What can a mortgage cover

Paddytheman

So interested in a property that needs some work and believe that you can include in the mortgage for works that will increase the value of the property. My question being, if the property is €320,000 to buy can I get a larger mortgage for works such as:
Attic conversion needs repair to make the roof safe.
Conversion of under stairs to toilet.
Insulation required to improve BER.

Appreciate any advice.

davo10

Paddytheman wrote: »

So interested in a property that needs some work and believe that you can include in the mortgage for works that will increase the value of the property. My question being, if the property is €320,000 to buy can I get a larger mortgage for works such as:
Attic conversion needs repair to make the roof safe.
Conversion of under stairs to toilet.
Insulation required to improve BER.

Appreciate any advice.

I did this with a property about 20 years ago. AIB would not give a mortgage for more than the house was worth at time of purchase because there was no guarantee that the renovations would increase the value. I got a mortgage for the property and had to take out a separate short term loan (I was renovating to sell it on) at a higher interest rate for the renovations. I don't know if this has changed but if anything mortgage regulations are tighter now.

closifer

We met with a bank manager recently who told us that if we wished to buy a house that needed some work that we could incorporate this o to mortgage ...just would need to bring in quotes for the work

Yourself isit

closifer wrote: »

We met with a bank manager recently who told us that if we wished to buy a house that needed some work that we could incorporate this o to mortgage ...just would need to bring in quotes for the work

That's odd. I mean could be a backdoor to 100%(+) mortgages.

Peregrinus

The bank really wants to know two things.

First, the extra money they advance will be spent on doing the work on the house. They can ensure this by only advancing the extra money when the work has been certified as done, which means the owner needs to fund the work in some other way, in the short term.

Secondly, when the work has been done, it will result in an improved value for the property, such that the total mortgage will still be within the loan-to-value guidelines. Presumably the bank's valuer will express an opinion about this and, if his opinion is not favourable, the application will be rejected.

bigronnie9

I enquired about this recently (First time buyer with full approval):

Banks take was that they can loan us 90% of the property value, fair enough.

If house needs work, they can also loan 90% of the value added to the property...

So if a house needed say €100,000 to do it up (rewiring/re-pluming/insulation/floors/windows etc), the banks valuer will estimate what value those works will add to the house once complete....typically between 38 and 66% apparently.

So your €100,000 they will take as adding maximum 66,000 to the house value.
And they will then loan you 90% of this.
So you could get a loan of around 59,000 to do 100,000 home improvements.

You will need quotes for all work to be carried out, and we were advised if any of the works included an extension or something that would require planning permission, you would need full planning permission and that this could seriously slow down the whole process.

Flatzie_poo

I had a similar query I brought up with my lender, hope this helps;

Not sure if still applicable but this was my experience with AIB - approx 1.5-2 years ago.

From my understanding after meeting an advisor, they will support works to refurbishment as part of the mortgage, with certain conditions met.

So let's say have AIP for €300k.

You need to borrow €250k for your purchase.

You still need to meet the 10% deposit against the 250k.

After this you can use the remaining 50k approved of costs against refurbishment - but they only contribute up to a maximum of 85% total cost to works carried out.

I think even they realise they can't go back to 100% mortgages...

Mooooo

Peregrinus wrote: »

The bank really wants to know two things.

First, the extra money they advance will be spent on doing the work on the house. They can ensure this by only advancing the extra money when the work has been certified as done, which means the owner needs to fund the work in some other way, in the short term.

Secondly, when the work has been done, it will result in an improved value for the property, such that the total mortgage will still be within the loan-to-value guidelines. Presumably the bank's valuer will express an opinion about this and, if his opinion is not favourable, the application will be rejected.

Thirdly perhaps obviously but if you have the repayment capacity, comfortably, they will also be more willing to do a deal. It is common in Agri and others that money would only be advanced as paid invoices are sent into them

Victor

Mooooo wrote: »

Thirdly perhaps obviously but if you have the repayment capacity, comfortably, they will also be more willing to do a deal. It is common in Agri and others that money would only be advanced as paid invoices are sent into them

Often, invoices will need to be certified by a quantity surveyor or other supervising professional.