Hi,
I have had a look around this forum (and have been lurking for a while now), but I had some questions around topping up a mortgage for renovations to which I have found no clear answers (probably because we are trying to do this extremely early in the process).
We purchased a house as FTB in halfway through this year and while the house is definitely liveable, we want to modernise and extend quite significantly. We drew down a 5-year fixed term mortgage (90% LTV) and by the time we want to do the extension, we'll be about a year into payments. I appreciate that it may not have been the best idea to fix for that amount of time given our plans, but hindsight…
In order to get the top-up we would be applying for a small exemption to the 3.5x LTI (need about 4x) and we would be paying about 1/3 of the works out of saved funds and would need a mortgage for 2/3 of the works (on top of the original mortgage). In the end, our LTV should actually reduce and be closer to 80% (on the basis that our house value is increased in an equal amount to the cost of the works – a stretch but not unreasonable in this area judging by prices for houses with a similar footprint to the extended house).
The questions I was hoping I could get a steer on:
I have had a look around this forum (and have been lurking for a while now), but I had some questions around topping up a mortgage for renovations to which I have found no clear answers (probably because we are trying to do this extremely early in the process).
We purchased a house as FTB in halfway through this year and while the house is definitely liveable, we want to modernise and extend quite significantly. We drew down a 5-year fixed term mortgage (90% LTV) and by the time we want to do the extension, we'll be about a year into payments. I appreciate that it may not have been the best idea to fix for that amount of time given our plans, but hindsight…
In order to get the top-up we would be applying for a small exemption to the 3.5x LTI (need about 4x) and we would be paying about 1/3 of the works out of saved funds and would need a mortgage for 2/3 of the works (on top of the original mortgage). In the end, our LTV should actually reduce and be closer to 80% (on the basis that our house value is increased in an equal amount to the cost of the works – a stretch but not unreasonable in this area judging by prices for houses with a similar footprint to the extended house).
The questions I was hoping I could get a steer on:
- Does a top-up mortgage replace your existing mortgage and therefore does 80% LTV apply, or does it work differently altogether?
- Is there a break fee, or is it deemed a top-up and therefore you are not breaking your original mortgage?
- If there is a break fee, has anyone ever seen it waived as you are staying with the original mortgage provider and they will effectively earn more from you?
- How are valuations done in this instance for the purpose of calculating the LTV on the renovated house? Will you need to get a valuation done on plans?
- Presumably you’ll need to increase life assurance cover for the further draw down and presumably a solicitor would need to be involved due to the increase in mortgage?