Advice please can we raise? any money to build an extension ?

happysnail_2

Hi

Myself and my husband both have debts of £8,000 and he has £10,000 we have a mortgage of £153,000 and a redemption figure of £159,000, our house is worth £180,000, so do not have that much equity,
I earn £17,500 and he earns £28,000 per year,

We have a very small 2 bed house and have had a figure of £15,000 grand to build a water tight shell to make it bigger if we could build on to our house our house would be then worth £220,000 like our neighbours which would make us more financially stable,

We are desperate to get more room so we can add an other member to our family we have a problem can we finance the build with our current debts? or shall we move but that would leave us with very little for a deposit for another house that's if we mangage to sale at all,

We were looking into loans of £25k for my husband to consolidate his existing and we don't think we could do anything with our mortgage with our wages

Andy advice appreciated

HappyMJ

happysnail wrote: »

Hi

Myself and my husband both have debts of £8,000 and he has £10,000 we have a mortgage of £153,000 and a redemption figure of £159,000, our house is worth £180,000, so do not have that much equity,
I earn £17,500 and he earns £28,000 per year,

We have a very small 2 bed house and have had a figure of £15,000 grand to build a water tight shell to make it bigger if we could build on to our house our house would be then worth £220,000 like our neighbours which would make us more financially stable,

We are desperate to get more room so we can add an other member to our family we have a problem can we finance the build with our current debts? or shall we move but that would leave us with very little for a deposit for another house that's if we mangage to sale at all,

We were looking into loans of £25k for my husband to consolidate his existing and we don't think we could do anything with our mortgage with our wages

Andy advice appreciated

How does borrowing money make you more financially stable? Isn't £15,000 grand something like £15 million...hmmm anyway it's possible to borrow the money. I'd borrow just what you need though...only the £15k. Never mind about refinancing that probably won't be approved as you would have too much debt available to you.

chesky369

Jointly you have debts which total more than your personal annual salary. It is highly unlikely that anyone will lend you anything at all, let alone a further £15k. You will have to wait for both an addition to your house and your family until you can afford both.

forgotmyname

£15,000 extension will add £40,000 to the house value sounds ambitious.

I cannot see how borrowing more money will make you more financially stable.

What happens if the unexpected happens, Extension costs more than you originally planned
or one of you falls ill? If you plan to have a new addition what about the extra expense of that?

I found out the hard way unexpected things happen.

andy.m_2

there are but a couple of things that do not quite add up in your theory I'm afraid.

A £15000 water tight shell is not an extension.
The fit out (plaster, electrics, fixtures and fittings) will add a lot more to your costs.

Increasing the value of your property doesn't make you more financially stable, sure it means that your property is worth more and proportionally that your equity is greater but it sounds like you then want to draw down against this increased equity with some form of remortgage. if so, then you will be worse off than now as you will have increased monthly expenditure.
If you do not intend to remortgage the equity then I cannot see how your situation improves at all, other than possibly your LTV will be lower for the future, but not by much.

Your situation sounds pretty similar to ours.
We have unsecured borrowing and could certainly afford to increase this to extend our 3 bed to 4.
When I looked into the borrowing it would be at a variable rate and that made me put a stop to it instantly, rates are only going one way in my opinion.
So, I then increased payments to clear the existing borrowing and in just a couple of years we will be debt free except the mortgage if things carry on as they are, touch wood.

Then and only then will I be in a sensible position to either extend or (more likely) move to get the extra room we're after.



Good luck with your decisions, but at the moment they don't quite stack up and hopefully you can either see this, or offer a bit more explanation to clear things up a bit more and get some better advice....

happysnail_2

Thanks for your replies me and my husbands debts are both loans which have 4 years to run this debt is being tackled, I mean we will be more financially stable in the long run if we can do this as once our debts are cleared we will have a lot more equity in our house and in 5 years our mortgage would be lower, and we should have £70,000 equity at least even in the current market ,
The extension costs sound ambitious but we have a builder relative wanting to do the job for us and a company would charge around 20,000 and above for the same request which is why we are wanting to find away of doing this ,

We are aware of the inside costs and have renovated a house before so not going in blind

But appreciate your comments and we won't go ahead now

andy.m_2

ours is not to put you off or tell you not to do it.
All anyone here wants to do is give you different perspectives to consider.

Don't lose heart or feel that anyone is judging you

paddyrg

Hiya, I can see what you're thinking, that adding a bedroom increases the value to the point where it pays for itself? Not a bad plan in itself, but unfortunately you don't get to "cash in" the value increase (which is a theoretical increase, of course) so you'll just leave yourself spread thinner, at least in the short term, I suspect.

But the answer is ask your bank - ask them if you can borrow £15k against a £40k notional property value increase. I'm afraid I rather suspect they'll turn you down, but they are in the best position to consider this as they know your borrowing position already.

Personally, I'd go turbo to clear some debt first - having that debt means things will effectively cost you (say) 20% more than they cost a cash buyer who can haggle a cash discount whilst you're paying extra interest. Clear the debt and you are in a much stronger position :-)