Which home improvements can be covered by a mortgage

tvc15

We are looking at a house which is kind of in move in condition but is quite shabby. We would want to do the following things probably in the first couple of years of living there:

Completely new main bathroom
Replace single glazed windows with double glazed
Extra attic insulation
Partial new kitchen (new doors, oven, fridge, sink, tiling)
Remove old wallpaper and paint the internal walls of nearly all rooms

We can (just about) cover this with cash but it would be great to increase the mortgage so we are not pouring all extra savings into these improvements. Which, if any, of these can you typically get covered with a mortgage? I know they have to raise the value of the property by x amount to be covered and that is not a certainty but I am curious to know what other people have gotten covered?

Woodville56

On a similar theme, will banks allow as part of a mortgage the cost of basic finish to incomplete house eg, kitchen, tiling etc or word it be better to negotiate a term loan for the outstanding works in order to make house liveable ?
We have seen a number of incomplete houses that might interest us if bank would allow extra in mortgage or term loan to finish off. We would prefer to retain some of our savings after deposit paid for furnishings etc. Advice or comments welcome !

tatli_lokma

Can't understand why you would want to be paying back for a new kitchen or wallpaper for the next 20 years or so. What you think you will 'save' will be much less than the interest. Why not ask the bank or a credit union if they would be prepared to give you a home improvement loan in addition to the mortgage? That way you will pay it back much quicker and won't have to pay more interest, and you won't be increasing the capital loan on the house

Adding unnecessarily to a mortgage is Celtic tiger thinking.

tvc15

It doesn't matter that you don't understand but there a multitude of reasons. Would you put every last penny you own into a deposit for the house? You also wont get interest rates as low as mortgage rates so over paying a variable rate mortgage for 5 years has huge advantages over a 5 year unsecured loan

ted1

Now a days they expect you to get a personal lain to cover home improvements such as new kitchens

Moonbeam

we were in a similar situation to you when we bought.
The house was very liveable except for needed rewiring and replacing the water stuff in the attic,that cost us so much we had no money for the new bathrooms etc but look at how much difference it makes in the long run having a smaller mortgage.
Paying 15k off our mortgage would save us over 30k,then either save up for the rest and do it bit by bit or get a credit union loan.

tatli_lokma

tvc15 wrote: »

It doesn't matter that you don't understand but there a multitude of reasons. Would you put every last penny you own into a deposit for the house? You also wont get interest rates as low as mortgage rates so over paying a variable rate mortgage for 5 years has huge advantages over a 5 year unsecured loan

So you're only getting a 5 year mortgage then?
It's different if the house needs a refurb to make it habitable, but the things you are talking about are purely cosmetic and due to personal choice. I stand by my opinion that adding to a 10/15/20 year loan to pay for a bit of wallpaper is utter lunacy. Either buy a cheaper house and the money you save on mortgage repayments can be saved and used to redecorate, or buy a house in your price range which needs nothing done. In 20 years your wallpaper will be long gone, as will your oven and possibly your kitchen and bathroom, but you'll still be paying for it. Anyone I know who has bought a house in recent years has factored the costs of redecoration into to equation and had the saved funds to cover it. The last time I heard of anyone adding to a mortgage to paint a house or get appliances there was a lot of tigers purring.

tvc15

So you don't seem to understand paying back variable rate mortgages at different speeds? If you take out a €5000 credit union loan at 8% over 5 years it will cost you more than adding €5000 to your 30 year mortgage and overpaying for the first 5 years, no added risk and no disadvantage

As for buying a cheaper house, we are borrowing less than 4 x our wages and we have the capacity to overpay, prudence in our case is allowing sufficient breathing room in our savings in case one of us loses a job etc. and having savings earning some interest rate instead of completely tied up in the property

Moonbeam

Have a look but you are better off not over paying and saving up lump sums and paying them off the principal.
I think the gist here is it would be very surprising for the bank to give you a mortgage towards home decoration.
Ask them though and see what they will offer?

tvc15

Well back on point, I wouldn't consider double glazing and insulation decoration as such

my original question which may not have many people to answer from experience was to find out what other people have had covered

tatli_lokma

tvc15 wrote: »

