Renovation Mortgage

Sanros

New Member
Messages
2
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:
  • 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?
Any insights would be appreciated.
 

Coldwarrior

Frequent Poster
Messages
266
on the basis that our house value is increased in an equal amount to the cost of the works
Can't answer all your questions but be careful on this assumption, from what I've seen its rarely the case, especially now as builders are getting very expensive, more likely the increase in value would be somewhere between 40% - 70% of the cost of the renovation.
 

RedOnion

Frequent Poster
Messages
4,941
Any insights would be appreciated
You haven't said who your existing lender is, or the amount of top-up you're looking for.

Your best starting point would be to speak to your existing lender and see what options they have, and how they treat top-ups. The process changes depending on the amount.
 
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