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  • FIRST POST
    • Mortytension
    • By Mortytension 5th Sep 17, 1:45 PM
    • 3Posts
    • 0Thanks
    Mortytension
    Remortgaging and funding extension, advice appreciated!
    • #1
    • 5th Sep 17, 1:45 PM
    Remortgaging and funding extension, advice appreciated! 5th Sep 17 at 1:45 PM
    I have some history here and have included some fairly representative numbers below; so created a new account. Hopefully it is not too long a post and many thanks in advance for any inputs!

    We would like to do an extension to our property and are in a fortunate position to be able to self-fund most of the cost. Our current fixed deal ends in March next year and it is unlikely that we will have the extension work started by then. So we will be re mortgaging before we spend our cash savings on the extension. As the rates are so low, I would like to get a longish term fix at 60-65% LTV (hopefully rates are at similar). This should be achievable in our current position per the example figures below.

    I was wondering about how best to extract the cash invested in the extension, in the middle of a fix term. The timeline roughly would be:
    1) Re mortgage in March next year
    2) Complete extension by Sept next year
    3) Get the place revalued in Sept
    4) Increase the mortgage and get funds back in Oct from the bank up to 65% LTV.

    My queries:

    1) Do banks let you revalue the property and release equity mid-term - if you are in the same LTV bracket with revaluation?

    2) Or is the only option to re mortgage again with associated costs? If so, I would need to compare the additional cost of staying on variable rate for few months vs remortgage costs and exit charges.

    3) Any ideas if offset mortgage might help with this situation?

    Based on the example below, the increase in value post extension should in theory drop the LTV from 62% to 54%. By increasing the mortgage to bring the LTV to 65%, I should in theory be able to extract 90% of my savings spent on the extension! And hopefully invest elsewhere with a bit better return!

    Example
    Current value- 365k
    Mortgage Outstanding- 225k
    Current LTV- 62%
    Cost of Extension (self funded)- 50k

    Case 1
    Assumed new Value (365+50)- 415k
    Original Mortgage- 225k
    Increase in Mortgage (assuming 90% of extention cost released)- 45k
    Increased mortgage- 270k

    New LTV ---65%
    New LTV without extension cost release ---54%
Page 1
    • Mortytension
    • By Mortytension 8th Sep 17, 10:04 AM
    • 3 Posts
    • 0 Thanks
    Mortytension
    • #2
    • 8th Sep 17, 10:04 AM
    • #2
    • 8th Sep 17, 10:04 AM
    Any thoughts much appreciated!
    • Spendingqueen
    • By Spendingqueen 8th Sep 17, 11:43 AM
    • 60 Posts
    • 6 Thanks
    Spendingqueen
    • #3
    • 8th Sep 17, 11:43 AM
    • #3
    • 8th Sep 17, 11:43 AM
    Following as I would also like to know this - I was expecting you had to wait till the end of the Fix.
    • dimbo61
    • By dimbo61 8th Sep 17, 1:50 PM
    • 9,463 Posts
    • 5,124 Thanks
    dimbo61
    • #4
    • 8th Sep 17, 1:50 PM
    • #4
    • 8th Sep 17, 1:50 PM
    Thoughts !
    Adding a £50,000 extension does not mean property is worth £50K more.
    Banks will only look at the value of the property as it is now !
    So do the extension and then get it valued for remortgage purposes afterwards.
    If you might run out of money get the shell and roof done first so they can see the main building work is done
    • Mortytension
    • By Mortytension 8th Sep 17, 2:11 PM
    • 3 Posts
    • 0 Thanks
    Mortytension
    • #5
    • 8th Sep 17, 2:11 PM
    • #5
    • 8th Sep 17, 2:11 PM
    Adding a £50,000 extension does not mean property is worth £50K more.
    Originally posted by dimbo61
    Completely agree. I'm expecting the the total costs to be more than the 50k estimate, but limiting it to what I expect the added value on a conservative basis is.

    Banks will only look at the value of the property as it is now !
    Originally posted by dimbo61
    Also agree. However, I'm considering a hypothetical scenario where the 'now' happens to be a few months into a long term fix next year, when the extension is complete and has added value to the property. Looking for ideas to extract this equity 'now' instead of waiting for the remortgage, which might only happen in 5 years time in the case of a long term fix.

    Worst case, I will have to pick up the best remortgage deal with low/minimal overall fees and exit charges; and then remortgage again once the extension work is done. Just hoping there is trick I am missing here, so I can avoid two lots of remortgage costs!

    Thanks!
    • dimbo61
    • By dimbo61 9th Sep 17, 11:25 AM
    • 9,463 Posts
    • 5,124 Thanks
    dimbo61
    • #6
    • 9th Sep 17, 11:25 AM
    • #6
    • 9th Sep 17, 11:25 AM
    Check what your current deal does at the end of the fix ?
    Some go onto the SVR and others go onto a tracker deal !
    Check out your current lenders existing customers retention deals some are trackers
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