Financing a renovation project

jlm29

Hi folks,
Quick query from those who may be a bit wiser on this property business than I am!

My partner owns his owns and lives in his own property. The house is mortgage free (it is his family home), and it is where we intend to live together when the time comes, and to raise our family. This house is perfectly habitable, but will need some cosmetic work, and also, if possible some structural (knock a few walls, build an extension, etc). Some of the work is essential, and some of it is simply a case of us wanting to put our own stamp on the place, rather than feeling like we're just picking up where someone else left off. I'm not sure exactly how much will need spending, it's a question of how long is a piece of string really... we could spend anything from 20k to 150k, depending on how much work we decide to do, finances, etc.

My question is this... if we wanted to borrow a larger amount of money, would we be getting a mortgage, remortgaging the house, or just getting a long term personal loan? If it's the latter, what would be the story in terms of deposits etc? Would we need to have a 10% deposit like with a mortgage? Is there a maximum term allowed for repaying such a personal loan, or could it be put over say, 15-20 years? i know if I were to go and get myself a credit union loan, it seems from their website that the most the money could be put over is 10 years. I recognise that mortgage interest rates would be lower, so obviously this would be a better option, if it WAS an option?

I know that I could go to a bank and ask all these questions, but this isn't happening in the immediate future, it'll be a couple of years, but I'd like to start getting my finances in line for morgage/loan approval now, to minimise hassle when the time comes.

jlm29

anyone?

Scortho

I'd say mortgage. So long as the loan to value ratio for the bank is good then I can't see why they wouldn't.
Personally if your house was going to be worth 350k after the renovation,
I'd rather loan you 150k in the form of the mortgage (so I have an asset as security) as opposed to a personal loan of 150k.
Your best bet would be to speak to a bank about it.

Alternatively how about saving up and doing it bit by bit?
While it isn't as attractive, it will save you a good bit in the long run. If its habitable then you can live with it. It can also give you nether ideas (the longer you stay in a house the more you realise things you'd like to change.)
While the avocado bathroom suite might not be modern or nice, if its functional then it's fine.
Likewise the kitchen and wardrobes. Units can be painted to make them look modern.
Repainting the house in light colours can do wonders for it until you have the funds in place to do it up more.

Personally I'd borrow to extend but would use my own funds to renovate.
You are in a great position of being debt free at what I'm going to guess is a young age so don't throw it away on a kitchen that will need replacing in 10 years but you'll still have the loan hanging over you.
When my parents bought our old house, our dining room had no floor or wallpaper or light fittings for 3 years. We had no dining table for another 2 years after that. They only improved the house as they got more money in. It put them in a much better position financially than had they borrowed to have it now.

StillWaters

Afaik you can't get a mortgage for below €50k. And if you are not extending, just doing internal refurb and cosmetic work I cant see it going above 50 unless you lose the run of yourself.

jlm29

Thanks a million folks. We've no definite plans yet as to what we'll do. There's a good chance we'll knock an existing extension, and rebuild a bigger one, in which case we would easily be spending over 50k, and would definitely need a mortgage.
We'd save as much as we can, but the bigger stuff would never get done, without help from the banks- either that, or I'd have to develop a skill for brick laying! The longer this project stays in the pipeline, rather than becoming a reality, the more moola will be in the bank. Obviously the fewer years we could put the loan over the better- I intend to be mortgage free well before I'm 60-65, unlike most of my friends!

Chrislongford

My mortgage is below 50k. Got it in 2012