Hi Everyone,

 

We are considering our options with regards to our extension due to the new stamp duty changes and we are now considering moving.

 

We have found a property we love, however it needs serious internal refurbishment.  My question is has anybody got experience of taking out a mortgage for a renovation project and then remortgaging to release equity after the internal works are done.  We are not planning any extensions but the refurb will be extensive (raising ceilings, re-configuring walls, new bathrooms etc.).

 

We have heard through a friend that the banks will only revalue and advance on a current mortgage if the footprint of the property is changed, does anyone have any experience of this?

 

For illustration our plans with the property financially are:

 

Purchase price £360k

Refurbishment Cost £65k

Estimated value after £440-460k

 

We will be taking out a 90% LTV mortgage initially (£36k deposit) and we would like to keep the same mortgage after the work to try and release £80k leaving 10% in the property (£45k based on a £450k valuation).

 

Thanks a lot 

 

You will only get equity release based on the increase in market value. Banks value properties differently than the market does. Putting in a swanky kitchen and bathroom will add precisely £0 in value in the eyes of the bank. You really need to increase the footprint or add more rooms in order for the bank to release extra equity.

 

After we did our renovation and extension, the bank initially only valued it £10k more than previously, despite spending close to £40k and adding an extra 20m², and ensuite and a downstairs bathroom. We appealed and they revalued closer to what we spent after sending a surveyor out.

 

Just have a plan to repay loans / credit cards in event if not getting a remortgage. Especially in current climate where a housing market slow down is happening, and price drops are likely.

There are a few lenders who would give you bridging and a future mortgage offer based on the future value of the property - off the top of my head I can't remember who, but look up brr lenders.

If you do look at bridging be absolutely sure you've got an out otherwise you can lose any value youve built up on the cost of finance...

On your own home I'd say you might struggle as you'll probably want to put in nicer finishes etc which cost money but don't necessarily add value.

You wouldn't be able to remortgage until after 6 months and then there's likely to be early repayment terms which is why lots of people use bridging for refurbs

Thanks Conor, that's really useful info.