Fixed rate on our semi ends in July. Two year deal at 4.2% which now looks like a distant dream. Current quotes coming in around 5.4 to 5.6 for a two year fix.
The complication is the renovation. Kitchen ripped out, new one being fitted next month. Bathroom half done. Extension at the back is structurally complete but not signed off by building control yet.
Broker says some lenders won’t touch it until building control sign off is done. Others will lend but at a higher LTV because they’ll value based on current condition not projected value. Has anyone actually remortgaged while works were ongoing. Did you have to pause the application until sign off or did you find a lender willing to work with it.
The alternative is falling onto the SVR for a month or two and remortgaging once everything is finished. But at 7 point something percent that is not a cheap holding pattern.
Done it twice on BTLs and both times it was a headache..
First time was 2017 on a two bed in Gateshead where I’d knocked through the kitchen and dining room. Building control hadn’t signed off yet. Went with The Mortgage Works and they sent a valuer round who marked it down about 15% from what I’d expected because the kitchen was basically a building site. Ended up on a higher LTV bracket which cost me an extra 0.3% on the rate. Not the end of the world but annoying when you know the finished value would put you comfortably in the next band down.
Second time I waited until sign off was done and the difference was night and day. Valuer came in, saw a finished property, valued it above what I’d paid. Got a much better deal.
My honest advice?? If you can stomach a month or two on the SVR and the works will genuinely be done by September, wait. The saving on the rate will more than cover two months at 7%. Do the maths on a spreadsheet, it’s usually obvious which way round works out cheaper..
Cheers!
Quick question on this. When you remortgage mid-renovation does the lender revalue the property as it stands right now (half finished kitchen, exposed walls etc) or do they use the original purchase price? Because if they’re sending a surveyor round and the place looks like a building site that could tank your LTV. Just wondering if anyone’s had this happen in practice.
@Trombone_Felix yes that’s exactly the problem. Broker confirmed the lender will send a surveyor who values it as seen. If the kitchen is ripped out and there’s no functioning bathroom on the ground floor, the valuation reflects that. Some lenders won’t even lend on a property they consider uninhabitable. My broker’s suggestion was to get the kitchen and bathroom finished before the surveyor visits, even if the rest is still a work in progress. Which is fine in theory but means spending money before the remortgage funds come through.
Update on this. Spoke to the broker again on Friday. Turns out the existing lender offers a product transfer that doesn’t require a new valuation. Rate is 5.52% on a two year fix which is higher than the best open market deals but it sidesteps the whole mid-renovation valuation problem. The alternative is wait until the kitchen and bathroom are back in, get a proper remortgage done at hopefully a better rate, but risk whatever happens to swaps in the meantime. Given the MPC signalling higher rates later in the year I’m leaning towards taking the product transfer now and reviewing in two years. Anyone see a flaw in that logic.