Most sensible way to fund a large extension?

Legacy_user

Hi, trying to get my head around how we could pay for this (if at all).

Last June we bought a house in an affluent part of Glasgow (yes such places do exist :rotfl:) the reason I mention that is because house prices have risen here for over 50 years and I strongly suspect will continue to do so and as such may be pertinent information here.

The home report value on the house was £350k and we came second at a closing date with £383k. The winner fell through though so it came to us.

The property is a 3 bed bungalow with the roof space untouched (just loftspace). 90%+ of similar properties in the area and already been extended up into the roofspace to go from 3 bed to 5 bed+ and we bought the house with the full intention of doing this "at some point".

The Loft conversion should cost around ~80K (its quite a big one) and the final value of the house would be around 500k - 550k. So the work would actual net a significant profit (hence why the area is so popular with developers).

We currently have £135k equity in the house and owe £255k on the mortgage. (assumed house value of £390k)

My question is, how do we fund this? Our mortgage at the moment is fairly "maxed out" so we couldn't afford significantly larger monthly payments. Is there any way to do this without significantly increasing monthly outgoings?

TBagpuss

The only way I can see to do it without increasing your outgoings is if you have a large amount of savings and can fund it without having to borrow.

depending ion the length of your mortgage term it is possible that you could look at re-mortgaging for a longer term (e.g. 30 years instead of 25) which would bring down the monthly outgoings a bit, although would of course be more expensive in the long run.

Bear in mind that the extension doesn't 'net a profit' unless, and until you sell the house.

Is there any way that you can reduce your outgoings or up your income, in order to build up some savings? (or overpay on your mortgage so that you can get in the habit of paying more, and be in a position to borrow more to extend in another couple of years)

Wobblydeb

beany_bot wrote: »

My question is, how do we fund this? Our mortgage at the moment is fairly "maxed out" so we couldn't afford significantly larger monthly payments. Is there any way to do this without significantly increasing monthly outgoings?

Can you do a lot of the labour yourself - got mates in the trades who can point you in the right direction, or give you mates rates?

When you say you are maxed out on the mortgage, what do you mean? They will not lend any more? Or that your monthly budget wouldn't stretch to higher repayments?

If they will lend you more, can you extend the repayment period over more years to keep the monthly amount the same?

If none of this is achievable then the reality is that you are maxed out on a £383k house, which means you cannot afford a £460k house. Even if it is worth £500k!

davidmcn

beany_bot wrote: »

Our mortgage at the moment is fairly "maxed out" so we couldn't afford significantly larger monthly payments.

Well, that seems to answer your question. You can't afford to add it to your mortgage (which would be the cheapest way of borrowing it), so you can't afford alternative methods of borrowing it. You could perhaps lower your monthly payments by increasing the term, but if you only bought 7 months ago that would probably incur early redemption fees.

System

Wobblydeb wrote: »

Can you do a lot of the labour yourself - got mates in the trades who can point you in the right direction, or give you mates rates?

When you say you are maxed out on the mortgage, what do you mean? They will not lend any more? Or that your monthly budget wouldn't stretch to higher repayments?

If they will lend you more, can you extend the repayment period over more years to keep the monthly amount the same?

If none of this is achievable then the reality is that you are maxed out on a £383k house, which means you cannot afford a £460k house. Even if it is worth £500k!

I mean our monthly outgoings. Our loan to value is decent £115k/£390k. (£255k mortgage) I suspect they would maybe lend us more but yeah as you said, it boils down to the simple fact we can't afford a bigger house. Even though our loan to value would increase even further after the work was completed and the house revalued.

As for mates in the trade yeah few electricians but they would still want paid and I don't have time to do any myself sadly.

Mortgage term is already taking me up to about 70y/o !! (I have plans to pay it off early though). so I doubt I can increase (or should) increase the term length.

Gary123456790

House ownership is a marathon, not a sprint. It sounds like you're got yourself into a great long term position. Right now you'd love to be able to do the extension but it sounds like there isn't a way to fund this at the moment.

I think the best idea is to put the kettle on, find something good on NetFlix and enjoy your new house. As and when you can afford major improvements you'll love your house more, but for now I think you need to enjoy what you have.

Thanks.

System

Gary123456790 wrote: »

House ownership is a marathon, not a sprint. It sounds like you're got yourself into a great long term position. Right now you'd love to be able to do the extension but it sounds like there isn't a way to fund this at the moment.

I think the best idea is to put the kettle on, find something good on NetFlix and enjoy your new house. As and when you can afford major improvements you'll love your house more, but for now I think you need to enjoy what you have.

Thanks.

You are so right. It's not actually really me, it's my wife has it in her head we can and should do this soon. And that there is some convoluted way to do it without increasing our monthly outgoings. But I don't understand what she is saying. And told her we don't "benefit" financially until we sell.

Simple fact is we don't "need" anymore space right now. So there is no rush.

Slithery

beany_bot wrote: »

My question is, how do we fund this? Our mortgage at the moment is fairly "maxed out" so we couldn't afford significantly larger monthly payments. Is there any way to do this without significantly increasing monthly outgoings?

Keep saving until you have enough cash.

scottishblondie

beany_bot wrote: »

Simple fact is we don't "need" anymore space right now. So there is no rush.

In that case just get saving. Every pound you save towards it is one less you'll have to borrow and pay interest on when the time comes!