So you don't seem to understand paying back variable rate mortgages at different speeds? If you take out a €5000 credit union loan at 8% over 5 years it will cost you more than adding €5000 to your 30 year mortgage and overpaying for the first 5 years, no added risk and no disadvantage

As for buying a cheaper house, we are borrowing less than 4 x our wages and we have the capacity to overpay, prudence in our case is allowing sufficient breathing room in our savings in case one of us loses a job etc. and having savings earning some interest rate instead of completely tied up in the property

I think I understand more than you. It's not a simple case of saying that the interest rate on a variable mortgage is a better rate than on a personal loan. Things like loan to value rate come into it as does the term of the loan. The mortgage isn't for 5 years so calculating the cost on that basis is incorrect. In addition in order to get a mortgage for more than the value of the property is very slim because doing as you suggest would in effect create a 100% mortgage situation for many borrowers and the banks have learned their lesson there.

Whatever chance you might have of getting a bit extra for the windows, attic insulation and redecoration are not feasible nor can you guarantee they will add value, given that a lot has to do with taste which could actually decrease the saleablity of your property. You could insulate your attic yourself, and paint and strip wallpaper yourself. The kitchen revamp can be saved for as can the bathroom.

If you can't see the logic in this I seriously question your preparedness of having a mortgage.

tvc15

Ok, I see you are coming from an emotional position where it pains you to think people are over stretching themselves and everyone putting too much money into property is an idiot, sure look what happened with the Celtic Tiger!

The chip you have on your shoulder aside, you simply cannot get a mortgage for the full value of a property and I am happy with that. I am fully aware of that we need to increase the value of the property so that the ltv would still be 90% which is why I am asking what has typically achieved this before

On the mortgage issue, tell me how it is worse to take a 5 year longer term and pay it off earlier leveraging the low interest rate, compared to an unsecured loan with a higher interest rate?

tatli_lokma

No need to be so nasty just because you didn't hear what you want to. Looks to me like you're the only one with a chip on your shoulder.

How about you tell the bank manager she/he is very emotional when they laugh at your request to add to your mortgage to paint your house :rolleyes:

its not an emotional response its a logical one. The emotional reasoning is the one where you want your house perfect and showhouse condition before moving in. The practical one is knowing that is not feasible. But it's just not the answer you were hoping for. Sorry 'bout that!

You say you have the cash to cover this - would the cash earn more for you in interest (after dirt) than you would pay in interest on the borrowed money?

tvc15

[Deleted User] wrote: »

You say you have the cash to cover this - would the cash earn more for you in interest (after dirt) than you would pay in interest on the borrowed money?

Unfortunately not, it would cover some of the difference but the benefit is having cash on hand in case of unforseen circumstances

Scortho

Would it not make more sense to use some of the cash for improvements and then as more cash becomes available do them?
I'd start with windows and insulation as that will start saving you money.
Then as more cash comes available you could look to do the bathroom and then eventually he kitchen.
The wallpaper? Strip it yourself and paint. Then likewise when you get cash you can get a painter in to do a proper job if you wish.

While they mightn't be the most modern bathroom or kitchen in the world, I'd rather live with something functional for the time being than having a higher mortgage just so I can have the nice fancy kitchen now.

tvc15

tatli_lokma wrote: »

No need to be so nasty just because you didn't hear what you want to. Looks to me like you're the only one with a chip on your shoulder.

How about you tell the bank manager she/he is very emotional when they laugh at your request to add to your mortgage to paint your house :rolleyes:

its not an emotional response its a logical one. The emotional reasoning is the one where you want your house perfect and showhouse condition before moving in. The practical one is knowing that is not feasible. But it's just not the answer you were hoping for. Sorry 'bout that!

What I wanted to hear was advice relating to the question I put up in good faith on a property forum. What you have posted is incorrect financial advice, Celtic Tiger references, aspersions on my ability to pay for or understand my mortgage and attempts to boil down my original question to 'why take out a mortgage for some wallpaper?'.

