Re-Mortgage for Extension?

steveoz

Hi Everyone,

Not sure this is the right place but I wanted to get some thoughts?

When we purchased this house (with the banks money) we had low paid jobs and struggled, we took out a 40+ year mortgage at 7.9% and were locked in for 5 years or we had to pay thousands. Over those 5 years we paid off next to nothing (a few thousand at most).

Fast forward, we've now been here for 12 years, we are thankfully in a much better position, cleared all of our cards, loans etc off, everything we have is ours and we only use money we have to buy things now. We've got our mortgage from 140k to 80k now, and we are overpaying taking off 1k per month from the mortgage after interest, our current deal is 3.39%.

We decided that as we live on a main road, and we now have three times the money we had when we moved in here and no other debts, that we should perhaps move. But houses are so crazy expensive, we'd have to pay about 100k more just to get our house on a quieter street, and to go detached with a similar house in a quieter street nearly 200k more! Seems insane getting into so much debt.

Anyhow, so for now we've decided to stay, and I have booked in all new windows and doors as well as some other work which I will be paying for out of savings (the windows are older outer beaded double glazing) hopefully this will improve the efficiency and help cut out more road noise (going with laminated glass on the outside). However, we decided we would like a new kitchen and extension if we stay.

We are thinking of re-mortgaging, as we are currently at 3.39 %, it will cost £800 to remortgage 1 year early. For the extension work we would want to take out 100k, so go up by 20k. But we can take advantage of still having over 50% equity in the house so a good rate.

We had our house valued, and we were happy with the valuation, I am not too comfortable owing more hence not wanting to move, but we are thinking that taking out 20k to extend and re-do the kitchen should add that 20k back onto the house value? Therefore it's more of an investment than an outright debt?

Does that make sense?

I'd already be clearing out another chunk of savings towards building work, but still want some left in case of emergency hence taking out the shortfall on the mortgage.

Is it the right thing to do? Or should we be happy with what we have and continue on the path to paying off the mortgage?


Thanks!


Steve

steveoz

Oh yes sorry, missed something out here.

Our lender said we could take out a seperate account now on a new product for the additional, then keep our existing 3.39% deal (which runs until Feb 2018). However, that seems to be more hassle, we will end up with a low interest product for the small amount and still be stuck on a higher interest on the larger amount.

If we remortgage now we have to pay 1800, but this will drop to 800 in Feb. The building work won't be starting until the spring anyway.

So it seems to make sense to wait until Feb, re-mortgage 100k on one better product. The plan was to take out 100k for say 14 years, and it still comes to our minimum payment now (700ish a month) but then we can overpay like we are now so it gives us some flexibility should our circumstances change.

I guess what I wanted opinions on is whether A) the remortgage in one lump one product and pay the £800 in Feb was the best idea for the additional borrowing and whether doing building work financed in part by the house itself was a good idea.

Would you chaps see the re-finance as a long term investment? Especially as borrowing is so cheap? It would make our kitchen nearly twice the size, it's currently an L shape, but we would be opening it up to have the longest / narrowest part of the L shape to double the size. We are going to fully refit it with new plumbing and wiring too.

Our property isn't worth a huge amount due to the location of it between two busy roads front and back, but I would hope that we should make back what we take out on the value of the property almost instantly?


Thanks!

sysadmin

Not got much to add in regards to your questions but we have just done pretty much what your thinking of doing.

Big pay rises this year + a big windfall for my partner meant we were able to clear all debts and started looking into moving into a bigger house. Like you, we live on a busy road. We have 3 children in a 3 bed semi so, 2 of our children share a bedroom.

After looking at what it would cost us to start again and buy a bigger house on a quieter street we decided it wasnt worth it. (£120k +)

We've been in our house 9 years and have already extended the ground floor. So we decided to stay and finish the house off so to speak. we re-mortgaged and took £40k out of the house and are currently having a loft conversion to make a 4th bedroom with en-suite, along with new roof, guttering, facias etc.

Once that is complete we will have a Porch, drive and decorate including carpets throughout.

