Remortgage/equity release for extension

sunshineinmypocket

Hi,

We moved into our new house in October last year. 

House valued at/purchase price of 462,000
Mortgage left as of this month is 364,361.

We are hoping to do a large single storey extension and loft conversion next year. This will turn it from 4 bed,1 bathroom + 1 WC, to 6 bed, 3 bathrooms.
Depending on the builder we choose, this will cost £150-200k
We would like to use the equity we have in the house to fund the main bulk of this, then we hope to have saved the rest/put stuff on long term 0% interest credit cards.

Our combined income will be approx £130k at the point of applying
No CC repayments at that stage
No car finance or equivalent
Approx £600/month on childcare of which £243 is from the voucher scheme. This cost will disappear in September 2021. 
Mortgage payment currently £1242/month

I appreciate things are a bit different at present but we are hoping to start the build Spring 2021 so no immediate urgency to apply. 
Could anyone advise as to whether this is a realistic plan? 

Many Thanks!

MWT

Equity release requires that any existing mortgage is fully repaid, so that is not going to work for you even if you meet the age requirement (minimum 55 for the youngest name on the deed)...

I leave the remortgage options for those more qualified to answer, but don't expect the use of 'long term' zero rate cards to go unnoticed on your credit score, and frankly they are not a sound basis for financial planning either as the offers can vanish without warning so hard to use them as a future plan or necessarily a wise move anyway...

sunshineinmypocket

Thanks, aware the 0%'s aren't ideal but will hopefully only be a small amount for a short time. We have a decent amount of income left over each month so could pay it off in chunks.

dimbo61

Lenders won't lend on something that is not there yet.
So you put down nearly £100,000 deposit and have a joint income of £130,000 a year but lenders don't give 100/120% mortgages.
The property might be worth £662-£700K when all the work is done.
However if the extension is poor or devalues the existing property they could end up with a massive debt on a property worth less than that.
You only moved in 10/11 months ago.
Get the plans drawn up and apply for planning.
Pay for the work in stages and save up the cash to for each stage.

sunshineinmypocket

I'm aware they don't lend on potential and that 120% mortgages aren't a thing.

But there has, historically, been the potential to get second mortgages to use the equity you have in a property. And I'm interested in knowing more about how that works/our chances. 

I'm not sure why how long we moved in is relevant? We purchased the house knowing we would have to extend it as we couldn't find anything on the market that we liked that was big enough. 

We have the plans drawn up and they have been submitted for planning permission. 

The builders we have had to quote for this have all said it will work out more expensive if we do the work in stages, and it could only realistically be broken into two parts.

And whilst I agree that it would be ideal to be able to save up and pay for this in cash, it would take far, far too long. Furthermore there is work that will need doing to the house in the next few years that doesn't make sense to do unless it is part of the eventual extension. 

But thanks anyway. 

gzoom

Additional borrowing is actually crazy cheap at present, we are thinking of doing something similar, adding £150k ish to our existing mortgage for a house extension, fixed at sub 1.5% APR for 7 years.

However our LTV currently is only 50%, so even with adding an additional £150K we aren't any where near an LTV the banks would throw a wobbly at.

They impression I get is the banks are willing to lend, but they are also very risk adverse at the moment. Maybe speak to a mortgage broker to see if you can find a bank whos willing to lend up to a higher LTV?

If you are planning the work anyways there is zero point in saving up or waiting, inflation is nearly as high as the APR on mortgages at present. Its almost free money if you can find a lender who will offer you borrowing at a higher LTV.

MWT

sunshineinmypocket said:

I'm aware they don't lend on potential and that 120% mortgages aren't a thing.

But there has, historically, been the potential to get second mortgages to use the equity you have in a property. And I'm interested in knowing more about how that works/our chances.

Your problem is the LTV...

Right now you are at nearly 80% already, even getting another £50,000 might be a stretch and from the sound of things that won't be enough.

You should speak to a broker though and see what they say, and of course your existing mortgage provider...