Again I understand that emotions run high when it comes to property in this country so I can see why it would upset and annoy you that someone requested information on how to borrow more money than is absolutely positively necessary. It probably comes from a good place that you want to swoop in and help me avoid the financial difficulties so many people now face but it is entirely misguided

The fact remains that you have no Idea about the state of the property, the value of the particular property or my ability to repay. I would appreciate if you could stop with the personal posts as it has pretty much ruined any chance of getting a serious reply about a genuine property question on a property forum. If no-one replies with information on what work they had done that allowed a property revaluation that’s fine but I wont be responding to your posts

Santa Cruz

tatli_lokma wrote: »

Can't understand why you would want to be paying back for a new kitchen or wallpaper for the next 20 years or so. What you think you will 'save' will be much less than the interest. Why not ask the bank or a credit union if they would be prepared to give you a home improvement loan in addition to the mortgage? That way you will pay it back much quicker and won't have to pay more interest, and you won't be increasing nous capital loan on the house

Adding unnecessarily to a mortgage is Celtic tiger thinking.

Spot on. What the poster is looking for is a 105% or 110% mortgage. Now lets think where did that get us before?
A home improvement loan over 3/5 years is the answer

tvc15

Santa Cruz wrote: »

Spot on. What the poster is looking for is a 105% or 110% mortgage. Now lets think where did that get us before?
A home improvement loan over 3/5 years is the answer

Unfortunately misinformation is quickly filling this thread and it might be time to close it. No bank will give you more than 92% of the value of the property and that is a very good thing! What I asked originally was about adding value to the property and getting a mortgage for 90% of the new value but this has been ignored

beertons

Don't get a loan for it. Get the jobs done bit by bit with savings. If the house needs that much work done to it, pick a different one.

The_Conductor

tvc15 wrote: »

What I asked originally was about adding value to the property and getting a mortgage for 90% of the new value but this has been ignored

Spending 30k (or whatever) on a new kitchen, insulation, new windows etc- does not add 30k to the value of the house. It makes it more livable in- and more suitable for you- but the value it might add to a house may be hard to enumerate- indeed, depending on the job and how its done- some people may even view it negatively, in which case, it may add negatively to the house (e.g. a neighbour got new bathrooms and a kitchen in before putting their house on the market. The person who eventually purchased the property ripped the lot out- as they weren't to their taste- and advised they would have paid 15k more, had they not had to replace them)......

It all depends.

tatli_lokma

Save your breath lads, OP will only accuse you of being emotional and not understanding the mortgage loan principles. What he/she wants is for you to tell him/her how to go about convincing a bank that adding a new kitchen and bathroom and giving the place a lick of paint will add €30k worth of value to his home so that he can pay for these things over the next 30 years. Telling them anything other than that will no doubt get you branded as emotional and the underlying sentiment I read in the posts is that we are all jealous.

OP, the only person really being emotional about this is you - you want the house to look a certain way. That is an emotional - and understandable - need. You are then trying to justify getting an increased mortgage to achieve this and you don't want to loose your savings. That is an emotional response to wanting a certain thing, rather than a logical evaluation as to whether it is a good idea.

If you had your mortgage paid off and wanted a new kitchen, would you remortgage your house to do it? or take out a personal loan for much longer than you need to? most people wouldn't do that.

As the conductor rightly says, spending €30k will not increase the house by €30k - mainly because two of the things on your list (insulating and redecorating) are not things that add value as they are general upkeep. The windows maybe but the other things can not be considered adding value. Even if you add a €20k kitchen which practically makes the dinner for you there is no guarantee that this will increase the value - there is a cap on the value of a house which is determined not just by its facilities and added extras, but by its location, price of other properties in the area etc etc. Some houses don't justify a €20k kitchen and you will never get it back.

Bearing this in mind, and the fact that the insulation and painting would be a relatively small cost, an average cost for windows for a 3 bed house (for eg) would be around €7000 (can be done cheaper, can be done dearer, this is just as an average). So it would appear that you are looking to spend about €10k each (give or take) on the kitchen and bathroom. Without being 'emotional' I cannot see any bank being prepared to loan you €20k for a bathroom and kitchen in this current climate.

