Question about mortgages

[JustAnotherUser123456]

Sorry if this is a bit of a stupid question but I am struggling to understand; DH and I have got a mortgage of £147,000 on our house, recently valued at £330,000. The house has only got two bedrooms but is semi-detached and has got quite a lot of land around it to extend. We contacted the bank about lending to us for a double storey extension and the bank quoted us an amount based on additional borrowing.

The amount they offered us on additional borrowing was £16,000 obviously no where near enough for us to do an extension. We were told the amount they could lend us was based on our ability to pay it back and I'm guessing it's so low because we pay childcare of £550 per month and my DH has a small loan of £5,000 which is due to be paid off in two years. DH earns £30,000 per year and I earn £25,000 per year but work part-time (this is my actual salary, not pro rata).

My question is are additional borrowing and remortgaging the same thing? I just can't understand why, when we have got so much equity in our house, the bank will not lend us the £70,000 we need to do the extension.

Any advice greatly appreciated.

The amount you can borrow has nothing to do with how much equity is in your house- that will only affect your interest rate. The amount you can borrow depends only on affordability ie your combined salaries taking into account debts, monthly expenses etc. The max i think you can borrow is 4.5 times joint salaries but that would be decreased based on your bills such as childcare. It would definitely be worth looking at remortgaging to see if another provider would lend you more and switch the whole mortgage to them. Each provider will have different affordability tests. I think additional borrowing can only be arranged with your current provider and would be classed as a separate debt to your existing mortgage with a different interest rate etc, but i could be wrong on that.

Thank you Mimi that makes sense

Exactly what Mimi said. However, have you thought the affordability through? If you borrow the 70k, your monthly payments will increase by over 50%. You'll still have a loan to pay and childcare costs. What if the extension costs overrun? Would you have any contingency? I don't know all the facts but reading your post it seems a little tight.