Buying your new home? It’s tough to get on the housing market today for first time buyers, and property prices can be high in your area, so buying a home starts to feel out of reach.  

There are a growing number of couples that I’m helping who are looking at property priced low for their area and in need of a bit of an upgrade.

Phrases like, in need or refurbishment, or needs modernisation. Those listings where it has only 1 or 2 photos because the estate agents worry nobody will view if they can see what the inside looks like! These are the things to look out for if you feel this could be an option for you.

PROS vs CONS

The positives:

As long as the property is ‘habitable’ it is generally able to be mortgaged. This means it needs to have a working kitchen and bathroom. It needs to be dry inside, have running water, working plumbing and heating. Some damp may not be an issue, but the house should be generally unloved rather than unliveable.

There are no end of refurbishment reels on social media to show you how people transformed these kinds of homes into something straight from the pages of a magazine.

Another excellent reason to buy these kinds of homes is because once the work is complete, potentially the home will be worth more, which means that when you come to remortgage, as there will now be more equity in the house, and you will be able to access better rates.

The very best mortgage rates are normally available at between 60% and 75% LTV, but most purchases do provide smaller deposits than this, by increasing the value of your home quickly, your 5% deposit may have now become 25% equity if you do things correctly.

The things to watch out for:

You cannot borrow MORE than a property is worth.

The property is the security for the lender in case you don’t pay your mortgage. They need to be able to get their money back, and they won’t be able to lend you more than you are paying for the home to allow you to do works. You will need to have the money for the deposit you plan to put in, the solicitor and purchasing fees as well as the works you need to do to be able to do the home improvements

Your buildings insurance should be made aware if you plan to make any structural changes during that year, like removing walls or extensions. Otherwise, if there was an issue during the works, you may not be covered.

Make sure you know the top values for homes in your area. It’s easy to get caught up spending on beautiful flooring and tiling etc but if you overspend you could be disappointed when the property isn’t worth more than your overall spend.

The ‘My friend said’ plan……

This one is important! – If you plan to do the works using loans or credit cards, and then borrow against the increased value in the home to clear these off…. think carefully before doing so.

You may not be able to borrow the money back out of the house when it’s finished to clear the debts. I have helped a few couples now who had overspent on renovations and not realised that they wouldn’t be easily able to remortgage. Sometimes this can work but here are a few reasons why I have seen people struggle with this strategy:

• The maximum borrowing on a remortgage is generally 90% or 85% for home improvements but lending for debt consolidation is different, and if you have already spent the money on the credit card or on a loan, the purpose for the remortgage is different and may limit your borrowing to 80% or 85% of the new property value. https://evergreen-mortgages.com/remortgaging/
• High balances nearing the maximum of your credit cards or using credit to a value that is 50% or more of your annual salary can impact your credit score and credit worthiness with the lenders, making it hard to access a new mortgage at competitive rates. https://evergreen-mortgages.com/debt-consolidation/
• People sometimes overestimate what the new home is now worth after the works.
• People sometimes underestimate how difficult it is to get a professional looking finish which is essential for the new valuation.
• Exceeding the renovation budget on the new kitchen/bathroom etc.

My opinion – is it worth doing – ABSOLUTLEY!

It’s how my husband and I have bought our homes and been able to increase our property value above the market increases, and move up the ladder. I have friends who are very capable in the trades, who have done this incredibly well, but… be ready to live in a property that does not look like the magazines, and maybe for a little while! Dust and building work is annoying to live with!

TOP TIPS for buying a renovation project

Try not to get into debt to do any works, take your time and save for those improvements, or look out for deals on materials. I know a particularly savvy young lady who got an entire kitchen on facebook marketplace for a bargain price and it looked like new!

Finally make sure to have a homebuyers survey so you know where to focus your funds. You may think the kitchen is the problem, but the trained eye of a surveyor may tell you the roof needs to take priority.

Get in touch or find more information: https://evergreen-mortgages.com/first-time-buyers/, https://evergreen-mortgages.com/debt-consolidation/, https://evergreen-mortgages.com/remortgaging/