Can a mortgage loan be for more than the purchase price of the home?

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If a person wanted to make some changes or remodel a room, could the loan be for more than the house to allow for that?
And if so, how much more? That is of course, if you’re approved for the amount.

  1. Reply
    Steve B
    April 30, 2011 at 12:35 am

    Not anymore ..

    It works like this .. you borrow money (Mortgage) against the value of the property (House). If you fail to pay the loan, they seize the property and sel it at auction to get their money back.

    In the ‘old days’ that value of the property was going up … so lenders were prepared to lend against the ‘future value’ of the house .. and you could get the famous “110% Mortgages”

    Now the value is going down. Most lenders will only lend 90% of ‘today’s’ value (some even less) because they expect the value to be drop ..

    If you want to borrow to make changes that would significantly increase the value of the house, they may well agree = say, for example, you need say £20,000 for an Extension that would add £30,000 to the value of the House, I’m sure they will consider your application.

    However £20,000 is usually the ‘minimium’ amount they will be willing to lend (anything less than this and the cost of administration etc make it not worth their while) – and a simple ‘remodeling’; of a room is unlikely to add significantly to the value of the house ..

    Indeed, some people who get 90% Mortgages on a ‘special deal’ 2 or 3 years ago and who are now trying to re-mortgage with another lender’s ‘special deal’ have discovered that the value of their house is LESS than their Mortgage (this is known as ‘Negative Equity’) ..

    As a result no other lender will touch them .. so they are stuck with their existing lenders ‘standard variable rate’ (which means in some cases their payments go up by 50%).

  2. Reply
    April 30, 2011 at 12:52 am

    There’s a lot more to know than that. Go talk to your bank, then go talk to another lender, go talk to an attorney and see if they have anyone lending money (especially an attorney that deals in real estate), just keep asking questions until you have a good understanding of what you are doing. Do not let anyone talk you into anything until you have the loan process and all the different types of loans and all the deals that are being offered-like for first time home buyers, and be sure you understand the difference of how much more you end up paying when you have a longer mortgage like a 30 year compared to a 20 year. There is a loan out there for everyone and there is always someone that will want to loan you money. If you need more than the price of the house, you don’t have the $ to buy and not lose out. . .but trust me someone will be willing to give it to you and hope you go under and they get the house back and the money you paid. Only fools borrow more than they can afford. That’s what’s happened to a lot of folks these days and then interest rates went up, values went down and poof, they are losing their house. It one of the biggest investments and biggest loan you will ever make. You need to do it wisely.

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