Owning our house outright & getting a mortgage for renovations

rwarren10

Hi, first time poster here - sorry if this has been asked before.

Basically we own our house outright (left in a will from grandparents). It is a small 2 bed bungalow and as our family is growing, we need to extend the house.

We are looking at a sizeable extension (basically building an extension the size of another house) as we want this to be our forever home. Planning permission and building control is passed.

Unfortunately I don't know the current value of the house - it was valued at 90k in 2003, so I am sure that has increased significantly. We have had a costing expert look at the plans and visit the house and he has estimated the home extension at 190k.

My feeling is the house is not worth 190k so what way does that leave us? If we get the house valued at say 150k, does that leave us 40k short or maybe even more if lenders only give us 90% LTV ?

The thing is, we have a good household salary combined so if we were to go to market to buy a new house we could afford one alot higher than 190k, will this be taken into account ? Instead of releasing equity from the house could we just go for a self build mortgage based on our salaries ? Or if we use all the equity in our house, do we still require a cash deposit ? Can we use the house as collateral?

Would the wee next step for us be to get a valuation on the house as it currently sits and take it from there ? Sorry for so many questions.

Thanks

BarelySentientAI

You can't borrow more on a mortgage than the lender thinks they could get back if you defaulted on the loan.  It doesn't matter how good your salary is at the moment, it's all about the value of the security.

Get a valuation, then work out what would be missing.

And "using all the equity in the house" and "use the house as collateral" are not two different things that you can do both of.  If you have a mortgage, then your house is collateral.

naf123

Use online sites like Zoopla/rightmove to work out house valuations. If you can't then ask a local estate agent 

gwynlas

You could get a valuation survey for which you would have to pay, ask three local EAs for advice re selling price, look at recent sales prices for comparables or look at on line guides. A whole of market mortgage broker would advise you on the best product going forward. You would not require a cash deposit as you would be using the equity contained in the current bungalow.

chanz4

that sounds mad price for an exetenion 

Hoenir

If you've no mortgage. Start saving hard. The numbers as they stand appear to leave you well short. Alternatively revise your plans to something more affordable. 

PixelPound

You will only get a mortgage based on the value of your house as is, rather than post extension. If the price of the extension is going to cost more than your house is worth, then is that a good idea? What happens if costs over run as can do on such projects.

I know it's your forever home and thus the fact that you are unlikely to increase the value of your house by anything like how much the extension will cost, but is moving elsewhere not a consideration if you can afford a mortgage above £190K