Raising funds for house extension
Discussion
A bit of general guidance from the lending gurus please.
We have a mortgage on our home, lets say about 150k on a 300k home. As the kids grow and need a room each, and with losing 2 rooms to offices now that we're both working from home full time, we'd like to add one more bedroom, and extend the kitchen into a large kitchen-diner.
Lets say, ballpark, this costs us £100k of additional borrowing, and maybe adds £50k of resale value to the property. The remaining £50k+ isn't entirely money down the drain, as we're ready for a new kitchen and some other refurb work anyway, regardless of whether we do the extensions or not, so there's opportunity cost to consider too.
We've looked at what we could buy ready-made for £400k locally (i.e. sale of our house, plus £100k more) and we'd have no hope of finding anything as suitable as our proposed extended home. So spending the £100k passes that sanity check, at least.
I spoke to our current lender, who would simply create a second mortgage for the amount required, and we'd pay 2 payments every month. In other words our monthly outgoings would take a hammering. Not impossible, but would mean a lot of sacrifices.
We were hoping to increase the term of our existing mortgage to help if not completely cancel out the additional monthly payments. This doesn't appear to be an option.
Do we need to borrow separately for the build, paying both payments until completed, and then re-value and mortgage the two loans into one with an extended term to reduce our monthly outgoings? Is that frowned upon, and might limit our options? Do we have to assume, for safety, that we won't be able to do this, and we could be stuck with our new, higher, outgoings indefinitely?
Are there lenders who understand this sequence of events as a whole project, and will form a plan with us up front that we know we can afford long term?
Folks must do this all the time, but I'm not sure how...
Thanks all.
We have a mortgage on our home, lets say about 150k on a 300k home. As the kids grow and need a room each, and with losing 2 rooms to offices now that we're both working from home full time, we'd like to add one more bedroom, and extend the kitchen into a large kitchen-diner.
Lets say, ballpark, this costs us £100k of additional borrowing, and maybe adds £50k of resale value to the property. The remaining £50k+ isn't entirely money down the drain, as we're ready for a new kitchen and some other refurb work anyway, regardless of whether we do the extensions or not, so there's opportunity cost to consider too.
We've looked at what we could buy ready-made for £400k locally (i.e. sale of our house, plus £100k more) and we'd have no hope of finding anything as suitable as our proposed extended home. So spending the £100k passes that sanity check, at least.
I spoke to our current lender, who would simply create a second mortgage for the amount required, and we'd pay 2 payments every month. In other words our monthly outgoings would take a hammering. Not impossible, but would mean a lot of sacrifices.
We were hoping to increase the term of our existing mortgage to help if not completely cancel out the additional monthly payments. This doesn't appear to be an option.
Do we need to borrow separately for the build, paying both payments until completed, and then re-value and mortgage the two loans into one with an extended term to reduce our monthly outgoings? Is that frowned upon, and might limit our options? Do we have to assume, for safety, that we won't be able to do this, and we could be stuck with our new, higher, outgoings indefinitely?
Are there lenders who understand this sequence of events as a whole project, and will form a plan with us up front that we know we can afford long term?
Folks must do this all the time, but I'm not sure how...
Thanks all.
Mark Asread said:
A bit of general guidance from the lending gurus please.
We have a mortgage on our home, lets say about 150k on a 300k home. As the kids grow and need a room each, and with losing 2 rooms to offices now that we're both working from home full time, we'd like to add one more bedroom, and extend the kitchen into a large kitchen-diner.
Lets say, ballpark, this costs us £100k of additional borrowing, and maybe adds £50k of resale value to the property. The remaining £50k+ isn't entirely money down the drain, as we're ready for a new kitchen and some other refurb work anyway, regardless of whether we do the extensions or not, so there's opportunity cost to consider too.
We've looked at what we could buy ready-made for £400k locally (i.e. sale of our house, plus £100k more) and we'd have no hope of finding anything as suitable as our proposed extended home. So spending the £100k passes that sanity check, at least.
I spoke to our current lender, who would simply create a second mortgage for the amount required, and we'd pay 2 payments every month. In other words our monthly outgoings would take a hammering. Not impossible, but would mean a lot of sacrifices.
We were hoping to increase the term of our existing mortgage to help if not completely cancel out the additional monthly payments. This doesn't appear to be an option.
Do we need to borrow separately for the build, paying both payments until completed, and then re-value and mortgage the two loans into one with an extended term to reduce our monthly outgoings? Is that frowned upon, and might limit our options? Do we have to assume, for safety, that we won't be able to do this, and we could be stuck with our new, higher, outgoings indefinitely?
Are there lenders who understand this sequence of events as a whole project, and will form a plan with us up front that we know we can afford long term?
Folks must do this all the time, but I'm not sure how...
