Financing Extension

[Hoddo]

Architect friend did a survey of our property and draft architectural sketches of a single story extension creating large open plan living/dining/kitchen, utility room, downstairs toilet and a hybrid room (spare bedroom/office). Rough cost was £65k.

House currently worth 220k with LTV of 79%. Post extension it would be worth £290k (had local agent review plans). We love our house, the village and the area. Do not plan on moving for 5+ years minimum.

Not yet spoken to a lender but can anyone in the know let me know what their reaction might be to releasing all capital in the property in order to develop it (cash savings would cover the remainder)? My fear is that they would view it as property speculation and as such not be interested.

What other options are there?

Thanks

[C0ffin D0dger]

Hoddo said:

Architect friend did a survey of our property and draft architectural sketches of a single story extension creating large open plan living/dining/kitchen, utility room, downstairs toilet and a hybrid room (spare bedroom/office). Rough cost was £65k.

House currently worth 220k with LTV of 79%. Post extension it would be worth £290k (had local agent review plans). We love our house, the village and the area. Do not plan on moving for 5+ years minimum.

Not yet spoken to a lender but can anyone in the know let me know what their reaction might be to releasing all capital in the property in order to develop it (cash savings would cover the remainder)? My fear is that they would view it as property speculation and as such not be interested.

What other options are there?

Thanks

In these days of super tight lending criteria they probably won't be interested. You cannot borrow against the projected worth of the house post extension as what happens if they lend you the money, the build goes tits up, and ultimately the house is worth even less than it's original value. The mortgage provider won't then have a means of getting their money back if they need to. Talk to them by all means and find out what you can get but this is probably what you'll be up against. You could take a more risky approach of funding the development through unsecured loans, 0% credit cards, etc. and then re-mortgage based on the new value once the work is finished to consolidate the debt but I wouldn't recommend it.

When we did our extension our lender would go up to 85% LTV based on the current value of the house. We were around 70% at the time so between that and the ~£20k we had in savings we were able to fund it.

Now in a similar quandary about having a loft conversion done. There might be some wiggle room in the mortgage this time but we'll have to see.

[BoRED S2upid]

No chance they will increase the LTV to 100% to allow you extend. They would prefer to bolt on a loan obviously at a higher rate to your mortgage but then you could remortgage when it's all done.

[NorthDave]

At that cost of extension versus cost of house are you sure that moving wouldn't make more sense?

[Hoddo]

NorthDave said:

At that cost of extension versus cost of house are you sure that moving wouldn't make more sense?

This had occurred to my wife and I and is something we continue to weigh up.

[Neil H]

So it will only be worth 5k more than the current value of the house plus rough build costs – not worth the trouble, especially if you don't have the finances readily available. Moving house would be a much better option.