Funding an Extension - Mind Blowing

brizza

Get the loan to cover everything so that you have a safety net and then stooze the credit cards as a back up plan to start moving the loan debt onto 0% credit card debt?

michaels

Lots of loans are advertised at 5% apr - do you not qualify for this?

Suppose you could only get up to 15k at 5% perhaps on top you could use a zero percent puchase card and agree with your builder that you purchase the materials on this (there may also be tax advantages to this). 0% purchase cards only last up to 18 months but after that you could balance transfer on to a 0% BT card.

Once the extension is built you can then see whether your new LTV and your ncome with other debts support a remortgage on to a better rate, at least with HSBC you are by no means on the worst svr.

StuC75

You WILL NOT have a better Loan To Value rate when the work is done.

you currently owe 132k of 145k = 91%.

If you borrow 30k

You wil then owe 162k of 175k = 92.5%

Your Loan To Value rate gets worse as the perceived 13k equity is still the same £'s but a lower % as the valuation has gone up..

All current 'reputable' loans are not front loaded with the interest in the same way the dodgy loans were in the past!.. If you look to settle down the line then interest will be rebated..

what happens if you are not able to find a follow on balance transfer card? the deal expires and you find yourself paying a much higher follow on rate.

With such a high credit card balance you may not be able to get a high enough limit (and how utilisation would count with credit file \ score)..

Thats a lot of risk to save a couple percent difference on the Bal Tfr compared to a Fixed Loan....

mike83 wrote: »

Thanks. This sir, Is precisely my OPTION 1 (from my original post). I see no way why this wont work.

"1 – Bank loan @7% for 25k, 5k from cash/savings only making 3% interest. Then re-mortgage the house at better LTV after the extension (LTV would be circa 75%, so could get a rate in the 3.x%?"

Okay, so I'll still have a loan to pay off, but I will likely get a better mortgage deal to counter balance the loan payments!

There's no reason why this would not work, despite some of the comments. My whole credit card scenario was kind-of the same thing, but using credit cards to pay for the extension, paying small fees to move to 0% cards whilst I chip away at the debts.

Unlike a loan where the full interest gets applies up front (lets say 5k for a 25k 5 year loan) the credit card fees of around £300-500 time for each balance transfer would be cheaper if I could pay off in the same 5 years (would need 3 balance transfers - each getting cheaper as I pay it off).

Based on that - I don't see why it is still not an option (besides my unanswered question "how do I pay a builder on a credit card".

Anyway - if all elase fails, Tesco loans here I come......

Cheers

michaels

StuC75 wrote: »

You WILL NOT have a better Loan To Value rate when the work is done.

you currently owe 132k of 145k = 91%.

If you borrow 30k

You wil then owe 162k of 175k = 92.5%

Your Loan To Value rate gets worse as the perceived 13k equity is still the same £'s but a lower % as the valuation has gone up..

I don't think the OP is proposing consolidating his borrowings on remortgage (and thus the LTV figures you calculate will not apply). If the extra borrowings are not secured then they will be considered by the lender when assessing affordability but will not be considered when assessing LTV thus potentially allowing the OP to qualify for a lower mortgage rate based on the lower LTV - all subject to affordability of course.

However what is unclear is whether paying a lower rate on the mortgage would save more than paying a higher rate on the unconsolidated debt will cost.

Agree with you about the interest on the loan part, isn't there some fixed formula for loan early repayment charges.

The OP claims he can save £900 pcm so paying off the 30k should only take 33 months and the amount outstanding halved after 17 months so there is less danger on them having trouble rolling over the debt on 0% short term deals after 18/24 months (assuming they really can maintain the discipline to pay off this quickly)

laidbackgjr

I would also question whether spending £30k on an extension will increase the house value by £30k. Some extensions add more value then they cost, others less, a lot depends upon what's being added and the area of the property.

mike83_2

laidbackgjr wrote: »

I would also question whether spending £30k on an extension will increase the house value by £30k. Some extensions add more value then they cost, others less, a lot depends upon what's being added and the area of the property.

Thanks, but this is not the question......I like my house and don't want to move can't put a price on that. I figured that it costs 10k to move......so even if my 30k extension adds only 20k.....what the hell.

Thrugelmir

mike83 wrote: »

Thanks, but this is not the question......I like my house and don't want to move can't put a price on that. I figured that it costs 10k to move......so even if my 30k extension adds only 20k.....what the hell.

Could you postpone the extension for a while. In the meantime pay down as much of the mortgage as you can in order to build equity to draw on.

Yorkie1

mike83 wrote: »

Thanks, but this is not the question......I like my house and don't want to move can't put a price on that. I figured that it costs 10k to move......so even if my 30k extension adds only 20k.....what the hell.

If it only increases the value of your house a little, when you come to try to remortgage the lender will see that you still have a very high LTV, and £30K debt elsewhere, and - as others have said - may decline to remortgage.

All of your plans are based on the lender being happy to remortgage to pay off debt, and others are telling you that the lender may not be, leaving you with potentially high interest rates depending on where the debt is located.

mike83_2

Yorkie1 wrote: »

If it only increases the value of your house a little, when you come to try to remortgage the lender will see that you still have a very high LTV, and £30K debt elsewhere, and - as others have said - may decline to remortgage.

All of your plans are based on the lender being happy to remortgage to pay off debt, and others are telling you that the lender may not be, leaving you with potentially high interest rates depending on where the debt is located.

Well.....I have very reluctantly decided that my beloved M3 must go to fund part of this. This will raise a good bit towards the extension, leaving me another 20k to find. I reckon I can find 5k, and will loan 15k at a rate of around 5.1percent. Which is far more digestible.

I will end up with only a 15k loan, and a ltv in the mid 70's. I see no reason why I would not get a remortgage on this, and I would have no other debts.

M3 is already on eBay!