Extension or not?!

Hannahkw1

I’ve been going backwards and forward between these two things for years! So would love opinions from others please!

Have lived in my 3 bed terrace for 12 years, in that time have paid off a large chunk of the mortgage and now have £100,000 left on it, house is now worth around £300,000. 

The house is a decent size in a nice area and is my forever home! My family are very happy here.

I’ve not done anything to the house in all that time and a lot of things are from when the house was first built in the 60s. All the electrics and boiler etc need to be done in the next few years.

My dream is to build a rear extension like the other terraced houses have and switch my living room and kitchen around. Initial surveyor said we should be able to get that in for £70k, which if we remortgaged for more would keep us under the 60% LTV.

Financially it’s doable if interest rates don’t increase any further. My hesitation is that if one of us loses our job or interest rates go up higher we would be screwed financially! I’ve got no idea on the the market really!

Let me know if you need any further details! But would love to know opinions! Make my home into a dream home layout wise or have financial security!

CliveOfIndia

Hannahkw1 said:

Financially it’s doable if interest rates don’t increase any further. My hesitation is that if one of us loses our job or interest rates go up higher we would be screwed financially! I’ve got no idea on the the market really!

Taking it at face value, this would give me cause for concern if it were me.  Losing your job?  One would hope that doesn't happen, sadly it's all too common an occurrence, and one which you cannot guarantee won't happen.

Interest rates going up?  I'm no economist, but gut instinct would say there's a reasonable chance of that happening.

Extending purely with the intention of increasing the value of the house with a view to selling it and making a profit is often not a good idea.  But you say it's your "forever" house?  In that scenario, extending can make a lot of sense - basically you're doing it to live in, you don't much care if you make your money back or not in the short to medium term.

BUT ..... would I risk the possibility of losing everything because doing so would stretch you to the limit?  I personally wouldn't.  There are too many unknowns in the equation which could just tip things over the edge.

It may be worth building up some savings first.  If you've got enough put away to weather a few months of unemployment, and can afford to absorb a moderate rise in mortgage payments, you'd be in a lot better position - both practically and psychologically (i.e. it would remove some of the worry).

I'd wager that the cost of doing it won't be much different in a year's time to what it is now.

One other thing to consider is the £70K estimate.  If it was a "proper" surveyor that gave you the estimate then it's probably reasonable to assume that it's an accurate-enough ball-park figure.  But things like this always cost more than you first thought, and will vary a lot depending on what you spend on fittings.  The actual cost of the bricks & mortar part is probably easy enough to accurately estimate but what about things like the kitchen for instance?  Will you buy a budget kitchen for a couple of thousand, or will you spend £20,000 to get your dream kitchen?

Sorry for the waffle !  Bottom line - if it were me I'd wait until I got some savings behind me to act as a buffer (as far as is reasonably practical) against unforeseen events.  But it's got to be your choice, of course.

Albermarle

Let me know if you need any further details! But would love to know opinions! Make my home into a dream home layout wise or have financial security!

It is not really a decision that anyone can make for you, especially when we do not Know you .

My hesitation is that if one of us loses our job or interest rates go up higher we would be screwed financially! 

Regarding interest rates, they seemed to have stabilised for now and the financial markets are indicating they could start reducing in about 6 to 9 months time. Mortgage rates have in fact been coming down a bit due to competition in the market.

Can not really comment on your job security. What sectors do you both work in ?

Do you have some emergency savings behind you? Usually minimum 3 months pay ( in case of temporary unemployment for one of you) + a contingency fund for things like having to replace a boiler, car etc is recommended. If you do not then this should be a priority before planning  more spending.

gwynlas

If you leave it building costs are likely to rise and the older you get the less years you will have left  to pay the mortgage.Are you seriously concerned that one of you might lose your job and not easily get another? If so do not do it. Otherwise I would suggest that you consider having the extension and upgrades done to make the home more comfortable for yourselves.

Nobbie1967

It’s your forever come, so it makes sense to have it how you want. The only issue would be the timing of the build for me. I’d probably plan to start in a couple of years time and use that time to get plans drawn up, get planning permission, think about fixtures and fitting and upgrades to take place at the same time such as heating systems and wiring.

