Home extension - Remortgaging vs loans

TheRocketSurgeon

Hi,

I'm looking to start work on a large extension to my home and am unclear on the best way to go about financing it. I expect to be able to directly pay for about half of the £60k it should cost. For the rest I see three options open to me...

- Remortgage based on estimated final value
- Bank loan
- Friends / family loan

I get the initial impression that IF I can just borrow money from people directly I'll save significantly, although obviously there's room for personal issues to arise from that should anything go wrong.

Then I'd be inclined to get a short term bank loan to cover the difference, as I would expect to be able to pay a £30k loan off within a year.

Only then would I think that a remortgage would be an option, but this is my biggest area of confusion. My mortgage was for £130k 6 years back, house is now valued at about 220k with about £110k of mortgage to go (I think). So if were to remortage with approved build plans in hand, I could go from £110k outstanding to £140k outstanding, on a house that should be worth about £280k after the work is done. Obviously though I don't like the idea of owing even more on the mortgage.

So is there a reason that the remortgage is actually a far better option? If agreed to, I can see that it's "free money" in some senses My morgage repayments would change but life would continue fine...

I'm aware that I probably should remortgage for the sake of it and this leads me to ask ... if I get work done and THEN go to remortgage anyway, I'd be able to "give" them the new part of the house as well, right, along with the increased value of the house from the rising market? So my repayments on £110k of a mortgage on a house of £280k (i.e 40% outstanding) should be... much less than the repayments I'm currently making for a mortgage that still has 85% outstanding? Is that how it works?!

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So I think my questions are:

1 - What is my ideal option to pay for an extension?

2 - Should remortgaging reduce the interest portion of my mortgage repayments?

Thanks!

foxy-stoat

I would not be borrowing £30,000 off friends and family, so strike that one out.

£30K on a personal loan is a lot, depending on your annual salary, credit history and current debt levels it may be possible.

Remortgage based on the current value, not future value, would be easiest option. Fix it for 2 years then remortgage for a better rate based on the revised value is where I would go.

two8tone

Remortgage based on estimated final value

I'm also looking at this option, but a high street bank has recently informed me it would not consider this type of loan to anyone and only willing to loan on the existing valuation, either re-mortgage or advance.


It was my understanding that a re-mortgage can be secured on the expected final value, if presented correctly, i.e. with approved planning permission in place and multiple quotes from contractors to complete all works.