Financing an extension

Chris754

Hello,
we are about to move house.
We have a 50% LTV for the new purchase.
Once we move in, we want to extend the property, but it will take months to sort out architects, planning permission and builders.
We need around £50k to pay for the work. If we borrow this now, it will give an LTV of 75%.
Should we borrow the money upfront and keep it in the bank, or go back to the lender in six months time once we need the money?

I presume that we will be tied to the initial lender to avoid a 2nd charge on the property, and that we will have to pay a second arangement fee, but this must surely work out cheaper than paying interest on 50k for 6 months when we don't need it?

Also, do we need to make sure that the extra 50k will still fit within the LTV of any deal we agree now?

Thanks in advance,
Chris

Simon_gloster

Monies advanced for a purchase will be used to purchase only. If works needs doing then this should be financed from the proceeds of your sale.

Should there be no money from a sale then you would have to wait 6 months in order to apply and take a further advance rate only. The LTV would be based on the property value now not in 6 months and based on what the lender thinks it worth not what you think its worth.

kingstreet

Take the higher mortgage at the outset, selecting an offset product to enable you to keep the additional funds in an account which will simply negate the extra interest.

The rate for additional borrowing later, is never as good as the rate you can get at the house purchase stage and there may be additional fees as you remarked.