Thanks all.
Lenders won't lend to you on the basis of what the value may or may not be when the works done, only what it's worth now?We have a mortgage on our home, lets say about 150k on a 300k home. As the kids grow and need a room each, and with losing 2 rooms to offices now that we're both working from home full time, we'd like to add one more bedroom, and extend the kitchen into a large kitchen-diner.
Lets say, ballpark, this costs us £100k of additional borrowing, and maybe adds £50k of resale value to the property. The remaining £50k+ isn't entirely money down the drain, as we're ready for a new kitchen and some other refurb work anyway, regardless of whether we do the extensions or not, so there's opportunity cost to consider too.
We've looked at what we could buy ready-made for £400k locally (i.e. sale of our house, plus £100k more) and we'd have no hope of finding anything as suitable as our proposed extended home. So spending the £100k passes that sanity check, at least.
I spoke to our current lender, who would simply create a second mortgage for the amount required, and we'd pay 2 payments every month. In other words our monthly outgoings would take a hammering. Not impossible, but would mean a lot of sacrifices.
We were hoping to increase the term of our existing mortgage to help if not completely cancel out the additional monthly payments. This doesn't appear to be an option.
Do we need to borrow separately for the build, paying both payments until completed, and then re-value and mortgage the two loans into one with an extended term to reduce our monthly outgoings? Is that frowned upon, and might limit our options? Do we have to assume, for safety, that we won't be able to do this, and we could be stuck with our new, higher, outgoings indefinitely?
Are there lenders who understand this sequence of events as a whole project, and will form a plan with us up front that we know we can afford long term?
Folks must do this all the time, but I'm not sure how...
Thanks all.
Your lender won't extend the term of your current mortgage because you want to borrow more money. They would also be unlikely to allow the further borrowing on a longer term than the main mortgage but some do.
Depending on what your ERC is with your current lender it may be better overall to redeem that, take the full lending on a new rate and on a term that fits with your budget. Rates are very low right now so it's likely to be lower than what you are currently on too......
Thanks Sarnie. We've got negligible ERC, so no worries there.
I guess my only outstanding question is, when the job is done and we attempt to remortgage to extend the term, do lenders frown upon term going up? Or do they not care because it's a new application? I've seen the box on mortgage applications where you explain you're releasing equity. I guess this is what that's for, but have no idea how that would affect the application chances.
If this is all daft, my apologies. I have no experience of this, and really don't want to find an affordability gotcha when it's too late.
I guess my only outstanding question is, when the job is done and we attempt to remortgage to extend the term, do lenders frown upon term going up? Or do they not care because it's a new application? I've seen the box on mortgage applications where you explain you're releasing equity. I guess this is what that's for, but have no idea how that would affect the application chances.
If this is all daft, my apologies. I have no experience of this, and really don't want to find an affordability gotcha when it's too late.
Mark Asread said:
Thanks Sarnie. We've got negligible ERC, so no worries there.
I guess my only outstanding question is, when the job is done and we attempt to remortgage to extend the term, do lenders frown upon term going up? Or do they not care because it's a new application? I've seen the box on mortgage applications where you explain you're releasing equity. I guess this is what that's for, but have no idea how that would affect the application chances.
If this is all daft, my apologies. I have no experience of this, and really don't want to find an affordability gotcha when it's too late.
The term they will allow will depend on your age, the age you will be at the end of the mortgage, your retirement age.I guess my only outstanding question is, when the job is done and we attempt to remortgage to extend the term, do lenders frown upon term going up? Or do they not care because it's a new application? I've seen the box on mortgage applications where you explain you're releasing equity. I guess this is what that's for, but have no idea how that would affect the application chances.
If this is all daft, my apologies. I have no experience of this, and really don't want to find an affordability gotcha when it's too late.
Speak to a broker if you are unsure, would be my advice!
Mark Asread said:
Thanks Sarnie. We've got negligible ERC, so no worries there.
I guess my only outstanding question is, when the job is done and we attempt to remortgage to extend the term, do lenders frown upon term going up? Or do they not care because it's a new application? I've seen the box on mortgage applications where you explain you're releasing equity. I guess this is what that's for, but have no idea how that would affect the application chances.
If this is all daft, my apologies. I have no experience of this, and really don't want to find an affordability gotcha when it's too late.
As Sarnie said, just get a broker on the case to work out all of your options across multiple suppliers. This is all they do day in, day out.I guess my only outstanding question is, when the job is done and we attempt to remortgage to extend the term, do lenders frown upon term going up? Or do they not care because it's a new application? I've seen the box on mortgage applications where you explain you're releasing equity. I guess this is what that's for, but have no idea how that would affect the application chances.
If this is all daft, my apologies. I have no experience of this, and really don't want to find an affordability gotcha when it's too late.
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