Mortgage and how to fund extension

sidetracked

Hi, first post

Our situation may be a little complex, or maybe not, but is broadly as follows:

We are purchasing a house for £115,000 with a view to immediately adding and extension, with a build cost of approx £40,000. Based on the local market etc, the completed value of the house should be in the region of about £170,000, however this isn't of huge relevance as we won't be looking to sell for at least 5-10 years.

The plan initially is to take out a 90% mortgage on the £115K (10% deposit) and fund the extension entirely from savings, but we are hoping to then have the house re-valued and extend the mortgage back up to 80-90% of the new valuation.

Does anyone have any experience of doing anything like this or advice as to which lenders may be receptive to extending the mortgage (on the basis of a new valuation within 12 months or so of the mortgage being taken out?

Meeper

If you want to re-mortgage to a new lender, you would need to: a) ensure that your existing deal doesn't have penalties to come out of, and b) wait at least 6 months from your purchase date before re-mortgaging.

If you want your existing lender to re-assess, you would need to ensure that you went with a lender which would allow this, it requires a proper discussion with them up-front as to your intentions and enquire as to whether they would allow a further advance, how long after the original mortgage you would need to wait, and what rates they would offer for this facility? Is it the same as their normal range, for example, or is there a special further advance rate?

Regardless, why would you want to increase your borrowings? Just to put back into your savings? If your mortgage rate is 4.5% (for example), why would you want to increase it just to put money into savings at cash interest rates at the moment, about 1.5%? It all sounds possible, but I'm not sure your rationale is well thought-out.

Thrugelmir

A lot will depend on whether you meet the lending criteria for an increased advance and whether the lender accepts the reason for the purpose of use of the additional funds.

holly_hobby

Also concerned that, whether on re-inspection, the extension will actually result in the anticipated increase in valuation from the surveyor (if not desktop).

Fingers crossed it does, but would be wise to just have it in mind, that the valuation that comes back may not entirely meet expectations ... always best to hope for the best but prepare for the worst !

Holly