Will roof+garage conversion help with house value for remortgage?

jam83

Hello I'd like some advice please !

I am trying to decide whether to keep a redundancy payout to help when our fixed rate deal on our mortgage comes to an end or to spend majority of money on a partial remodel of house as it is currently very outdated. We can manage at current mortgage rate on just my husband's salary, but as our mortgage is by far our biggest expense I'm a bit apprehensive of spending my payout and risking not being able to get a decent remortgage due to us only having one income now.

We have recently bought a new house (sept last year ) and are looking to convert the flat roof on half of the property to a pitched roof to match rest of house and also do a garage conversion to make downstairs living space bigger.

I've recently taken voluntary redundancy and will be a housewife for the next few years. This means when our fixed rate comes to an end in 3 years time we will only have one income to be assessed against instead of the two incomes we had when we took the mortgage out at the end of last year.

As we were first time buyers without a big deposit when we bought the house we are paying a whopping 6.2% on our current fixed rate deal, so even if the interest rates go up I would hope that we would be able to find a remortgage at worst at the same interest rate.

Our house is a semi that we purchased for 250 K. The other half of the semi has been remodelled along the lines of what we are planning and was bought for 315K in March 2012. Important to note though that next door has been renovated to a really high standard, whilst we would still have an old kitchen etc.

We wouldn't be left with no savings if we went ahead with works and would probably have about 10K in savings for emergencies.

Basically my question is would we be shooting ourselves in the foot when our fixed deal comes to an end by spending our money this way? Would we be better off keeping money to use as more of a down payment on remortgage if required? The only thing that concerns me is our mortgage was taken out on a joint income of 80K, but our income is now only 43K basic + bonus taking it up to approx 60K per year.

Do mortgage companies take in to account works you have undertaken since buying the house that would improve value of house?

I'd really appreciate some advice as I'd love to start the works on our new house, but am super cautious as I have no experience of remortgaging.

Thanks!

jam83

Don't get the wrong impression about my comments on our house vs next door. Our house just needs redecorating and a new kitchen. There's nothing wrong with our existing kitchen, but it's about 10years old so looks a bit naff. Next door have one less bedroom than us as they have an Ensuite, but they have roll top baths etc and their house is lovely!

amnblog

If you are down to one income I would think you are well advised to resist spending your capital at this time.

Thrugelmir

I would use some of the funds to overpay the existing mortgage if at all possible. As you'll save a good amount of interest at the rate you are paying.

The remainder keep as a reserve. Wouldn't commit to any major financial undertaking until the future has certainty.

dimbo61

Bought house for £250K with small deposit say 10% ? £25K so £225K mortgage !
Now you are paying 6.2% and most fixed deals allow 10% overpayments ( please check with your lender )
I would split the money in three.
Keep one third in savings
Pay one third off mortgage
Use one third to improve the property
Only my views

Kynthia

It's hard to say how much a mortgage lender would revalue the property so that's guess work. So it might be easier to do some maths on what might happen when you remortgage in 3 years time. Look at your repayments and see what LTV you will be remortgaging at if your property value doesn't increase, does it being it down to a lower level with better rates? However as you'll be on one income, roughly how many salary multiples is the amount you'll be remortgaging at? If it's high or your partner doesn't have an excellent credit history then you might not get what is a good rate at the time. That brings us onto interest rates, how likely do you think they'll rise in 3 years time? If you didn't qualify for a good rate when you bought will you when you remortgage on one salary and what rate might that be as they can get much higher than they are now?

Just some things to think about.

jam83

Thanks for all of your help. I think I'm going to overpay my mortgage (by approx 10K), get the roof done and keep the rest in savings. That should still leave us with a healthy nest egg of about 25K for a rainy day/down payment for remortgage. Our mortgage interest is calculated daily and we can pay an extra £500 per month without being penalised, so I think that's probably a good option. The roof is going to need doing soon anyway as it is a flat roof that hasn't got much wear in it and I know in the long run a conversion to pitched will save us the £ and hassle of getting the flat roof repaired/replaced every few years. We bought this as our forever home so I don't mind spending a bit more on something that would last.
It's just a shame that we didn't have this money a few months ago to us for a bigger deposit in the first place! We got a 95% mortgage which we applied for in April last year (we moved in sept last year, the mortgage company just took forever as did the people moving out of our house!) Even though we were lucky enough to both have a really good credit ratings and good jobs we were cash poor due to negative equity on sale of my husband's shared ownership flat having eaten up all of our savings. At that time it was the only mortgage open to us with our deposit as I am a first time buyer but my husband isn't. So none of the first time buyer mortgages were open to us. My husband didn't own his flat anymore so the deals open to existing homeowners weren't open to us either (he had only sold the following year so enough time hadn't passed for him to be reclassed as a first time buyer either). Even though 6.19% is a whopping interest rate it really was the only option open to us at the time, so I think it's time to start chipping away at that mortgage with overpayments so that it's paid off before we are 102!
Thanks again for all of your help!

Prothet_of_Doom

Do you NEED more space ?

jam83

We could do with more space as our living room is small and only has space for 3 people to be seated. Luckily there are only 3 of us, but we are hoping to have more children soon, which was why we thought more space would be needed. Also, it's a 4 bed house so the downstairs is a bit out of proportion with upstairs (we have a large integrated garage with a bedroom above it).

dimbo61

Having £25K earning 1-2% in savings while paying 6.2% !
Can you reduce the term? It cost me £50 to change our term from 22 years down to 10 years.
Now this increased the mortgage by £500 a month but we had savings!!!!
If you use " whathecost" you could work out how to reduce the mortgage term so that you are over paying by say £1000 a month for the next 3 years!
Once the fix is ended and you have used up most of the savings just extend the term back out to original term.
Hopefully you will have 15% equity or even more by then!

Dave_the_Ginger_Cat

In terms of the value increment, I'd ask an estate agent.

Personally I doubt you'd recoup the cost for the full roof investment, though I've no doubt you'd make it more marketable. The living space/garage it's hard to say without seeing it