the floor. All figures are theoretical for easy maths.

Savings: 400k
Mortgage: 200k
So allowing a purchase of up to 600k (with a separate fund for legals etc.)

If a house is available for 500k, but requires 50k in renovations.... is it possible to get a mortgage of 550k?

OR, do you re-apply for mortgage with lower savings (keeping 50k cash for renovations)

There would be no main contractor, the purchaser would be getting their own materials / tradespeople.

I'm guessing its the latter.... or how does it work in this particular scenario? It's no big deal re-applying for a mortgage as eventhough savings are lower, so is the mortgage amount.

PS. I'll let you know the banks response, when they respond.

Cuddlesworth

The mortgage is the money you borrow from the bank.

If you have 400k in savings, and want to buy a house for 500k+ 50k for renovations, then the most likley answer is that you would get a mortgage of 150k against the house and use 50k of your money for the renovations.

JohnCleary

We are mortgage approved for a lot more than we'll need to spend on the purchase (ex renovations).

I guess my question is... can I just throw a figure at the bank for renovations (I have renovated units in the past so have a fair idea of budget), or do they need a quote from a contractor? The amount needed for purchase + renovations will still come in under what we are mortgage approved for.

Or is still like the 'good oul days' - "Sure you may aswell take an extra 30k for a car too" (I'm using this an example, we have no intention on borrowing any more than we need)

Cuddlesworth

JohnCleary wrote: »

We are mortgage approved for a lot more than we'll need to spend on the purchase (ex renovations).

I guess my question is... can I just throw a figure at the bank for renovations (I have renovated units in the past so have a fair idea of budget), or do they need a quote from a contractor? The amount needed for purchase + renovations will still come in under what we are mortgage approved for.

Or is still like the 'good oul days' - "Sure you may aswell take an extra 30k for a car too" (I'm using this an example, we have no intention on borrowing any more than we need)

When you pick a house, the bank will get a valuer out. If it needs serious refurb, the bank will expect you to have the money. And in the circumstances you listed, you would defiantly have the money.

GaGa21

Based on our experience, the banks will ask for a written quote on headed paper or their own form filled in and stamped by builder. They will also request you to include a 10% contingency into your budget.
And they will also only approve the extra amount requested if bank valuer deems that the work will add equal value or more to the house.
The money will also only be given when they receive your paid receipts and usually in 2 lump sum payments.