Financing an extension?

Lulabellarama

Hello,

I'm hoping to get some advice on whether we are able to finance an extension on our home in the near future. We bought our house last year, as first time buyers. It was a respossesion and I felt we paid under market rate for it. The area we live in has an extremely bouyant property market and from looking up sold prices, they are still heading upwards. At present we have no equity in the house, only having a years worth of repayments under our belt, but I do think our property is probably worth about £20k more than we paid for it, if it were to be revalued.
We are keen to do a side return extension to make the kitchen into a big open plan family room. Estimates from friends in the business are around the £45k mark for the kind of finish we want. We can't get any money from our mortgage provider unless we request a revaluation, which I expect they are conservative about. Is there any precedent for borrowing the money from another source and then remortgaging when the work is complete and using the increased value to repay the loan?
Am I making sense? Is there a way to do it other than saving, which we do, but would obviously take many, many years.

chalkie99

we paid under market rate for it. The area we live in has an extremely bouyant property market and from looking up sold prices, they are still heading upwards. At present we have no equity in the house

If you paid under the market rate and prices are heading upwards how can you possibly have no equity? That doesn't make sense.

Your mortgage provider doesn't seem to share your idea of valuation and be aware that the cost of an extension is not always recovered by an increase in property value.

You wont get an unsecured loan for the amount you require and, even if you could, it would be problematic getting an increased mortgage when work is complete because the mortgage company would look at your outstanding credit and have no guarantee you would pay it down with your new mortgage advance.

You could post on the mortgages section and see if any of the brokers who hang out there have suggestions.

Lulabellarama

What I mean is that the bank valued the house, for mortgage purposes, at the amount we paid. I believe that was a very cautious valuation and given that prices have also risen I would estimate that a revaluation might put it as £20k more than we paid. But that's obviously not garaunteed.
I'll try the mortgage board too, thank you for your help.

gb12345

Lulabellarama wrote: »

I believe that was a very cautious valuation and given that prices have also risen I would estimate that a revaluation might put it as £20k more than we paid. But that's obviously not garaunteed.

Even if someone did revalue it at an extra £20k, that won't get you a £45k secured loan (or anywhere near one).

StuC75

Is the 20k extra on how it currently Is? Not many secured lenders will lend it against what it may be worth after the work.

The Easier option is looking for a general unsecured loan - as that has no relevance to property value, just what you can afford..

Lenders such as Tesco have much better rates now (not too many points off mortgage products) - as dont forget if you did secured lending you would be pushing up the LTV % so may not be in the best rate bands..

I recently did this on more modest scale, knowing that when fixed rate up on the mortgage and repayments in meantime & slight improvement for the work that I could then re-work the mortgage to cover this off - if the rates involved make it worth while...