Building an extension - where to start and how to finance?!

Briony123

We’ve been thinking about extending our home since moving in 3 years ago and since we purchased our home house prices have gone up significantly in our area with houses of a similar style and location on surrounding streets selling for up to £50,000 more than what we paid for our home.

My question is how do we decide what the best way to fund the extension will be?

• re-mortgaing for the current value and taking a loan out for the difference?

• saving the money ourselves although this would take several years?

• loaning the money from a bank / building society or credit cards?!

we don’t know where to start! 

Has anyone done something similar and can share how they decided what to do? 

Thank you 

Rosa_Damascena

You forgot the following finance options:

• rob a bank
• win the lotto
• work like a dawg until you drop whilst you're young enough to do it (my chosen strategy)

grumbler

Credit cards of course! It's just c.25%+ - the best way of borrowing more than £50K for several years.

Sorry, I am being sarcastic. Even if you manage to borrow more than £50K on CCs and even if you manage to pay for everything by CCs, without cash, how are you going to pay the debt off if the interest alone will be £13K+ p.a. (more for cash advances)?

onomatopoeia99

Cheapest money is likely to be remortgaging, provided it doesn't put you over a LTV threshold and increase the rate on your whole existing mortgage amount.  Personal loans can be had at not much over the mortgage rate if your affordability is good, but bear in mind there is a limit on the size of an unsecured personal loan (£25k perhaps?)  I know when I looked into it £25k was the point where personal loans started to get massively more expensive. 

As I've got older my atitude to debt has changed, so I'd save up rather than borrow more.

Briony123

Thank you everyone! We’re early 20’s and this is our first home so unfortunately don’t know much about all of these things, this website has definitely helped! Real shame they don’t teach you any of this stuff in school 🤯

scottiescott

Briony123 said:

Thank you everyone! We’re early 20’s and this is our first home so unfortunately don’t know much about all of these things, this website has definitely helped! Real shame they don’t teach you any of this stuff in school 🤯

You're absolutely right. Life skills should be taught to everybody in schools.

Laz123

Remortgaging is the best option.

I word of warning though. To prevent you getting ripped off by a builder as happens so many times and on these forums there's a lot of tales of woe if you get to the stage of getting the financing use a builder who is willing to show you their previous work. If they won't do this don't use them.

AAZ

Re mortgage will be the best options particularly if local house price has increased, you need to be under bank acceptable LTV

TELLIT01

Please don't over extend yourselves when borrowing.  Interest rates are very, very low at present so allow for possible increased interest rates in the future unless you get a mortgage where the rate is fixed for life.  Is that even available?

travis-powers

TELLIT01 said:

Please don't over extend yourselves when borrowing.  Interest rates are very, very low at present so allow for possible increased interest rates in the future unless you get a mortgage where the rate is fixed for life.  Is that even available?

I always think of this, when I bought my first house the interest rate jumped to 17%!

 Will it happen again probably not but if I knew such things I wouldn’t be on MSE!

TELLIT01

travis-powers said:

TELLIT01 said:

Please don't over extend yourselves when borrowing.  Interest rates are very, very low at present so allow for possible increased interest rates in the future unless you get a mortgage where the rate is fixed for life.  Is that even available?

I always think of this, when I bought my first house the interest rate jumped to 17%!

 Will it happen again probably not but if I knew such things I wouldn’t be on MSE!

We had the same experience and it was very scary.  Fortunately it didn't stay high for long, and the first thing we did when it increased was to speak to our lenders who were very understanding.

Just checked and in fact our highest rate was 'only' 15%!