Interest rates seem to have peaked now and should be falling in a couple of years time which means you should be able to get a decent rate on a fixed mortgage which removes the interest rate risk. Not knowing what sort of jobs you do, it’s hard to assess the risk of job losses, but I’m certainly hearing about a lot more redundancies happening and economic indicators are looking pretty bad over the next year and unemployment is starting to rise as interests rate bite.

I think the big inflation in build costs is mostly over now as material prices have all fed through, so doubt the build cost will change too much, May even drop if we go into any sort of recession which is a distinct possibility.

The crystal ball has now gone cloudy, good luck👍

Albermarle

If you leave it building costs are likely to rise

After the recent steep rises, many costs are stabilising or even reducing.

 think the big inflation in build costs is mostly over now as material prices have all fed through, so doubt the build cost will change too much, May even drop if we go into any sort of recession which is a distinct possibility.

I agree with this.

Bigphil1474

I'd just add, the current forecast is for a decline in interest rates over the next year or two, but it only takes something to go off in the world, and we might be back with high inflation and high interest rates - especially if it kicks off in the middle east. Don't want to be all doom and gloom, but I would suggest building some savings up over the next couple of years. If you can't afford to do that, then can you afford to pay extra mortgage payments etc. and have contingency for any emergency repairs.

Presumably you are looking at a 2 storey conversion for that price? Do you know any good builders - an estimate from a good builder might be less - worth asking locally. We had an estimate 6 months ago for a single storey 6mx3m extension and the builder said around £35k not including decorating. 

casper_gutman

Bigphil1474 said:

I'd just add, the current forecast is for a decline in interest rates over the next year or two, but it only takes something to go off in the world, and we might be back with high inflation and high interest rates - especially if it kicks off in the middle east. Don't want to be all doom and gloom, but I would suggest building some savings up over the next couple of years. If you can't afford to do that, then can you afford to pay extra mortgage payments etc. and have contingency for any emergency repairs.

Presumably you are looking at a 2 storey conversion for that price? Do you know any good builders - an estimate from a good builder might be less - worth asking locally. We had an estimate 6 months ago for a single storey 6mx3m extension and the builder said around £35k not including decorating. 

£35k might get you a shell with a couple of sockets and a basic single bulb light fitting, but if you want an extension plus some structural remodelling of the existing accommodation, all finished to a reasonable standard, plus a new kitchen in a new position, plus the electrical and plumbing work this will all entail, and the usual bits like bifold doors, roof windows etc., and a bit of basic landscaping so your garden stops looking like a building site, then you could easily spend £70k I'm afraid. We certainly did, and more, for a single storey extension.

markin

If you don't have saving to survive 1, or both being jobless for a year its a big no!

If your saying the electrics are from the 60's, black rubber? Then that and the boiler are the top priority.

MikeJXE

My hesitation is that if one of us loses our job or interest rates go up higher we would be screwed financially! 

If everyone thought like that no one would buy a house 

Bigphil1474

casper_gutman said:

Bigphil1474 said:

I'd just add, the current forecast is for a decline in interest rates over the next year or two, but it only takes something to go off in the world, and we might be back with high inflation and high interest rates - especially if it kicks off in the middle east. Don't want to be all doom and gloom, but I would suggest building some savings up over the next couple of years. If you can't afford to do that, then can you afford to pay extra mortgage payments etc. and have contingency for any emergency repairs.

Presumably you are looking at a 2 storey conversion for that price? Do you know any good builders - an estimate from a good builder might be less - worth asking locally. We had an estimate 6 months ago for a single storey 6mx3m extension and the builder said around £35k not including decorating. 

£35k might get you a shell with a couple of sockets and a basic single bulb light fitting, but if you want an extension plus some structural remodelling of the existing accommodation, all finished to a reasonable standard, plus a new kitchen in a new position, plus the electrical and plumbing work this will all entail, and the usual bits like bifold doors, roof windows etc., and a bit of basic landscaping so your garden stops looking like a building site, then you could easily spend £70k I'm afraid. We certainly did, and more, for a single storey extension.

That was for adding an extension on to the back of a semi with steel support to open up the back of the house, and French doors. Didn't include new kitchen, which I appreciate can be a big expense, but electrics and plumbing wouldn't be significant price for us. All in, we had an accurate budget of £50k for the finished space, but in the end we decided to look elsewhere (family probate property which we have a part share of the proceeds).