How would this work - mortgage on house for development

[ServiceDroid]

Can anyone advise about this?

We're looking at a 3-bed property on a massive plot, which we could extend to make 4 beds, 2 baths, big kitchen etc.

We have enough equity to put down about 20% of the total purchase price. However, this wouldn't leave us with any money to do the extension. If we put down a smaller deposit, we'd have some money to start extending it, but we wouldn't have enough to do the whole job.

Can anyone advise about how mortgages work in this scenario - is there any possibility of borrowing against an extension you haven't built yet?

(For context - if we buy this, we'd be borrowing significantly less than the total amount for which we have an offer in principle. Also, while I realise we sound very naive, we've built / extended before so that element of it doesn't faze us, it's just that previously we had enough equity in the house to just use that to finance it).

Thanks in advance for any help.

Bumping cause I'd like to know the answer. We're buying a house atm with a view to extending but won't have the equity to finance it for a good 5 or 10 years. Not the end of the world as this is our forever house and we don't need the space now, but it would be ace.

Hi, we are currently extending our property so might be able to help.

Our mortgage company will offer upto 80% of what the porperty is worth. So if you needed to extend it would depend on the market value.
Our difference is we were already living here so we needed to extend our mortage borrowing a little to carry out our extension. Had to have a visit from surveyor to check current market value and bank would lend 80% of that.

So if your house is worth what you are buying it for, then dependant on bank you might need to use the full 20% to put down as deposit.

They don't take into consideration planning granted when doing their valuation.

Thanks for your replies. Our mortgage company has said that they will lend up to 90% on a pre-existing house, or 85% on a new-build. I do find the whole thing hideously confusing though, and I'm probably missing something really obvious!

We have just done this with handelsbanken. They are providing a staged mortgage where money is released once each stage of the build is carried out. We obviously have had to prove we can afford the higher mortgage and that the house will increase in value by the required amount. They are certainly worth talking to as we had no luck with mainstream lenders for renovation. Good luck.