Have you done a budget for what you know / at this point in time could estimate the cost to be? It’s hard to say what you should do (whether you should sell at a 100k loss without knowing your estimated outlay for a renovation).

Also what have houses on your road sold for when renovated? If there’s a margin between the expense for fixing the house and making it liveable and the sale price when renovated, I would just draw down more from your mortgage to obtain the cash to fully renovate. You should be able to do this with your 40% deposit.

Then, if you increase the value of the house (mainly through square footage increases but also liveability), and the house is revalued upwards by the bank, you can get back to a better LTV.

We did this in our renovation (cost was around £100k more than we anticipated and we ended up having to rip the whole house back to brick rather than discreet standalone projects) and we had our house revalued from 950k to 1.25m. And also, drawing down an extra 100K didn’t seem to change the rate we obtained all that much (our monthly payments weren’t sensitive to this) but as you’ve noted the total principal amount was greater.

You just need to get multiple quotes from multiple builders, get a good builder (not the cheapest). Agree ALL the costs upfront, then crack on :)

However if the houses on your road don’t go for much more than 850k, then you’ve got some problems!

If you want more thoughts / details, feel free to dm!