Extending Mortgage for extension

30andcounting

Hi

We currently have a property where we have approved planning permission for an extension.

Current mortgage £134K and House value £226K £92K equity.

We have spent the past cpl of years renovating the existing house and overpaying the mortgage. We have c£15K on 0% cards to fund this, we couldnt remortgage to fund as we were mid term.

Looking to borrow up to 85% LTV to current value to extend and add £10K to the mortgage for these current improvements, leaving £5k on a long 0% card.

Just wondering if we have cocked up financing improvements this way? Because when Im coming to remortgage im fearful we may not be able to borrow as much as we need.

I earn £57K and my partner c£12k (self employed)

Im probably looking to borrow £55k - £10K of which will pay off the 0% cards.

Anyone done this before? I thought I was clever in saving interest....:(

The house value should be c£310-£320K once finished.

Thanks

foxy-stoat

I would first ask the lender what they think its worth through their index linking and go from there. Some lenders will allow you to pull equity out to fund unsecured debt and building works, as long as the numbers stack up.

30andcounting

Yeh - given the spending has been to improve the currently properties value (roof work, boiler, windows etc) I want to use 10K to reduce these and then the remainder to fund the extension. Using a broker in this circumstance would be beneficial I guess to get full market access - will increasing the term temporarily on a 2 year fix help the affordability? Then reduce again after 2 years when the LTV is better after the extension.

Thanks

Whats_your_forte

In terms of lenders, you may be limited if you are looking to go to 85% loan to value including debt consolidation but hopefully this will not be too insignificant in terms of the interest rate. 85% loan to value for home improvements should be no issues at all but the lender may question the level of work to be done if this will have an adverse effect on the value

The only other pitfall to look out for is that valuations on remortgages tend to be a little bit more conservative than those for open market purchases and so you may have to bear this in mind when working out the figures as to how to structure the new deal and whether consolidating the debt is in your best interest versus the packages being offered to you