Financing an extension

mark55man

Looking to extend our home later this year to help with the ever growing kids, and want to think about options about how should I structure the finances.

Some facts

• The max budget for the extension would be £40K of which I could raise about half through realising the last of my assets.
• We have 16 months left (Aug 09) on our 5 year fix mortgage (5.69% on 183K left) and even with an additional £40K will be well under 75% LTV.
• Our current provider (Alliance and Leicester) will only offer a 2 year fix and I don't really want to go on a Standard Rate for the £40K now (whilst waiting til I can remortgage in Aug/2009, or to spend 16 months on the Standard Rate for the main mortgage if I take out the 2 year fix now £180K).
• I can't (am very reluctant to) remortgage until Aug/2009 as theres a £7k redemption penalty.

So I would appreciate some crystal balls on the mortgage market in 12 months time - and the merits of fixed / offset / discount in these circumstances.

Alternately, I would be happy to consider a non secured loan - or would it make sense to try an alternate provider / second mortgage - but I am worried about that

Hope you can help directly - or by pointing me at some good resources - bit of a mixed bag of facts - but that's why I need some help!!

Thanks

Mark

Tiddler_2

I don't think anyone can predict what is going to happen with mortgages next week, never mind in 12 months time.

I take it you are looking to raise £20k and not £40k as you say you can get half of the money from selling your last asset.

You could get an unsecured loan for £20k but these are usually over a shorter term 7-10 years max, so payments are often higher and rates probably higher than A&L's standard rate aswell. (A secured loan would also almost certainly be higher than A&L's SVR)

Obviously paying a £7k penalty would be stupid for a 16 month tie in.

Personally I would see if A&L had any products with no ERCs that you could put the extra money on, and then remortgage the whole lot in Aug 2009, as it is better to be paying a variable rate on £20k for 16 months than on £183k for a minimum of 8 months (if you took the £20k on a new 2 year fixed deal)