Bank won't give me a loan due to equity

fatbelly

enthusiasticsaver wrote: »

. You could use 0% credit cards and then hopefully remortgage once the extension is done.

As others have said, a secured loan seems unlikely due to your lack of equity. It's possible a specialist broker may come up with something but a higher interst secured loan is something to be avoided.

I did something similar a couple of years back when I took the decision to use low/zero interest unsecured borrowing to avoid dipping into share-based savings that were doing quite well.

I used a mixture of

https://www.moneysavingexpert.com/credit-cards/money-transfers/

and

https://www.moneysavingexpert.com/loans/cheap-personal-loans/

and found it surprisingly easy to borrow.

warby68

Please don't be 'devastated to say the least' about this. Be realistic and patient instead.

A house price of £300k is not really giving you any premium on the proposed extension spend so you aren't making anything immediately other than a bigger home. You need a bigger chunk of equity to reduce that risk for any secured lender. I too am surprised that even £20k is on the table.

You can have an extension just not today. Save up or overpay for a few years and then try. If house prices do appreciate fast, that may help as well to grow your equity at a good pace.

Yes you could move and affordability could give you a new 90% mortgage or whatever but the risks for the lender on the property are lower in that case - there is no development risk for them. However the costs of a move would be a good chunk towards your extension.

Yes you could finance it on cheap credit cards but this is not a £20k conservatory, its £80k which is a very unwieldy chunk of debt if something goes wrong

foxy-stoat

Its probably mad to spend £80,000 on a property that you wont recover the costs if you sold it.

Why not sell your 2 bed and buy a 3 bed - may work out more cost effective on the lending front as you cannot borrow against a future value once you finish the work.

Clive_Woody

Have a chat with the architect who did you plans and see if the build can be split into stages, such that your savings and a £20k loan could cover stage 1. Maybe you could build the outer shell of the extension, make it water tight then save up sufficient money to complete the inside of the build.

A big note of caution: If your savings are your only emergency fund, then think very hard about whether you want to dip into these. If one or both of you lost your jobs how would you pay your bills?

As already suggested, the best option might be to wait and save up. If you have had your plans approved then I think this approval remains valid for a long time.

Dangermac

NegativeNellie wrote: »

Hi,

I am wondering if someone can please help me I am desperate.

My partner and I bought our home in 2017, a 2 bed semi at £210k with a mortgage of £184k and 13% deposit on a 5 year fixed rate. We have paid back nearly £20k so far. We are wanting to do an extension on it and have had the plans agreed. The quotes roughly for this is £80k but the bank has told us they can only give us £20k due to not having enough equity on the property yet. I am devastated to say the least as houses in our area are doing similar and it is adding value to the properties. They are now going up to £300k as a 3 bed semi. We are both earning good money and have savings but that doesn't seem to matter to them. Other people have mentioned to try brokers is this something we should look into? Is there something else we can do? Or is it just a pipe dream and we should sell and move?
I would really hate to as we would love it to be our forever home as it is close to a school, not over looked, has a big garden, garage and driveway. Any help would be much appreciated:(

If the bank were to lend you a further £80,000, your mortgage would be circa £260,000 (I'm assuming that you have not repaid £20,000, but simply paid £20,000 of payments).

But house would be worth circa £210,000 because the extension would not have been done. The bank have no mechanism to ensure that this happens. They are also unable to build the extension for you.

So you would be in massive negative equity, certainly until the extension has been built.

The bank are absolutely correct. And if they did lend you the money, the 'must be someone else's fault brigade' would be outraged if there was a subsequent mortgage default.

You need to rethink this project. If you can somehow fund the works, and then apply for a remortgage, you may have a much better chance.

I would also make the point, as others have, that spending £80,000 to possibly achieve £80,000/£90,000 of increased value is hardly 'adding value' - it sounds like you would possibly/just about get your money back within the increased house value.

DM

parking_question_chap

Dangermac wrote: »

If the bank were to lend you a further £80,000, your mortgage would be circa £260,000 (I'm assuming that you have not repaid £20,000, but simply paid £20,000 of payments).

But house would be worth circa £210,000 because the extension would not have been done. The bank have no mechanism to ensure that this happens. They are also unable to build the extension for you.

So you would be in massive negative equity, certainly until the extension has been built.

The bank are absolutely correct. And if they did lend you the money, the 'must be someone else's fault brigade' would be outraged if there was a subsequent mortgage default.

You need to rethink this project. If you can somehow fund the works, and then apply for a remortgage, you may have a much better chance.

I would also make the point, as others have, that spending £80,000 to possibly achieve £80,000/£90,000 of increased value is hardly 'adding value' - it sounds like you would possibly/just about get your money back within the increased house value.

DM

This with bells on.