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How does increasing the mortgage to extend work?

(6 Posts)
MacaroniAndWalnut Tue 18-Dec-12 09:46:31

Or not work

We've just finished repaying a big loan. We've been repaying £250 a month for that which was easily do able

We want to extend our house

Currently it's worth about £200k. We have £40k equity. I think we'd need £30k for the extension

Clearly if it was as straight as that our LTV ratio would decrease too far and our rate would be much higher?

But then once the extension was finished the house would be worth, presumably, at least £30k more, perhaps a bit more on top going on the price if identical but extended houses on our road

So in that case our LTV ratio would be back up to a decent level wouldn't it?

Would you remortgage once to get the capital for the extension , if we even could, pay a higher rate until extension done and at that point remortgage again? confused?

lalalonglegs Tue 18-Dec-12 10:16:07

Banks are quite conservative at the moment - I don't think they will lend against future value. Some building societies (such as the Ecology and the Norwich & Peterborough) lend to self-builders, holding money back until certain stages of work have been reached, they might lend to you for a large extension.

crazyhead Tue 18-Dec-12 14:06:26

What lala said. I just did a remortgage of a small BTL based on equity release for doing the place up and even that restricted my lenders, despite the fact I was still retaining 35% equity AFTER the lend.

Basically, the heady old days of whipping a bit of cash out of the house are no longer....

Ring London and Country to check with them, but my guess is that trying to get a mortgage at 5% would give you terrible rates if anything.

If that were me I'd be saving for it.

FishfingersAreOK Tue 18-Dec-12 14:17:00

Also, if you get quotes/think it will cost you £30K it will end up costing you £40K....[bitter experience emoticon] as there is the old "don't forget the contingency" element.

myron Tue 18-Dec-12 15:03:52

Also add 20% on top for the VAT. Builders ALWAYS quote exclusive of VAT. So.... ..........70K basic cost of quote.
14 K = 20% contingency (unforeseen costs)
Total (exclu VAT) = 84K
16.8K = 20% VAT
Total (inclu VAT) = 100.8K!

MacaroniAndWalnut Tue 18-Dec-12 15:42:11

Thanks guys that's sort of what I thought. I guess it's perfectly feasible that in a year or twothe house may be worth £180k even with an extension

That £30k was plucked out of the air but a pretty conservative estimate. The extension will be around 18 sqm

Anyway I think we need to save save save for a year or two and see the lay of the land then

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