Buying a home with extension potential

Jazz11

We are first time buyers and looking at a house that has potential for extension like other properties in the area.
Is it possible to get a mortgage for the cost of the house plus extension works right from the start of your mortgage... 
How does it work?

lincroft1710

You can usually only borrow against the value of a property at the time you buy it

Mark_d

In the mid 2000's there was a mortgage lender called Northern Rock.  They used to offer mortgages up to 125% the value of the property.  The interest rate on these mortgages was significantly higher than for regular mortgages to reflect the increased risk that Northern Rock was taking on.  But that wasn't enough to save Northern Rock.

Nowadays I don't think any lender would offer this type of mortgage, so you can buy the property with a regular mortgage and cross you fingers that you get approved for a loan for the extension.  But in my opinion, if you need the extra space from day one then I suggest you look for a bigger house rather than a small house which can be extended.

thegreenone

If it has the potential to extend that's great but my thought is that you should live in it, as is, for a few years to get the feel of it.  You can then decide how to extend to suit your needs.  You might whack something up straight away and then decide, down the line, it's not right and you have wasted a serious amount of time and money.

Or buy something bigger now.

Having said that, I've just remembered that a friend found the perfect (location) two bed cottage with room to extend.  They started the extension process immediately but her two sons were at uni so had to share for a while when at home.

Albermarle

Alternatively you could reduce the deposit ( assuming it is large enough), and use the cash to upgrade the property. However you will most likely end up paying a higher interest rate on the mortgage.

Otherwise do not underestimate the cost of building work, which has shot up since Covid. Another reason to just buy a bigger/already extended house.

FreeBear

Albermarle said: Otherwise do not underestimate the cost of building work, which has shot up since Covid.

Budget around £4K per square metre, and you shouldn't be too far off the mark. Some will say £2-3K/m², and if you can get what you want at that price, you have done well. £4K gives you wriggle room for any unexpected overspend.

If this is London, the price could be higher.

Section62

Jazz11 said:

We are first time buyers and looking at a house that has potential for extension like other properties in the area.
Is it possible to get a mortgage for the cost of the house plus extension works right from the start of your mortgage... 
How does it work?

What kind of extension would you be looking at? One storey or two?  Removing existing walls or using existing openings?

Allow time for design, planning consent (if not PD) and building regs approval - could be a year or more depending how busy people are.

Also don't underestimate the amount of disruption building work causes - if you are having walls taken out the builder may prefer you to move out during at least parts of the work.  If you insist on living in during the job then expect some builders to refuse to quote, and others jacking the quote up to cover the 'hassle' factor.

If the house is too small for you to start with then consider how you'd potentially manage to live for several months without use of some rooms.

The ability for a mortgage company to sell a repossessed house which is part way through building work is severely restricted - I'd be surprised if you can get a combined mortgage + improvement loan, especially as FTB's, and if you can then it would possibly be via a good mortgage broker.  The mortgage company is taking a big risk if you start work and then run out of cash, so expect to pay a premium for that.

Bluebell1000

FreeBear said:

Albermarle said: Otherwise do not underestimate the cost of building work, which has shot up since Covid.

Budget around £4K per square metre, and you shouldn't be too far off the mark. Some will say £2-3K/m², and if you can get what you want at that price, you have done well. £4K gives you wriggle room for any unexpected overspend.

If this is London, the price could be higher.

We'd been getting a range of quotes recently for an extension and I agree with your pricing. We were pretty horrified when the first quote came in. We did find someone at about £2k per square metre after a recommendation and they're doing a great job so far, but most quotes were in the region of £3-4k per square metre.

FreeBear

Bluebell1000 said:

FreeBear said:

Albermarle said: Otherwise do not underestimate the cost of building work, which has shot up since Covid.

Budget around £4K per square metre, and you shouldn't be too far off the mark. Some will say £2-3K/m², and if you can get what you want at that price, you have done well. £4K gives you wriggle room for any unexpected overspend.

If this is London, the price could be higher.

We'd been getting a range of quotes recently for an extension and I agree with your pricing. We were pretty horrified when the first quote came in. We did find someone at about £2k per square metre after a recommendation and they're doing a great job so far, but most quotes were in the region of £3-4k per square metre.

Your price just for a water tight shell with electrics & plaster completed ?
On top of that you need to budget for the finishing touches and furnishing - If a kitchen, that could easily add another £20K to the budget.

Bluebell1000

FreeBear said:

Bluebell1000 said:

FreeBear said:

Albermarle said: Otherwise do not underestimate the cost of building work, which has shot up since Covid.

Budget around £4K per square metre, and you shouldn't be too far off the mark. Some will say £2-3K/m², and if you can get what you want at that price, you have done well. £4K gives you wriggle room for any unexpected overspend.

If this is London, the price could be higher.

We'd been getting a range of quotes recently for an extension and I agree with your pricing. We were pretty horrified when the first quote came in. We did find someone at about £2k per square metre after a recommendation and they're doing a great job so far, but most quotes were in the region of £3-4k per square metre.

Your price just for a water tight shell with electrics & plaster completed ?
On top of that you need to budget for the finishing touches and furnishing - If a kitchen, that could easily add another £20K to the budget.

Pretty much, yes (shell with electrics plaster and flooring plus fitting). However we've already got the kitchen (from our old house) which we're DIY fitting, so in our case we're not expecting many extra costs. It'd add a fair bit more if we were getting it all new. 

BikingBud

Mark_d said:

In the mid 2000's there was a mortgage lender called Northern Rock.  They used to offer mortgages up to 125% the value of the property.  The interest rate on these mortgages was significantly higher than for regular mortgages to reflect the increased risk that Northern Rock was taking on.  But that wasn't enough to save Northern Rock.

And that didn't end happily ever after did it?