Releasing equity after home extension

MoneySpendingExpert888

I am in the process of having a home extension at the moment (this month) which will add another bedroom onto my house and would thus bring it in line with a higher valuation (£350k area).

Currently i am going to pay for this out of my own savings, which i just about have enough to cover, and wasn't able to do it via remortgaging or a new mortgage as my mortgage isn't due until June and the builder that we wanted to go with was only available during this period.

I asked my current mortgage company if when i come to remortgage that obviously my house will be worth alot more than before, if i could take out some of the equity as my LTV will probably go down to about 35% and you already get the best rates at around 65% so i'd basically be tying up most of my cashflow into my house, although that is a sensible thing to do, but i also need some cashflow for my own personal use since i will put near enough all my savings into this extension.

They said that if the extension is already done when i come to remortgage that it would then be considered 'debt consolidation' which is something they do not do, they would only borrow the £ if the extension hasn't been carried out and that i would then apply for a 'Home improvement' loan which then gets added to the mortgage at that rate, but can only do this if i apply in June, but by then my extension will already be completed.

So by this time i will pretty much be free to shop around for any mortgages, but what would be my best option if i want to get some of this equity out? e.g. i have 140k remaining on my mortgage, the house is now valued at £350k (post-extension) which is LTV of 40%, to get it at 65% i would then need to borrow £230k (instead of £140k) which is essentially me asking the bank for the £90k difference to go directly to me instead of paying off my current mortgage company since there is only £140k remaining. Is this kind of thing possible? Sorry im pretty clueless about this topic in particular hence why i thought to ask here.

Thanks in advance for any help

kingstreet

Remortgage to new lender.

Solicitor handles repayment of existing lender, passes on surplus funds to you and registers new lender's charge.

MoneySpendingExpert888

Hi Kingstreet,

Thanks for your reply, so would i not mention to them that i am going to do this? basically just state how much i want to borrow and the value of the house and then get the solicitor to handle the procedure as you mentioned?

If so that sounds like a very good and comprehensive idea, from what i believe any lower than 60-65% LTV it pretty much makes no difference in regards to the rate you will get? Thanks

kingstreet

Not mention what to whom?

In your application you state how much you wish to borrow, the estimated property value. The lender assesses, issues a mortgage offer and when ready, the solicitor representing you obtains the funds and disburses them as appropriate.

MoneySpendingExpert888

Sorry i meant in regards to mentioning to the company whom i am taking out the new mortgage with. As i probably would have told them that i would be borrowing £x amount but only £x is going towards covering the old mortgage and the remaining £x will be going directly to myself.

kingstreet

You'll have no choice.

You'll be expected to set out how much you need to refinance the existing mortgage and how much is required for other purposes and what those purposes are.

caprikid1

Is it worthwhile paying to have savings ? Maybe you should consider and offset mortgage ?

Thrugelmir

What's the £90k going to be used for? The purpose is going to influence any decision.