We know we will add value to the house but were not bothered about the figure to be honest as we've decided that this will be the house that we stay in until all the children leave home (youngest is only 5 so plenty of years to go yet). We may in our golden years downsize but thats at least 30 years off and who know what house prices will be like then anyway.

steveoz

Thanks for the reply.

It sounds like you are having quite a bit of work done for 40k, so hopefully your house value will increase in line with what you spend

I think that's the thing I have struggled with, this house has served it's purpose, it's a typical 1930's bay fronted semi, with some extension work already and a large drive. It is not in a bad area, in fact, we bought this because it was in a good area and catchment for schools etc and (touch wood) very low crime. The same elsewhere is too expensive for what it is and we have decorated this a lot, we would still have to start over.

My daughter will be leaving school in two years, she's so far had a safe and secure upbringing in this house and the house is plenty big enough, we just have a bit of an odd shaped kitchen that we would like to refit (in honesty it is more like the utility on the back of the garage is joined to the kitchen as part of it).

It's been a 'family' home, and I love it, but I don't think I want to live here forever. Ideally I'd like to retire somewhere away from everything somewhere quiet.

To get into so much more debt right now though for something similar just in another area just doesn't stack up right now.

I also had a little 'plan' I put together 5 years ago, which means we would have paid for this house in the next 5 years (from now, already three and a bit years into that plan). So to go backwards also seems a bit hard for me. But I am trying to convince myself that the building work should at least add that value to the house, and in the meantime the rest of the years we are here we can also enjoy it?

tidds

Just out of interest, hope you don't mind me hijacking. We intend to do a double storey extension in 3-5 years, but were expecting to need to spend 70-90k on the extension alone. Have you both already got quotes for the works? Are my expectations on how much it'll cost too high?

sysadmin

steveoz wrote: »

Thanks for the reply.

It sounds like you are having quite a bit of work done for 40k, so hopefully your house value will increase in line with what you spend

I think that's the thing I have struggled with, this house has served it's purpose, it's a typical 1930's bay fronted semi, with some extension work already and a large drive. It is not in a bad area, in fact, we bought this because it was in a good area and catchment for schools etc and (touch wood) very low crime. The same elsewhere is too expensive for what it is and we have decorated this a lot, we would still have to start over.

My daughter will be leaving school in two years, she's so far had a safe and secure upbringing in this house and the house is plenty big enough, we just have a bit of an odd shaped kitchen that we would like to refit (in honesty it is more like the utility on the back of the garage is joined to the kitchen as part of it).

It's been a 'family' home, and I love it, but I don't think I want to live here forever. Ideally I'd like to retire somewhere away from everything somewhere quiet.

To get into so much more debt right now though for something similar just in another area just doesn't stack up right now.

I also had a little 'plan' I put together 5 years ago, which means we would have paid for this house in the next 5 years (from now, already three and a bit years into that plan). So to go backwards also seems a bit hard for me. But I am trying to convince myself that the building work should at least add that value to the house, and in the meantime the rest of the years we are here we can also enjoy it?

All in the work is costing us around 50k.
Ours sound almost the same as yours, 1930s bay fronted semi, busy road but good area and the schools are good too. The only thing we dont have is a side garage.

steveoz

Sounds similar then Sys, I think it sounds like a good plan for you, improve what you have and get some more use out of it like we are thinking, then later when it's time to sell up and retire, you should still get your money back.

Hi Tiddis, the part for the kitchen where building work is required is a single story flat roof extension to the back of the existing kitchen, but the roof will need to be re-done and raised, a knocked through wall to the side to open up and support, and a new outer wall with old one knocked down. Floor raised, ceiling redone.

We've been quoted 15k just for the base build above.

The extension itself is only an additional 5 meter squared section, but it essentially requires some of the old stuff to be redone.

I read somewhere budget 1.5-2k per sq meter for a single story, nearly double for a double story.

Of course it doesn't include plastering, electrics, heating, plumbing, tiling, worktops, units and fixings / fittings. That's all going to double our cost, but then, it's a kitchen, a room won't have all of that, kitchens can get quite expensive.