Remortgage and House Extension Question

Moneygrabber89

Hi Guys,

 

Can I ask a little advice? Our house was bought for £160,000 (North east England) 2 years ago. We have since installed a new kitchen and general home improvements such as new front door and carpets. We got it valued yesterday and were shocked to hear that they would advertise for 190,000 and would not accept any offers below 185.

 

Me and my partner are due within the next year to renew our mortgage (remortgage). At around the same time we are looking to extend our property on the side (in a 3 bedroom semi corner plot) creating another bedroom and ensuite upstairs and extra living space downstairs to potentially extend the kitchen dinner or create a separate living area.

 

My question becomes around remortaging. With us having £130,000 left to pay on the mortgage and the house being valued at £190,000 does this mean we could lend a maximum additional amount of 70k?

 

Once the house has been extended, we anticipate it would be worth £260,000 as the house (4 bedroom semi extended) on the same street with a north facing garden and there garage is internal where we have a separate garage so we have additional downstairs living space.

 

When applying for the additional borrowing would they consider lending us more knowing that the house will be worth more after the extension? Do we remortgage as soon as the work is complete as will get a better loan to value?

 

K_S

@Moneygrabber89 If your property is currently worth 190k, you may be able to do a capital-raise remortgage (for home improvements) for up to 90% of that value, so approx. 171k. If your current outstanding mortgage is 130k, that means an additional 40k or so. It is important to note that the mortgage lender will do their own valuation.

Mainstream residential lenders will base the value on the condition at the time of application (190k), not the post-extension projected value (260k).

Once the work is complete, you can indeed remortgage (subject to paying any ERC applicable) and lower the LTV.

Moneygrabber89

Thats frustrating. Our extension would cost around £60k. is there a way around this?

We are planning for the future with another kid soon so ideally need the extra bedroom.

Also would that mean i am better going on a varible rate for now until extension is built in a year so dont have any early repayment charges when i want a new deal with better LTV

K_S

Moneygrabber89 said:

Thats frustrating. Our extension would cost around £60k. is there a way around this?

We are planning for the future with another kid soon so ideally need the extra bedroom.

Also would that mean i am better going on a varible rate for now until extension is built in a year so dont have any early repayment charges when i want a new deal with better LTV

@Moneygrabber89

- no way around it unfortunately with normal residential lending

- you don't necessarily need to go on to SVR. You could remortgage to a no/low-fee no/low-ERC tracker/discount product. You wouldn't be protected from a rate-rise but you should definitely save overall compared to falling on to SVR and staying on it.

Moneygrabber89

Would there be an option to get another loan on top. Say 20k and then after the remortgage after extension lend an additional 20k on mortgage and then pay off the loan?