16 April 2015
Uninhabitable property, self build or full refurbishment required?
Just because a property is run down or even classed as 'uninhabitable', does not mean you cannot get a mortgage on it. Or if you are intending to purchase a property to let out, but it's currently in an 'unlettable' condition. Lenders will cater for these scenarios (dependant on the exact type of works required!). In the main, the work required needs to be cosmetic - a redecoration, maybe a new kitchen or bathroom. Many now offer 'refurbishment' loans where the work must be carried out within a period of time after purchasing the property, normally three months. Others will allow the works to be completed, revalue the property and lend based on the newer property value. Each lender will work on the valuers comments once they have visited the property and adjust their offerings accordingly. Just because the high street or your current lender says no, does not mean that it can't be done!
As the local area continues to become a 'new homes exhibition', there are a number of lenders also assisting customers with more private projects such as development and self builds. Normally the customer will purchase a property in need of work, knock it down and rebuild, or extensively renovate their existing. Either way, the lender who funded the original purchase will need to be advised and aware of all works as you will be altering their security!
On a self build, the lender will issue the funds on a stage basis. Normally once the foundations have been laid, property built to eaves level, made watertight and so on. At each stage a valuer will review and advise the lender of progress and to release payments. If the property has increased in value as a result, you will tend to find the lender may lend on the Gross Development Value (the end value).
On a full refurbishment, again, the lender will want to know the plans and may lend in stage payments against the end value of the property, depending on the extent of the works involved.
The lender will require sight of all planning permissions and estimates of costs involved before lending any funds. Seek out a local architect to assist you with plans and costs and always make sure you set out your budgets from the outset.