Home Improvement loan on top of Mortgage

Miami8

Registered User
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We are in early days of looking for our first house, and having a look at properties in our budget, it is likely we will need to make some improvements to whatever we buy. I understand that lenders won't usually allow an extra (e.g) €50k on a mortgage unless we can show that the value of the property would increase by at least that amount (and that this is difficult to get approval for) . Is there the option instead to take out the mortgage and simultaneously get a home improvement loan for €50k? I know we will need to explore this option with the lender, but just wondering if it is even possible at all, if anyone has any experience/ advice. We can afford repayments, without over-stretching.
 
Provided you have sufficient income to meet the criteria, you can borrow up to 90% of the sale price. The banks are allowed to approve exceptions to that, though you'd be looking at the new year before they are available again. Do you have savings of more than 10% of the price?
 
Hi, yes - we have mortgage approval in principle, deposit etc is fine. Where we are getting confused is if we see a house for less than we have approval for, and need to do work on it - EG we have approval for €350k but the house we end up with is €300k, but needs €50k of work doing to it. I know the bank won't give us the higher amount as a mortgage, if the works aren't going to increase the property value to €350k+

So is there a case of getting the €300k mortgage plus €50k in a personal loan at the same time, knowing that we can afford both monthly, but do banks allow this kind of thing?

I hope I am making sense!
 
Technically, yes (assuming you mean mortgage of 270).
Subject to lending criteria, etc.

They are also allowed to give you mortgage of 270 (90%), and then later advance further money to do renovations. Having spoken to people who've gone through this, you'll need a chunk of money yourself for renovation as the banks are always slow to give out the final but of the money.
And as someone who has renovated property, always expect it to cost a lot more than you think!

You're already mortgage approved - best option is to talk to the bank that's approved you. You'll only get very general advice without the details.
 
If the bank will not give it to you then you can explore other options such as the Credit Union. But the best thing would be for it to be an additional mortgage as that is the cheapest money. You should talk to a broker who may know all the options and the chances of a bank giving you a top up.
 
Thank you for your reply, yes I mean 270.

We had already heard from friends that any works will probably cost more rather than less than expected! We do have some extra cash but probably not enough to do everything (again all based on rough sums at this point)

We'll chat to bank, I appreciate we can only get general info here, but I guess we just want to know if it is a runner at all.
 
A bit different, but may be relevant.

A few years back I talked to BoI about a mortgage top-up for renovations (LTV was about 60%) and we could have afforded the extra mortgage cost.

In the end I didn't go through with it but over the phone they told me they would need:
  • A valuation in advance
  • Signed-off plans by an engineer in advance
  • Funds supplied in arrears after engineers' sign-off of progress
  • A valuation afterward to demonstrate value had been added
They told me all this could cost me in the region of €1000.
 
Thanks NoRegretsCoyote - This is similar to what I heard before, but in our case the work we are talking about is more cosmetic, e.g. the house needs a total new kitchen, flooring etc. which, while costly, probably won’t increase the value of the house by the amount we need to spend.

While the total cost of purchase and works would still “add up” to less than the amount we’ve been approved for a mortgage, the finished house won’t be valued at that amount.

I believe this is different when you are doing significant works, like extensions to add more space, as the value of the house goes up in line with the spend.

We do have a good history with the credit union though, so that is an option to explore too. I will chat to them too.

It boils down to not having enough cash available – we can easily afford repayments (what we are looking for is much less than our rent + monthly savings currently), and we are more than happy to do work room by room when we’re living in a house, but the bigger things will need to be done before that, and we just won’t have the funds.
 
Thank you very much Justin - those explanations make perfect sense. Something to keep in mind for sure.
 
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