Renovation Mortgage

[mcmurray]

Does anyone have experience of the advertised mortgages intended for renovation projects?

Presumably they start by lending for the initial purchase then follow stages with payments to enable you to pay for the work. However that is just my opinion, I guessed that they followed the self build model.

Alastair

 

[masochists-r-us]

Alastair,
How about borrowing the total amount you need via an offset mortgage. This way the interest on your debt is calculated daily and any money you have on deposit is used to reduce your overall debt on a £ for £ basis. i.e. £100k mortgage and £50k savings = £50k outstanding mortgage to pay interest on. This what we've done, but you will need to very disciplined with your overall spending as well as being ruthless with cashflow i.e. don't buy this month what you can wait until next month to buy.
If you can't borrow enough yet, take what you can get now and extend later.
The best rate we found for this type of mortgage right now is 2.74%.
Good luck.

 

[DaveBrigg]

We also have an offset mortgage, and agree with advice given already. The biggest problems are likely to be:
1) Persuading the mortgage company that their money is safe. i.e. that your property will at least be worth at the end what you have borrowed, especially if it is not worth that at the start.
2) Persuading the mortgage company that you do not need lots of unnecessary work doing, like replacing all old timber.

Our first survey, completed by someone sent by the building society, mentioned structural problems, the need for a damp proof course, and stated that all floors needed to be replaced. We then got another survey done by a company experienced in working with old buildings, which explained that any cracks were historic and just needed raking out and filling, a damp proof course was unnecessary if the leaking roof, gutters and downpipes were repaired, and the floors were mostly fine, even if they tended to slope. The mortgage company accepted the second report without any question.

In order to safeguard their money, some of the loan was only going to be released once work was complete. I had a long chat with someone in their office, describing the work and explaining that we actually needed the money to pay the builder and roofer, who quite reasonably didn't want to wait until the end before getting even a first installment. The funds were released without any more problems.

Lenders will sometimes listen, especially if you have expert advice to back you up, so don't be afraid to ask for the product which best suits your circumstances.