What you could try and do is to mortgage the house for its current value, then use savings or a personal loan to carry out the refurb. Once complete, get the house revalued. The hope would be that the house value increases by the equivalent amount that you spent. On the basis of the increased value you then increase your mortgage and repay yourself or your personal loan. That is the only way I can see this working, and even then it is not a very sensible thing to do, but it would be your choice. A bank is not going to be very quick to agree to hand over €30k more than the current value of the house without having some certainty that the €30k will in fact increase the value in the way you claim it will. For all they know, you could get bob the builder in and end up reducing the saleability of the house, or have such horrendous taste that any estate agent will reduce the price to get a sale! So with that in mind, a bank would probably only agree to increase your mortgage upon proof that the work has increased the price of the property.

Woodville56

Woodville56 wrote: »

On a similar theme, will banks allow as part of a mortgage the cost of basic finish to incomplete house eg, kitchen, tiling etc or word it be better to negotiate a term loan for the outstanding works in order to make house liveable ?
We have seen a number of incomplete houses that might interest us if bank would allow extra in mortgage or term loan to finish off. We would prefer to retain some of our savings after deposit paid for furnishings etc. Advice or comments welcome !

Sorry guys for reverting to my original posting on this topic, but in recent discussion with a bank re the position as outlined above, the bank suggested that we "max out" our mortgage approval capacity ie borrow 92% in buying an incomplete property and use the balance of our savings to finish off the house.
Our own intention was to put most of our savings against the deposit ( thus a better LTV mortgage rate) and negotiate a short term House Improvement Loan from the bank or credit union to do the finish off works. Which option would Boarders recommend as we're not very mathematically minded ..
Thanks !

Scortho

Woodville56 wrote: »

Sorry guys for reverting to my original posting on this topic, but in recent discussion with a bank re the position as outlined above, the bank suggested that we "max out" our mortgage approval capacity ie borrow 92% in buying an incomplete property and use the balance of our savings against to finish off the house.
Our own intention was to put most of our savings against the deposit ( thus a better LTV mortgage rate) and negotiate a short term House Improvement Loan from the bank or credit union to do the finish off works. Which option would Boarders recommend as we're not very mathematically minded ..
Thanks !

I'd put savings towards a bigger deposit.
Then as money became available do the house up bit by bit or alternatively get a short term loan. My parents didn't have a dining room or sitting room for 3 years. It was bare concrete walls until money was available to decorate etc.

No way would I want to be still paying for the kitchen (that will have probably been changed again) in 30 years time.

The_Conductor

Getting the LTV down will most probably get you a more favourable mortgage rate- but will not necessarily give you money (at all) for redecorating etc.
As a generalisation- lenders will not want to lend to you for redecorating- full stop. They will lend for things like rewiring/boiler replacement- the absolute necessities to get the house up and running- after that you're on your own. I'd be inclined to agree with the above suggestion- pay for the redecoration when you can afford- do it over a few years- maybe room by room- focus on the kitchen, livingroom, bedroom and a single bathroom first- and progress outwards to the other rooms.

A lender may give you a 92% mortgage (this is the max you'll get)- but you're even less likely to get approval (as opposed to approval-in-principle) the higher you go with your LTV ratio.

Get the LTV down- use your savings and get a lower interest rate on the mortgage. Then leverage your ongoing cashflow to do your redecorating?

pwurple

OP, it depends. You can 'choose' to go for a higher LTV rather than putting all cash in, if you still have room in the LTV range. However, If you wanted to get the bank to revalue the house based on future improvments and mortgage based on that, it doesn 't work that way.

I know exactly what you mean by not wanting to spend all the deposit on house, it is a very nervous feeling parting with lump of saving. Loading mortgage makes more sense a few years down the road though, rather than year one, with the way compound interest works.

Your best option is to do the minimum required now, and either save for the refurb, or get credit union loan.

Best interest rates for us (we took out mortgage 4 months ago) was a fixed rate, so no overpaying on those anyway.