How do I fund a house extension?

Kricho

Morning all

I'm looking for some guidance in relation to funding a house extension. Here are the facts...

- We purchased a house in the last 12 months
- That mortgage is 90% LTV
- We have improved the house considerably but if we remortgaged I suspect we would get 80% LTV
- We want to put up a large house extension which would cost £100,000 - £150,000
- The value it would add to the house is greater than the cost of the extension
- Our existing mortgage was well within our mortgage burrowing capacity

My question is how to I fund a house extension?? The banks I have spoken to will only lend based on current value not value when complete. As we recently bought it we won't be able to fund a whopper of an extension this way.

Does any one have any experience of this? Are there companies I should speak to or particular high street banks?

Any guidance would be much appreciated!

holly_hobby

You will not obtain any high st secured lending based on estimated future value (poss an investment bank may consider it, but your talking high interest (to reflect risk) if they do - to which if you are subsequently prevented from remortgaging back onto a high st resi arrangement (re - status, property issues or both)then you'll be between a rock and a hard place with affordability possibly driving a forced sale. (sounds dramatic but to be responsible, you have to duly consider both sides of the coin here).

You can't remortgage to release 100k+ of equity, and you won't obtain an unsecured personal loan 100k+ loan (not withstanding the above discussions re investment banks).

Of course your income would obv need to support your mge, and any funding sourced for the extension - which I'm sure you're aware of.

Notwithstanding all the above, you will of course need to obtain LA planning permission for the extension, AND also the permission of your mge lender to perform the works (assuming you secure the funding somewhere).

So there you have it ... IMHO as it currently stands this is a no goer

Sorry ... although I'm hopeful that someone will come along and tell me there is a home for this ....

Good luck

Holly

Kricho

Thanks Holly - I think you are right! We're all over planning aspects as husband is an architect and I'm an accountant so coming to the forum is my last resort!

Only option I can think about at the moment is doing it bit by bit i.e. doing £30k chunks of completed build at a time (e.g. completing the ground floor kitchen extension with build quality that will take the second floor in the next tranche) and finance this with unsecured loans. Once each part of the build it completed we would then re-mortgage it to secure a lower interest rate then suffer the early repay charge on the pers loan.

latecomer

Trouble is that unfinished building work wont necessarily increase the houses value and could even decrease it.You may have to get a completion certificate for the ground floor extension before being able to re-mortgage it and that would involve getting it roofed etc which would then need to come off to build the second storey etc.

If you are going to re-mortgage several times then it might be worth going with mortgages which have no ERC but possibly a slightly higher rate.

Simon_gloster

Kricho wrote: »

Morning all

I'm looking for some guidance in relation to funding a house extension. Here are the facts...

- We purchased a house in the lasit 12 months
- That mortgage is 90% LTV
- We have improved the house considerably but if we remortgaged I suspect we would get 80% LTV
- We want to put up a large house extension which would cost £100,000 - £150,000
- The value it would add to the house is greater than the cost of the extension
- Our existing mortgage was well within our mortgage burrowing capacity

My question is how to I fund a house extension?? The banks I have spoken to will only lend based on current value not value when complete. As we recently bought it we won't be able to fund a whopper of an extension this way.

Does any one have any experience of this? Are there companies I should speak to or particular high street banks?

Any guidance would be much appreciated!

Even doing it in chuncks isnt really going to help as most lenders (who is yours as a couple will do 85%) will only do 80% on a further advance. Yes you would be able to challenge their index linked as the floor area has increased. It seems like a lot of hard work and stress ahead.....could you have not bought a bigger property as its a recent purchase or thought about it a little more!!!

Kricho

Agree Latecommer - you would have to identify distinct parts of the build which you would be able to do and complete in order to remortgage i.e. complete kitchen ground floor extension first then remortgage, complete new garage, utility ground floor next then go for second floor etc.

It would be more expensive long term to do it this way as you would be buying chunks of work you didn't need but at least it is financeable.

We've got a lot of headroom monthly outgoings wise I'd just rather finance with "cheaper" mortgage debt than more expensive unsecured.

Current mortgage has no ERC which is good!

Simon - a bigger house would be lovely but would have cost a lot. We paid £420k, if we bought the house we are trying to build in the area it would be north of £750k so I probably would have been waiting a long time! We bought a place which needed a whole load of work doing to the current shell which we've almost done - house next door (identical but in tip-top order) sold for £95k more than ours a couple of months after ours.

Thank you for your insights so far - very helpful!

latecomer

If yours is now in the same kind of condition as the one next door? If so you could potentially re-mortgage and get the majority of the funds you need to do the extension.

Thrugelmir

Kricho wrote: »

We've got a lot of headroom monthly outgoings wise I'd just rather finance with "cheaper" mortgage debt than more expensive unsecured.

Overpay your current mortgage and build equity. Lower LTV will result in cheaper mortgage interest rate on your current borrowing.

Improvements to existing property do not always add value relative to cost. Not least that the work incurs 20% VAT and that individuals personalise with a higher quality finish.