Urgent advice needed - mortgages etc.

the goon

I am a first time buyer hoping to purchase a property which requires renovation. I am unsure whether if when bought how I will choose to renovate the property.

The bank has asked that I bring them a quotation for renovations which would require me to employ a surveyor to produce a report.

I basically just want approval in principal based upon my salary so that I can place an offer on the property. Any advice anyone? I would really appreciate it. It seems a bit ridiculous to have to pay for a surveyor when I don't even know if I'll get the property.

phormium

The bank won't bother giving you approval in principle on a property they basically don't know the price of, that is why they need to know what the renovations will cost. There is no point in you getting an AIP for an amount that allows you purchase it but does not have provision for money to renovate it. Banks in general are not much good if you want to buy a run down property and do it up gradually with your own money over time. They want a plan in place for the renovations and a time scale to ensure the house becomes good security for the loan otherwise they are unlikely to lend.

So that is why they want the report, depending on the report and the cost of renovations your income may or may not be sufficient for the total amount that will be required to bring the house to suitable standard.

Dardania

phormium, in your experience, would banks require an actual quote from a builder, or would budget estimates from say a QS or architect suffice?

phormium

In theory you would think either would suffice, in practice in my experience it would almost always be a builders quote, several if there were different aspects of the work, such as one quote for the structural stuff, quote from electrician, plumber etc. I am no longer in banking so things may have changed in last 2 yrs but if I were underwriting the loan I would prefer to see builders estimates, I say that (at the risk of annoying all architects engineers etc) as I found that for example with houses built by direct labour the estimated cost was almost always not enough to complete the job and extra top up loans were needed, which did cause problems. Renovations are even more tricky if they run over as the extra cost may not be reflected in the finished value. As a very simplistic example lets say you buy a house for 190k that will be worth 200k with a new roof, if it happens that you run into extra costs that means the roof cost 15k then that does not increase the value of the house to 205k, its still just worth 200k. However you should ask your bank which they will accept as bank policies differ and 2 yrs is a long time ago in banking!

Dardania

Thanks for that - I see the bank's perspective on looking for a tradesman's quote (and I say that as a building services engineer!) but it does seem frustrating to have to get a builder involved to quote, on a property that you don't even know if you'll end up buying. I suppose I could pay the builder for the quote, and deduct the quoting cost from the final bill if we proceed with engaging their services.

I think we'll have to talk to the bank as you suggest - maybe they have some simple guidelines of a certain cost per square metre that they limit work to, or looking at the cost of neighboring refurbished prices as targets for the "asset"

killers1

the goon wrote: »

I am a first time buyer hoping to purchase a property which requires renovation. I am unsure whether if when bought how I will choose to renovate the property.

The bank has asked that I bring them a quotation for renovations which would require me to employ a surveyor to produce a report.

I basically just want approval in principal based upon my salary so that I can place an offer on the property. Any advice anyone? I would really appreciate it. It seems a bit ridiculous to have to pay for a surveyor when I don't even know if I'll get the property.

You can apply to the Bank to get mortgage approval in principle based on your salary. They will be able to tell you the maximum amount you qualify to borrow and that they would be willing to lend to you. Then you will know whether bidding on this particular property is an option or not when you factor in the approx cost of the works involved. If your AIP is for a sufficient amount to buy & renovate the property then you can put an offer in on the property. Once your offer is accepted you get a valuation done on the property together with the costings for the renovations etc and go from there. No point in paying for surveys etc on a property that you haven't even had an offer accepted on yet.

Dardania

To update this thread for posterity, following a chat with our (future) mortgage provider AIB. I asked them about properties requiring renovation, and their response was:

They are fine with the concept of renovations, with the following criteria:

• They need to see the property valuation for before and after the renovations, to ensure that the renovations add value to the property
• they loan 75% of the renovation cost (working on the principle that not all renovations will add value, and are in fact just pretty looking - such as an internal door)
• the renovation cost budget has to be signed off by someone qualified to do so (an architect or quantity surveyor - I presume a well detailed builder's quote would also suffice) - you can't do it as it is a conflict of interests (kicker for me as I work in construction)

to summarise the loaned amount, presuming they are happy with all valuations and budget costs:
<HOUSE PRICE> * 0.92 + <RENOVATION COST> * 0.75 = LOANED AMOUNT

the 0.92 is presuming you're getting a 92% mortgage - you can of course reduce that if you have a greater amount of savings, or if for a 1 bed apartment, they max out at a lower amount I think

snowey07

I had a similar situation with the bank.

After I had my offer accepted by the seller , in order to get the mortgage, i had to get a survey and then a quote for the work the surveyer reccomended. I got the builder to write up the quote

The surveyer said there was extreme rising damp but the builder didnt beleive it was rising damp and wrote a letter to the bank explaining his reasons etc ( he was right as well, there was no rising damp) He also included jobs that the survey didnt show up and made a note about other jobs that he didnt think were nessecary

So basically , get your offer in and then go for approval. As far as I know no banks are giving approval in principle just rough estimates of what you might get.

killers1

snowey07 wrote: »

I had a similar situation with the bank.

After I had my offer accepted by the seller , in order to get the mortgage, i had to get a survey and then a quote for the work the surveyer reccomended. I got the builder to write up the quote

The surveyer said there was extreme rising damp but the builder didnt beleive it was rising damp and wrote a letter to the bank explaining his reasons etc ( he was right as well, there was no rising damp) He also included jobs that the survey didnt show up and made a note about other jobs that he didnt think were nessecary

So basically , get your offer in and then go for approval. As far as I know no banks are giving approval in principle just rough estimates of what you might get.

Was the property you were buying over 100 years old?

snowey07

killers1 wrote: »

Was the property you were buying over 100 years old?

it was 130 yes old and now you mention it I think that was some of the problem with the bank