House needing extension- mortgage??

Cookie82

Hi

I am looking to buy a house that needs an extension. My question is- would it be better to get a larger mortgage now to include cost of extension - or increase my mortgage at a later date- as I assume this would have remortgage fees?

Hope that makes sense

pinkteapot

I assume you mean you've got a lot in savings and your options are to:

1. put it all down on the house and get a smaller mortgage, then later remortgage to release money to pay for the extension

2. put less down as a deposit, get a bigger mortgage, then use the rest of the savings to pay for the extension

?

The reason I'm checking is that you can' borrow more than you pay for the house in order to fund the extension. In fact, you can't borrow more than 95% of what you pay for the house (ie pay a 5% deposit).

Herbalus

I bought a house with a view to renovate. I took out a larger mortgage than needed to purchase the house, which means that the excess (which in reality is my savings), can be used for the extension.

Cookie82

Hi

Yes pink teapot that's what I mean just wondering if that's what you could do - keep back some of the money from the sale of house and put down lower deposit. Our LTV is around 50% so would increase it to 60% ish

I guess may be better to do now then with good rates rather than in couple of years as looking to fix for 5-10years

kingstreet

Take a product with an offset facility and place the extra money in there until it's needed.

Then you don't pay for it until you actually use it.

Herbalus

kingstreet wrote: »

Take a product with an offset facility and place the extra money in there until it's needed.

Then you don't pay for it until you actually use it.

I thought about that. But offset rates can be higher, and all of my savings are earning more in interest after tax than my mortgage rate.

kingstreet

You've already got your mortgage.

I was suggesting that to someone needing a new mortgage to purchase a property, like the OP.

For example, I did a 1.99% variable for life offset product KFI for a case this morning. Upto 75% purchase.

martin1959

Generally speaking, the lower the % loan, the better interest rate you will achieve.


The common 'break' points are 60% LTV, 75% LTV, 85% LTV 90% LTV and the worse rates are for 95% LTV (if you can get a 95% loan)


Try and avoid just going over one of these break points.


Depending how much you are keeping back, Santander are paying 3% interest on 123 A/C (between £2k -£20k with 2 DD's and an external credit of £500 PM) and you can have an account in a sole name and a joint name, so a couple could get 3% on up to £54k


With rates as low as 1.6% it would pay to borrow more and put it at 3% return. Make sure you have some flexibility to repay if the mortgage rates go up at end of fixed rate, or if you select a tracker rate.