How to finance an extension on a house we're buying

[MayimBialik]

We are looking to buy a house in an area that we love with a view to adding a 2 storey extension on the back to create a larger kitchen and a 4th bedroom with ensuite. The house is a lot cheaper than we were looking to buy so we were wondering if it is possible to mortgage it for more so that we can finance the extension. Is this possible? Does anyone have any other suggestions as to how we can get around this? We don't have the cash to hand to finance the extension yet we can afford a more expensive house if you see what I mean.

Thanks in advance

You can get a mortgage to finance extension, though the mortgage company will probably want to see plans, builders quotes etc before they'll agree to the mortgage. This means you have a big financial outlay (and hassle) getting those in place with no guarantee they will eventually agree. You might also get clobbered with a higher rate to compensate for the risk they're taking (trusting you to build the extension and not just run away to a beach somewhere with the money!).

It would be worth you speaking to a knowledgeable mortgage advisor - London & County are very big, experienced and reasonably priced, so might be a good place to start?

Good luck!

Our experience is the bank will only lend on the current value of house (not what it will be worth)- irrespective of the fact you could afford to buy a bigger house. Get familiar with LTV as this will limit your borrowing. No easy answers I'm afraid.

Hi
We are in a similar situation. We are buying a house below our budget but on a 95% mortgage and using our equity to do (some) of the work. We are being stung with a higher interest rate.
When I spoke to our bank, they said the other way we might be able to do it, is to buy the house, using all our equity as a deposit. Once we had moved in, we would have to wait 180days and could then apply for a further cash advance to do the work.
Hope tha helps

If the mortgage you need in total is less than the value of the house as is, should be fine - some lenders will be more generous on valuation for potential extension. Could you apply for planning permission in advance?

If you do not need to borrow more than the value of the house as it currently stands, then no problem, you will just have a lower deposit and a higher loan to value rate. Well, so long as the amount is no more than 85% or so of the current value (although there are some 90-95% mortgages around). You will pay higher mortage payments because of the high loan to value rate, but get it all done in two years and you can refix on the basis of the new value and probably at a lower rate. We have financed our extension by increasing our loan to value rate. We had a big deposit and an original 60% LTV. Now we have an 79% LTV (that was carefully worked out!), higher mortgage payments, but enough money to fund the extension!

You can call the planning officer for the area and get an idea of what they will and won't allow. We were allowed a two storey over part of the back of our house, because lots of other people on our street had done it, but it was very strictly limited in size. Our side extension (which we thought would be a problem as we have a boundary line down a shared drive) was actually not a problem at all and in the end we made it larger to regain the space we lost at the back.

Thank you very much for all your replies. The house is currently worth £200k but Im pretty sure the value would increase to at least £250k with a 4th bedroom and much larger kitchen diner. It would more than likely be more looking at prices in the area but I'm going for a conservative estimate. We wouldn't be doing it to make money, it would be so that we can feasibly stay in the house long term.

We have had an offer accepted and love the house so should we not be able to do an extension we would be happy in it, although we would have to move again fairly soon as we will outgrow it.

Thank you very much for all your replies. The house is currently worth £200k but Im pretty sure the value would increase to at least £250k with a 4th bedroom and much larger kitchen diner. It would more than likely be more looking at prices in the area but I'm going for a conservative estimate. We wouldn't be doing it to make money, it would be so that we can feasibly stay in the house long term.

We have had an offer accepted and love the house so should we not be able to do an extension we would be happy in it, although we would have to move again fairly soon as we will outgrow it.