Funding an extension, need to remortgage, need advice.

[sweetkitty]

Our desperately needed extension is about to start but we don't have enough money to finish it do will need to remortgage to finance it.

For example, the extension is going to cost at least 50K, we have 25K in savings, I don't think we have enough equity in the house to borrow the money just now so will have to wait until the build is in progress. Worse case scenario is we use 0% interest credit cards to get it built then remortgage.

When do you remortgage? When it's wind and watertight?

We probably have about 15-20K in equity, the extension will probably add about 60K to the value of the house at least.

Not even started and I'm stressing!

I would definitely get my finances sorted out BEFORE work starts. We've approached the bank about borrowing money for an extension, sounds like we're in a similar situation where we don't have the money readily available, but you're taking a huge risk putting the cost on credit card etc banking on the basis that you will be able to get the funds via a remortgage at the end. We approached the bank and were told that they wouldn't consider a remortgage until the works had been completed. Banks usually have a retention so that even if they make you an offer, they won't release the monies until the work is done and a valuer goes back in to the property to confirm its worth what they thought it would be worth.

I don't mean to be unduly negative, but what happens if the extension doesn't add as much value as you think it will? Or maybe that it does add £60k but the house is worth less now i.e. without the extension that you think so that overall, the value isn't as much as you need? Banks are really being tight with their lending at the moment, and mortgage valuations are sometimes short of that the market value is.

Also there is the possibility of you not meeting the criteria for a bigger mortgage / have enough equity etc for a bigger mortgage.

If I were you, I'd make sure I had everything sorted out - get a few estate agents round, explain what you're doing (show them the plans) and get them to give you a REALISTIC valuation (tell them its for mortgage purposes, not for marketing). Go in to see the bank, show them the valuations, get them to go through the re-mortgage process with you and even though they won't be able to process the application until later, they should be able to tell you whether you can remortgage.

Your problem might be the equity - once the build is finished you may only have £30k of equity which would be 80% of a house worth £150k so ok mortgage -wise, but that £30k would only be 15% of a £200k house which isn't normally enough for a lender.

The house was valued a few months ago so have a rough idea what it's worth now.

We could get a mortgage for the whole of the new house worth IYSWIM as we had it in place for another house and would be looking to borrow a lot less.

We wild be looking to borrow 25K. The extension is going to cost 50K.

Even if the house is worth the bottom of out estimations it would still keep us under 80% LTV too.

You could therefore do it by way of a personal loan then which is probably more certain, and then remortgage at some point in the future (once its done or even later) to pay off the loan.

It is all stressing me out. Mandy21 what are you having done? I take it you are in the same position as us, unable to finance it all from equity?

Get the money sorted first as prices may fall and it might not add what you had hoped and that would be so stressful

What you're proposing sounds very risky. There are so many things that could go wrong - house value falls a lot further over the next few years, remortgage is tight, one of you loses job, extension costs more than it should/takes longer, the 60k additional value is overly optimistic (& besides, EAs can't predict years into the future).

Can you not save up and get to a position where the credit cards are contingency rather than part of the core plan?

Why are you planning a big job if you can't afford it? Serious question btw as this is so so risky.

We aren't planning on starting the work until we have the money. We're desperate for the extension, but like you say, don't have the cash available so we're waiting.

Oh OK I thought it was about to start!

Why are we getting it done? Because its far cheaper than moving house, we cannot keep living in this house the way it is, saving up would take us about 5 years.

I'm not getting it done on a whim this has taken 3 years 2 sets of plans and 4K already.

But if you don't have the money before they start how can you get it done? You will always be worrying and extensions rarely come in on target. I think I have misunderstood somewhere becasee many people would like to extend but can't afford it so don't! Maybe revise plans with a good architect?

We have half the money, borrow the rest, then remortgage when complete. Even if the remortgage value is way way low we will still be ok. We want to borrow 25K for an extension v 60K to move house.

What if you can't borrow the extra after you start the build? How will you pay your builder? What kindof extension is it and how do you know what value it will add? I think this is insanely risk. You can't afford it.

