best way to fund an extension?

B-J-D

we love our house but since having our 3rd child we are wanting more room so was thinking of either extending on the back of the house or doing a loft conversion. we are going to look into both options this year with the plan to start building spring 2018. so i am starting to think about how we finance this so any advice would be appreciated.
we have a mortgage of 100k ish house worth 160k ish. the fix rate ends in august.
no other debt.
4k in savings.
if we stick to the budget i have come up with we will have £400 a month to either...
1. save in an isa then get a loan to cover any shortfall
2. use to over pay the mortgage now to then borrow what we need
or is there something else im not thinking of

jimjames

Really depends how much you think it will cost. Our extension was £60k and was funded via extending our mortgage at 2.09% but we have a very low LTV so that wasn't an issue. We also paid for lots of fittings etc on 0% credit card with 2 years interest free period.

spadoosh

Adding it to the mortgage could make it quite an expensive option.
Sainsburys are offering loans from 2.9%

Lets say you have 20 years on your mortgage and ona reasonable rate of 2%, total cost of adding £15k to your mortgage will be about £3000. A 2.9% loan paid over 5 years will cost you just over £1000.

Depends what offers you can get obviously but adding it to the mortgage is normally a bad idea.

The above poster makes a valid point with how much youre anticipating it to cost. Basically its a balance between low interest percentage and legnth of the borrowing. As mentioned a mortgage is quite an expensive (long term) way of doing things.

Linton

spadoosh wrote: »

Adding it to the mortgage could make it quite an expensive option.
Sainsburys are offering loans from 2.9%

Lets say you have 20 years on your mortgage and ona reasonable rate of 2%, total cost of adding £15k to your mortgage will be about £3000. A 2.9% loan paid over 5 years will cost you just over £1000.

Depends what offers you can get obviously but adding it to the mortgage is normally a bad idea.

The above poster makes a valid point with how much youre anticipating it to cost. Basically its a balance between low interest percentage and legnth of the borrowing. As mentioned a mortgage is quite an expensive (long term) way of doing things.

Extra mortgage at 2% is clearly better than a one-off loan at 2.9%. You dont need to borrow for the full 20 years. Just make overpayments on your mortgage corresponding to the money you arent paying back on the one-off loan.

spadoosh

Linton wrote: »

Extra mortgage at 2% is clearly better than a one-off loan at 2.9%. You dont need to borrow for the full 20 years. Just make overpayments on your mortgage corresponding to the money you arent paying back on the one-off loan.

Sensible way to do it. Miss out a few months overpaying though and youve made it more expensive. If your as prudent as that a 0% credit card would be a better option assuming you could borrow enough and have the means to pay off or balance transfer before any 0% ends.

Schoolworker

We have planning for an extension and going to get plans to building control for them to be passed and fingers crossed do the extension this year. I have been overpaying our mortgage and will continue to do this until we start building. Also extend out our mortgage to 14years instead of the 9years and borrow extra for this as well as using some savings. Waiting for rough price of this from a builder but think we will need to borrow £60k as well as maybe use some savings. If savings not needed then I will overpay to being down the balance as much as I can until we have to remortgage in June 2020.

B-J-D

Wow 60k for your extension Jimjames?! I hadn't realised they could cost that much! Putting things on 0% credit cards is a good idea. I was going to apply for a new one (
I use a tesco one for all my shopping to get points)this year but maybe I should hold off.


When borrowing more on the mortgage is it in 2 separate parts or is it just added together?

The 400 a month we are hoping to save now could be an over payment to pay it off quicker.

Schoolworker

I believe that we would have part 3 of our mortgage and we are with nationwide. Part 1 is our original mortgage and part 2 was extra borrowing when we moved to this house.

jimjames

B-J-D wrote: »

When borrowing more on the mortgage is it in 2 separate parts or is it just added together?

With our mortgage it is in multiple parts, each additional borrowing is shown separately and has different rates. We currently have 5 different parts to our mortgage.
£60k was on the low side for costs but includes everything such as fitting out, new bathroom, kitchen units etc as well as doing a lot of work ourselves. It is a 2 storey extension 10m x 4m so it's pretty big. A loft conversion would be a lot cheaper, probably in the order of £20k or so.

sysadmin

We've just gone through exactly this.

1930's 3 bed semi. 3rd child needed a new bedroom. We have created a loft conversion with a 6m x 3 m bedroom. plus en suite plus walk in wardrobe

Total cost (excluding decorating and furniture) was around £34k. However, this included a hip to gable adjustment of the roof and a new roof, sofits facias and guttering all round. (Midlands based)

We added the cost onto our mortgage.and similarly to you our house was (before the conversion) valued at £190k and we had around £110k remaining.

Really pleased we did it. We're getting it decorated this week with the hope to move in and move everyone's rooms around in the next 2 weeks!