Funding an extension?

kmmr

wolfwiser - £50k is over the maximum for a personal loan (£25k), but have you looked at bridge financing places? I've never used them so not sure on the rates, but I think they put a second charge on your home, so perhaps that could work.

I'm not sure how the rates work out.

Edited: http://www.acceptances.co.uk/short-term-finance/bridging-loan-rates here is one. Looks like rates are 0.99% PER MONTH, so 12.4% APR. Not great, but for 6 months it could work.

JimmyTheWig

geraint83 wrote: »

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!

I believe that Zopa are good for short term loans, though I might be wrong.
But I wouldn't bet on being able to secure the additional mortgage funds immediately, however. It can take months to get through all the paperwork, survey, etc.
Even then the bank may say no and there's not much you can do about it if they don't agree with your valuation.

kmmr

JimmyTheWig wrote: »

Even then the bank may say no and there's not much you can do about it if they don't agree with your valuation.

I my case we did win that fight too. The idiot who came and valued it initially said that after spending £70k his estimate would be that the value would be unchanged. We were increasing from 1 to 2 bed, and increasing the floorspace by 25%. Anyway, after providing comparatives they decided it was a mistake, and the valuer admitted he just valued it as it was and didn't realise what he was supposed to be doing.

sigh... an extra stress I didn't need.

In relation to planning, I thought I HAD planned everything, but I was wildly wrong. And I changed things too as the build progressed - but it is very hard not too, and if you haven't done a big project before the learning curve it steep. Watch a few Grand Designs to see how the best laid plans go astray. Be cautious about thinking 'they are so stupid! That won't happen to me'.

geraint83

JimmyTheWig wrote: »

I believe that Zopa are good for short term loans, though I might be wrong.
But I wouldn't bet on being able to secure the additional mortgage funds immediately, however. It can take months to get through all the paperwork, survey, etc.
Even then the bank may say no and there's not much you can do about it if they don't agree with your valuation.

Thanks, will look into Zopa.

In our case, it would be extending our mortgage rather than a full blown remortgage, so hopefully it shouldn't be too much of a hassle - we'd only need to borrow the extra £30k - the amount outstanding on the short-term loan.

JimmyTheWig

geraint83 wrote: »

In our case, it would be extending our mortgage rather than a full blown remortgage, so hopefully it shouldn't be too much of a hassle - we'd only need to borrow the extra £30k - the amount outstanding on the short-term loan.

Not sure there's much difference between a full remortgage and extending your mortgage. In either case you need to meet their criteria, so need a valuation, proof of income, credit checks, etc.

wolfwiser

Jimmythewig - Regarding my partners property, you've also missed the option of changing the mortgage to a buy to let (expensive though they are), the mortgage company gave permission on the current repayment residential mortgage to let it out as they don’t do B2L mortgages, that side of things is okay and not a massive concern as yet. To all intents and purposes it is self sustaining and unfortunate that we need to keep 25% equity in there to satisfy future B2L deals.

Thanks for the other advice on bridging loans and the like, I think I'm going to have to do some serious calculations to work out the best option. My gut feel at present is to remortgage to a reasonable LtV rate and maybe makeup the shortfall with personal loans, although I think in order to get a decent interest rate my partner and I would take out separate loans, off the top of my head I think the rates are the most favourable around £7.5 - 15k, but guess they rapidly get worse as you approach them maximum allowed.

Does anyone know how early repayment penalties are calculated, I think its typically a certain multiple of a months interest payment - so with respect to that would a longer loan term (e.g. 10 years) be preferable??

Geraint83 - if you contact your current lender you may have a reserve facility and be able to get at mortgage repayments you've already made, and release some equity at relatively low cost?

jamesd

For unsecured loans the repayment bill is up to two months of interest on any overpayment, whether it's partial or complete. Some lenders don't charge that. A longer term would increase that penalty a little because you'd have paid off less but the effect over a few months is insignificant.

What did your current lender say about LTV after new valuation following the work? Looks as though the £20k is on the current valuation at 80% LTV.

Given your incomes it's entirely possible that you can get £30k out of credit cards into your bank accounts. You might try Virgin who allow balance transfers from current accounts to their cards for a fee between 3% and 5%, then 0% for whatever the term of the deal you sign up for is.

An overdraft might be viable, depends on your banks. If your lender is willing to lend later on valuation after construction this might be a fairly inexpensive way to go.

cb4fwh

Wolfwiser,

At the time, I was on a circa £45k salary.

I had various 0% cards, with limits of 4k (M&S Money), 6k (Tesco), 4k (play.com MBNA), 8k (Virgin Money MBNA) & 8k (Lloyds TSB).

I was never refused for any new card, nor any balance transfer but my credit history is A+. I have never defaulted or missed a payment ever...

wolfwiser

Thanks again for the information, my current lender will only value on current property at a max of 80% LTV, so I’m looking to remortgage against an optimistic yet achievable valuation (my next door neighbour is up for sale for £265K which cannot hurt my situation) with a lender that will offer 85% LTV. I can get a mortgage with a free valuation, (other initial costs = £90) and whatever they valuation comes back at I'll release all but 15% equity, unless it’s really low and then I'll try a different lender/valuation. The interest rates get silly after 85% LTV, so looks like a safe way to go.

I've been advised that if you state the value at say e.g. £100k, the lender will never say - "oh actually it’s worth £110k" only confirm the applicants £100k valuation - as it’s not in their interest to do so.

The reminder of the required funds I guess will come from a combination of cards and loans, as yet to be confirmed! Though I didn't realise just how much credit card debt people could wrack up, cb4fwh debts (or limits at least) of £30 is a little scary to me!

jamesd

Your new lender plan seems sensible, good luck with it!

I could live for about four years on my credit cards, maybe five.