Best way to fund extension?

Laurz29

Hi everyone,
This is my first post, but I've been looking on here for the past few months and have found everyone's posts and threads really helpfull, so thank you.
I've just purchased my first home, i bought it for 10% less than than it's worth as I bought it off my landlord, he was eager for a quick sale.
I'm looking into having the property extended within the next few years, and was just wondering whether it's best to remortgage to free up some money or to get a personal loan. I have already started over paying on my mortgage by £130 a month.

Any feedback would be great x

dimbo61

What you need to do is build up the equity in the property or build up your savings in ISA,s
Its work what someone is willing to pay for it
How much deposit did you put down ?
Getting a Loan to do improvements is not a good idea

Laurz29

Thank you for your reply. I put down a 15% deposit and like I said, am over paying each month. Looking to increase this to £250 a month after Xmas. I'd just heard of people taking out loans for doing the house up so didn't know if this was the best option. Will over paying by more help me release more equity in the future?
Sorry, this is all new to me.
Thanks again for any advice, much appreciated x

mrchiggles

So, this was our situation, which might help you.

We bought a house in 2007 for £200k on a 90% mortgage and had done various improvements ourselves (inc new kitchen, etc) and ended up at the start of the year with a valuation of around £230k for the unextended house. Mortgage down to the £170k mark by then leaving us with about 60k equity.

We wanted to build a double height extension to put a 4th bedroom on, 2nd bathroom and dining room at the front. Looking at the local market we saw lots of houses that had previously been extended in a similar fashion (although older) for the 280k+ mark.

So if we did spend £50k on the extension then it would have been £180k + £50k = 220k mortgage on a 280k property which gave us an 80% LTV which was reasonable (although clearly not as good as the 75% LTV we had prior to extension.

The mortgage provider wasn't going to release 50k on the promise that the property would be extended and therefore achieve the value it was expected to achieve so we borrowed 50k on a personal loan to do the work. Took 3-4 months during which we were paying £1000 a month for the loan repayments (ouch!) but when it was completed we just remortgaged with a new company for £220k, paid the original £170k mortgage off and paid the loan off.

Obviously we took a risk, if we hadn't achieved the 280k valuation when extended we'd have been stuck with a loan that would have taken quite a while to pay off but we were confident enough based on the local market.

In addition, we are obviously lucky enough to have the income to get such a large loan and be able to cover the repayment.

Hope that's of some help!

Laurz29

Thanks mr chiggles,
That definitely helps, probably best I do some research of the local area to see what prices extended houses are going for. Luckily, my husband is a builder and will be doing all the work himself ( this will be a long project as will be done at evenings and weekends! ) plus we get materials cheaper.
Thanks again x