Funding an extension?

kmmr

Whats wrong with an unsecured personal loan? I walked into my bank and they said I was pre-approved for £25k. I had been a customer for 10 years with just a current account, so they were comfortable with me.

10 minutes later a major stress was resolved - for a while at least!

It was about 10% interest rate from memory, and I paid it back after 2-3 months with no break costs.

DevilsAdvocate1

We had an extension done 3 years ago. Our situation was a bit different in that we had a lot more equity in our house and we used that (our house was worth £170K and we only owed £50K).

However, a few posters have commented on how the costs increased during the build. This did not happen to us, but I think this was mainly because we hired an excellent architect at the outset.

It cost us £1000 - £500 up front and £500 after the building regulations had been passed. The architect sat us down and went through all the things we were hoping to achieve from the build. He then spent 6 hours, measuring every room in our house plus the distance to the neighbouring houses. He also looked at the location of trees, drains etc.

He then did detailed plans of the house as it was, before doing detailed plans of the house we wanted.

The architect arranged a meeting with the planning department before we submitted the plans. The planner came to my house and we went through what we were proposing. As a result of this, we made one change to the plants (put frosted glass on a window) We received 6 objections to our plans, and the architect put in a letter refuting the objections. The plans were passed first time.

These plans were very detailed, right down to the materials to be used. Three of the four builders we asked to quote, commented on how great the plans were as it left nothing open to interpretation.

During the build I only made one, small change (the location of a door). This change was so small it was not chargeable.

We got 4 quotes. Three were within £500 of each other. The fourth was £5000 more. Of the three, one of the builders gave me the creeps. He then tried to get money out of us.

The one we picked was the most open. He offered us the opportunity to go to his current project and speak to the owner. The owner had used the same architect as me, so we felt that as the arichtect might recommend this builder it would be in the builder's interest to do a good job.

There was no increase in costs during the build. Its been two years now and I don't regret it at all.

For information - we had a 2 story extension put on the back of the house, increasing the floor space by around one third.

HTH.

JimmyTheWig

It depends how desperately you want the extension done quickly.

You say that your partner has permission to let her house out for 12 months. Does that mean you are planning on selling in that time? If not, what would you do with it? How far through the 12 months are you?
If you are going to sell that property then use the money from that for the extension.
If you are not going to sell that property then you risk not being able to let it out - in which case you'll have a mortgage to pay between you with no help from tenants. In that situation I wouldn't want to be taking on more borrowing now.

charlotte_rose

saving and patience will win through

wolfwiser

Devilsadvocate1 and kmmr, thanks for a little bit of positivity! I understand the value of having accurate drawings, and have mentioned in an earlier post that I shall endeavour to obtain planning permission soon regardless of the outcome of finance options, this I believe has approx 3 years to act upon so can use it as a fall back at a later date.

The builders I have spoken to already come recommended from several sources, and I also have a recommended architect who is booked to undertake the drawings, he seemed very knowledgeable and has already outlined the limitations I will face regarding planning. I have only spoken to one builder thus far, but shall of course get several quotes, and not 'estimates'.

Although I shall have a contingency budget, I want to get accurate prices and also realise that it’s not always about the cheapest builder, but rapport and trustworthiness also counts!

As for personal loans, well this is certainly an option and I actually thought quite probable, and may be preferable to high loan to value mortgages, and/or credit cards.

Regarding my partners house, based on the market - demand for rental is very high (we already have someone wanting to move in after the current 12 month contract is up) but selling is the area is slow (new builds with first time buyer scheme seem to trump resale properties).

Thanks again for the input...

geraint83

Hi,

At a risk of hijacking another user's post, I'm currently in a very similar situation so thought I'd post here rather than start a new thread.

My wife and I are currently looking to extend our home and are in discussion with an architect. As things stand, we estimate that the extension will cost around £70k, and we have enough savings to cover £40k of this - leaving a £30k shortfall.

We've spoken to our lender and they can only offer us another £5k before we reach the LTV maximum. They can't lend on the expected value of the property when the extension is complete (which is reasonable, I suppose), but are also basing their current LTV calculation on what the computer says the house is worth (according to house pricing statistics, while we know that house prices in our area haven't dropped by the same percent as nationally). They're unwilling to come out and re-value our home as it currently is since we haven't done any substantial structural alterations since purchasing 5 years ago.

However, our lender has told us that in theory (based on our wages etc), they could lend us another £70k, so we'd be in a position to remortgage when the extension is complete (subject to staying within the LTV ratio, of course).

From the answers on this thread, it would seem that obtaining an unsecured loan is the only solution to our £30k funding shortfall, and that these loans would be paid back immediately after remortgaging when the building work is complete.

Is this a correct understanding of the situation, or could we consider alternative options? I suppose we could look at 0% credit cards, but I'm not convinced that we'd be able to get enough credit for what we need.

Any advice would be welcome!

wolfwiser

Well I guess you're pretty much asking the same question, however I'm looking for a large sum, of ~£50k. It seems a shame that a second mortgage or similar are not readily available, as no doubt this will add value to the house, I think more people are opting for extending rather than upsizing as over £250k you'd be paying 7.5K in stamp duty, so if youre close to that value it makes it worth staying and spending the money on your current property.

For us its looking more like getting creative with credit cards and personal loans, then remortgaging against the new higher value and paying all the loans/cards off. Is this REALLY the best way??

geraint83

Exactly.

We're in very similar circumstances - we've just had our first child and need some more room. We can't find any larger houses we like in the same area, and the increase in price would probably be prohibitive if we could find one (because of stamp duty etc as you mentioned).

For us, it's about getting an extension that meets our needs for the future (we'd hope to stay in the extended home as long as possible) rather than making a profit.

It's a shame that there aren't any other funding possibilities because all we need really is a very short term loan. We could fund around half the cost using our savings, so we'd only need to take out the loan towards the end of the project and it would be repaid immediately!

kmmr

wolfwiser wrote: »

Well I guess you're pretty much asking the same question, however I'm looking for a large sum, of ~£50k. It seems a shame that a second mortgage or similar are not readily available, as no doubt this will add value to the house, ...

For us its looking more like getting creative with credit cards and personal loans, then remortgaging against the new higher value and paying all the loans/cards off. Is this REALLY the best way??

Your problem is that you are being judged by the actions of other people in the past.

Banks used to give the money in advance, but would find that 6 months later the money was gone, and the house wasn't finished. I'm not saying the owners *always* spent it on holidays or living it up - in fact they probably just got a little carried away with spending a little more here and there... and choosing the slightly better version of everything. Believe me, it's easy to do!

It is harder, but it means you do focus more on the budget when you simply don't have the cash there.

I know the common perception is that banks are the root of all evil, but in this case they are trying to be less risky - and provide more safety and security for depositors and shareholders. And we are all shareholders now!

JimmyTheWig

wolfwiser wrote: »

Regarding my partners house, based on the market - demand for rental is very high (we already have someone wanting to move in after the current 12 month contract is up) but selling is the area is slow (new builds with first time buyer scheme seem to trump resale properties).

Regardless of supply and demand, if the mortgage company has only given permission to let it out for 12 months, you need to sell it or pay the mortgage without tenents.