House build funding options

siouxchief

Hi all,

I have recently got planning to build a house onto my house which should cost £150k to build. I plan on building next Spring which coincides with the end of my 3 year fixed mortgage at the end of March of my current house. In the past 3 years my current house has gone from being £500k to £650 so some equity exists.

Essentially i want to know the best way to fund the £150k plus avoid early repayment mortgage charges. If I do get a mortgage it will be paid off immediately after I build the new house so only a matter of months.

Is the best option to stay with my current mortgage (4.95%) but drop onto the standard variable rate (4.7%) thus avoiding a new mortgage and hopefully they can increase the mortgage by the £150k I need? Not sure if you increase a mortgage when on the SVR would you need a whole new mortgage thus potentially introducing early repayment charges which is the big thing to avoid when its only needed for 6 months.

Obviously I could just ditch my current provider and search for a fresh mortgage with the 150k added and make sure no early repayment charges are payable but just wondered what people suggest.


Thanks for any help

SavingSteve

Remortgage when your current deal ends. That can either be with your existing provider or with another provider, you'll need to work out if you can save by switching (including the costs incurred with switching).

I'd suggest using a broker. Many lenders will agree to additional borrowing for a 'project'. Just as many will not, so you'll need to pick your lender wisely, a good broker will be able to point your application in the right direction.

They'll likely want some firm quotes behind the "will cost £150k to build" estimate.

Another suggestion would be to take out an offset mortgage, so as soon as you sell the new build you can pay it down against your mortgage balance.

Lots of useful info on this site : http://www.buildstore.co.uk/

They also offer an advised broker service. I have never used them so no idea if they are any good. Good luck.

kingstreet

You would be asking your current lender for a further advance. A remortgage is a new mortgage from a new lender to repay the old one.

The big issue for this is going to be how the valuation of the security property is going to be affected by the build.

You can't do this without the permission of the lender.