Borrow for max a month on credit cards until remortgage comes through, have a fair idea what the house will be worth after remortgage, at lowest valuation we will be looking at 80% LTV.

So we can't afford 25K but we can afford up to 100K for another house?

I agree with others - it does sound very risky and highly stressful. I would certainly get the finances in place before starting the build. Most builds will have overruns on time and budget and I feel it's not fair on the builder if he gets to a position where you can't pay.
Worse case scenario is that the build starts and you have to halt it and then you will face living in a building site until the funds are raised.

We are desperate for an extn, we bought the house on the premise that it would be extended but we can't afford it for a number of reasons. I am having to wait - it's far, far from ideal but it will be at least 2 years maybe more.

I would sell but house values have declined so we would lose money. You have my empathy but a building project is mega stressful anyway without the lack of finances.

Investigate the re mortgage now in case things change with lending.

The difference in risk between moving and extending is:

• if you were moving then you'd have a mortgage agreed before taking on the debt of the new house

• with your extension plan you're assuming a remortgage will be available at some point in the future - and given the fragility of the banks that may be questionable - what would you do if they refused you a remortgage at that point?

What you need is some kind of commitment to the remortgage from your bank - but I doubt you'll get this in advance. Worth a chat with them anyway.

Forgot to add DH works in the HO of a bank, he obviously knows a lot about the market and mortgages. He's going to investigate into it as he doesn't work directly with mortgages.

Also forgot to add what the actual extension is, an additional 2 bedrooms and the teeny boxroom doubled in size to make a 2 1/2 bedroomed house into a 5 bedroomed one, good sized utility room plus a sunroom/playroom/second reception at the back. No new bathrooms, no new kitchen, it's mostly bedroom space as we have 4 DCs.

Don't stress!

We did this last year. Our renovation was large scale and we had less than half of the required funds up front.

We kept paying our builder until the money ran out. It was crucial to us that the builder knew what we were doing. Thankfully he trusted us as had an idea of what the house was going to be worth.

We had the house revalued once the windows were in. I remember the surveyor coming round and my heart was in my mouth in case he didn't value it whets I had. Thankfully the kitchen was just being fitted and he could see if would be a 'quality finish' so I think that put his mind at rest

A positive reply!

The builder will get paid we will just use the cards until we can get the remortgage.

DH is going to talk to a few people at work and I'm going to get an estate agent in to look at the plans, will they actually come out and do this, I've looked about at what other 4 beds in the area are on for, one recently sold for the minimum we think it might be worth but that was one less bedroom, no second reception, smaller utility room and garden and not in the cul de sac location oh and it backed onto the railway line, if it can achieve that in this market I'm thinking we will be ok.

Speak to your bank.

We remortgaged for an extension and had the money up front from the bank based on a valuation of the property. Even if you are not able to get all you need you would be better off with it on a mortgage then on credit cards.

If the bank won't entertain it you need to query whether you could remortgage once the work is completed.

No matter how careful you think you are being with costs you should also budget for some contingengy (around £10% of building cost) - have you factored that in?

We're in a similar position, although at an earlier stage. We moved last year to a house that needed total renovation and extending was always part of our plan. We have enough cash left over from the sale of our previous place to pay for most of the loft extension we intend to do up to first fix. To complete that and then do the second extension at a later date we will need to remortgage.

Fortunately my family have offered to lend us the extra cash we may need to pay for all of the first extension upfront in case we can only arrange for a remortgage after it is completed. I'll be looking into remortgaging asap though and hope we may be able to secure at least an offer based on planning permission, as that in itself is likely to have a positive impact on the value of the house.

It it's a risky strategy planning to do large amounts of work without having the funds definitely in place. It doesn't mean you shouldn't do it. It partly depends on whether you are risk adverse or not. In our case the final result that we can be pretty confident about justifies the risk at this stage. we live in an expensive area. We could never have afforded a house of the size we will eventually have. Even on the most conservative estimates the added value after the extensions is going to be far more than the cost of the building work.