Best way to remortgage to build extension?

Clonger4 · 10 January 2011 at 3:32PM

Hi

I am looking to extend my house when I remortgage soon. What is the best way to do this? I have been told that you can get a mortgage with a draw down facility. Is this a good way of doing it.

Current value of house 140k
outstanding balance 85k
Extension cost about 25K.

Any advice would be welcomed.

Jim

ps as anyone had any dealings with Homebank Financial Services. the advisor said as recommended by MSE.

Senior_Paper_Monitor · 10 January 2011 at 4:01PM

Probably depends mainly on what your current mortgage arrangements are

leeoregan · 10 January 2011 at 4:57PM

Hi Jim,

Using a draw-down facility is useful, however if you intend to do your extention when you remortgage,it might make more sense to remortgage for a larger amount and take out some equity for the works.

You could remortgage to £110,000 which would release £25,000 for your extention. I would however recommend trying to keep your loan at 75% of the property value (which would mean taking out slightly less - £20,000), as generally rates are better at this range.

Hope this helps!

Clonger4 · 10 January 2011 at 5:00PM

Thanks

I am currently on a 2 year tracker repayment mortgage. It is up for negotiation at the end of Feb so I thought it an ideal time to look at getting some more cash for an extension.

leeoregan · 10 January 2011 at 6:14PM

definatly the right time to start looking

Senior_Paper_Monitor · 10 January 2011 at 6:24PM

Drawdown arrangements usually have a three month restriction for completion - I would suggest considering a no ERC to 75% LTV offset (certainly available - just done one - and I seem to recall there was an 80% on the market as well but am a little busy to go checking at the moment). Slightly more expensive than the cheapest rates and are trackers/discounts, but over short term who cares? See if you can negotiate a deal for the builder to part finance by way of credit (many are doing this now) if you need to. Then look to remortgage on the increased value when completed (on the one I refer to earlier, the lender agreed to give an estimated value 'after build' within the standard valuation [based on full plans etc] and remortgage subject criteria etc at that point).