Been advised to Post in here rather than Loans, anyone got any ideas please?

Moneynovice

Home Extension Options???
29th Sep 15 at 10:31 PM
#1
I'm hoping for some good money advice - my head hurts from googling every evening!
I've been offered an advance on my mortgage - 25k at 2.69% fixed for two years and to lump it in with my outstanding loan - 89k - I was previously on 6.49%, so affordability should not be an issue.

I'd love to extend our home with this money but getting quotes from builders, it is going to cost aprx 40k. Can I take the 25k now and put it in a high interest savings account? Do I have to pay tax on it? Then reapply in 6 months for the rest of the money? Lloyd s said I can re-apply in 6 months.
I could take the 25k now and try and get a personal loan for the 15k? 3.6%??

A valuer visited the house and gave a valuation of 135k - however my little house comes with a very large garden and he suggested I could easily split the garden and get planning permission for a property development. He thinks the land could then be worth £70-80k. Would my lender then include this in the total valuation? The valuer on the day said without planning permission he could only value the property as having a big garden...

I'm tempted to shelve the idea and re-try again in 6 months but then i might not get offered the 2.69% fixed for two years...

Ideally I don't want to sell half my garden but would be happy to pay the £180 for planning permission if it means Lloyd s would then give me the full 40k..

Any help/advice appreciated? I know I should save the 40k but my kids will have left home by then...

JimmyTheWig

Why have they only offered you £25k?
Is it because of the loan to value?
Or is it more to do with affordability/income multiples?

If it's the latter then getting a better valuation after planning permission won't help.
If the former, I don't see that waiting 6 months will help. The value is unlikely to go up by that much in a short space of time.


My gut feeling is to take the £25k and go for the personal loan.

Moneynovice

Hi

25k is the difference between outstanding money owed and the value and they've offered me a 25k advance. based on 85%. Affordability isn't an issue on the 40k, he checked that.

Am I allowed to put the 25k in a high interest accounts for 6 months? then get my personal loan? or is this bad maths?

Was hoping having the land accepted for planning permission would increase the total amount they would advance but seems it could do the opposite..

Thanks for replying

JimmyTheWig

Yes you can put the £25k in a savings account and earn interest.
You'd be taxed on the interest that you earn.

But what would be the benefit of waiting 6 months before getting the personal loan?

Moneynovice

I'm thinking that the build should happen in spring/summer and also i can reapply to the bank in 6 months for another advance..the rate they're offering on the advance/mortgage right now is low and this may not be the case if i wait and do the whole amount..

Majority of the extension is for my sons new bedroom - he has a children's account... (he's 10) could I put it in there and still be legit I wonder? I don't believe he pays tax on his account?

Thanks for taking time to reply, very confusing for me right now..

eddddy

A few thoughts...

Your house is currently worth £135k. If you spend £40k on an extension, would it be worth at least £175k? Have you asked an EA about this?

It sounds like you want to ultimately increase your mortgage to £129k at 85% LTV, so the mortgage valuer will have to value the extended house at £152k or higher.

Given the development potential of your garden, is extending your house the best idea? For example, is there room for 2 new houses if you don't extend (but only 1 new house if you do extend)?

If Lloyds LTV limit is 85%, waiting 6 months wont change that. i.e. they will still only lend you 85% of £135k = £115k in total.

I don't think Lloyd's would increase their valuation as a result of planning consent. The consent only lasts 3 years, and presumably the mortgage period is for longer than that. (And there is no guarantee that you would get consent again, if you reapplied.)

kingstreet

Moneynovice wrote: »

Home Extension Options???
29th Sep 15 at 10:31 PM
#1
I'm hoping for some good money advice - my head hurts from googling every evening!
I've been offered an advance on my mortgage - 25k at 2.69% fixed for two years and to lump it in with my outstanding loan - 89k - I was previously on 6.49%, so affordability should not be an issue.

Did you ask for £25k, or did you ask for more? If yes, why was the amount reduced?

I'd love to extend our home with this money but getting quotes from builders, it is going to cost aprx 40k. Can I take the 25k now and put it in a high interest savings account? Do I have to pay tax on it? Then reapply in 6 months for the rest of the money? Lloyd s said I can re-apply in 6 months.
I could take the 25k now and try and get a personal loan for the 15k? 3.6%??

You seem to be getting this all a*se about face. You get plans and estimates for the work, then look into financing it. You can consider remortgaging, a further advance, secured loan or unsecured loan. This £25k seems to have you all excited when it isn't actually what you need.

A valuer visited the house and gave a valuation of 135k - however my little house comes with a very large garden and he suggested I could easily split the garden and get planning permission for a property development.

Yes and that would mean your property would be worth less, as part of it is going to be sold off.

He thinks the land could then be worth £70-80k. Would my lender then include this in the total valuation? The valuer on the day said without planning permission he could only value the property as having a big garden...

Your lender would view its security as getting worse and could demand anything you make from selling the land to balance the valuation/mortgage situation.

I'm tempted to shelve the idea and re-try again in 6 months but then i might not get offered the 2.69% fixed for two years...

Ideally I don't want to sell half my garden but would be happy to pay the £180 for planning permission if it means Lloyd s would then give me the full 40k..

Any help/advice appreciated? I know I should save the 40k but my kids will have left home by then...

Why not get some proper advice instead of dealing with people who have nothing but their own product to sell. Independent broker and get a 3D view?

Moneynovice

Thanks for replies. Single extension 22k double extention 40k. I have had a plan drawn up for double extension and two builders have estimated it to cost 40k.

I asked for 40k but that would mean the value would need to be 153k - they valued it at 129k I asked for them to come and look, as I believed it could be worth 153k..the valuation came back as 135k. I'm now trying to think of ways to raise the extra cash.

Putting the double extension on will make a small 2 bed (3rd large bedroom converted into a lovely bathroom by previous owners) into a large 4 bed worth about 195k

The side extension has no impact on the land at the back of the property, it has 1/3 of an acre so I would still be left with what most people consider a large garden if i sold off the bottom 1/3.

Yes I need proper advice but I'm getting conflicting advice from surveyor/architect/bank etc which is why I find myself here...

Moneynovice

should add, I paid 104k for the house 3 years ago and have 89k left on existing mortgage..so I think the double extension is a worthy investment, not sure why the bank don't see this..

eddddy

Moneynovice wrote: »

..so I think the double extension is a worthy investment, not sure why the bank don't see this..

The bank's mortgage department will only look at lending money that's safely secured on existing property.

They wont get involved in funding 'speculative investment projects' (like building an extension).

If you want somebody to speculatively fund your extension plans without security - you're in sort of 'Dragon's Den' territory.

So a personal loan may be the best bet, as it's based on your salary and outgoings, rather than the future anticipated value of your house.

Moneynovice

Yes looks like a personal loan is the immediate option, or sell the bottom third of my garden and fund the extension that way. Still find it strange that the land has been valued at 80k but the bank wont include it in their calculation and they see it as de-valuing my house price...ah well maybe I need to wait a couple of years and my house might be worth the magic 153k and then the mortgage rates might be sky high though, I need a crystal ball! Thanks for pointers