Remortgaging for home improvements

[Wigeon]

We are shortly going to be building a kitchen extension and financing it using a combination of savings and re-mortgaging when our current deal runs out (soon). We are lucky enough to have plenty of equity in our house so hope the actual remortgage won't be a problem and have an IFA who is very helpful in finding us good deals.

But can anyone tell me how it actually works when you borrow additional funds for home improvements - do they give you the money for your home improvement in a lump sum, or in installements, or what? Do they ask you for specifics about the home improvement you are planning or do they just give you the dosh (subject to all the usual credit checks etc etc). Have searched the mumsnet archives and done some general googling but can't seem to find the answer. Any info gratefully received!

[LouMacca]

We re-mortgaged to get our extension done. We had a 60k mortgage and then borrowed an extra 40k to get the extension and inside done. Once the re-mortage was approved the bank paid 40k into our bank account as a lump sum so we now owe 100k. Like you we have loads of equity in the house so a valuation wasn't needed. Hope this helps.

Btw we actuallly shopped around for the best deal and the lowest rate on offer at that time.

[DisparityCausesInstability]

Our bank wasn't bothered about what we wanted the money for - they would have lent us the money for a round the workd trip but they did want to know that our house would be worth at least as much when we were finished extending it and they wanted assurances that it wasn't being used for playing with on the stock market.

They would only realise funds for 85% of the value of the original property, we made the application, were successful and then they hung onto the money until we gave them the nod - it was in our account within 3 days and spent all too quickly.

[Wigeon]

Thanks very much for the replies. So LouMacca, they just put the money straight in your account too? And Disparity - how did you prove that your house would be worth at least as much as when you'd finished with the extension? Or prove that you weren't actually going to gamble on the stock market with the cash?

[DisparityCausesInstability]

They sent out a surveyor to get a current valuation and asked him to predict a valuation based on the plans, which had been approved.

Incidently the future increase in valuation came back at less than they were giving us (and we were adding quite a bit ourselves) - they advised us that it was a bad investment but still gave us the money - the surveyor's valuation for remortgage purposes in our experience has always been very very cautious (They undervalued our last property by 40%) so we just ignored it. We just signed a document stating that we weren't using the money to play on the stock market.

[Wigeon]

Thanks again - that's really helpful. Hopefully because we have lots of equity, any valuation based on the house plus extension will be fine. Although from our point of view we are planning on staying in the house for many years so I haven't given much thought to whether the extension plans increase the value of the house, just that they significantly increase the liveability for us!