If you've had an extention on your house how did you fund it?

[TeaRex]

This is such a stupid question but just thinking about potential future and if we were to extend how we'd go about it.
So if you extended did you save for the extention, re-mortgage, get a bank loan or other? I've no idea how it works :/ thanks :)

It was essentially funded by a mortgage on the house. We bought and extended the house before we moved in. We took out a mortgage to purchase the house that was higher than the purchase price by an amount equivalent to the extension.

The LTV would of course take into account the increased amount of the mortgage. We knew the value of the house would rise by more than the extension (and so we would eventually get the money back) and we could afford the increased mortgage repayments.

Similar for us. We remortgaged a few years ago for about £100k more and changed to an offset mortgage. Now a few years later we are drawing down on it. Wish we had the money upfront but sadly not.

Just a word of warning that banks lend on the basis of current value, not what it might be worth when its extended and they wont lend over the purchase price (you may find some may go to 90 or 95% as a max).

If you have equity in the house, you can re-mortgage to release that, but otherwise you will need to save or get a loan so you have the money upfront. Once the work is complete, you can remortgage based on the new value and maybe bring down your LTV for a more competitive rate, or pay off the bank loan if you took one out.

The gamble is obviously that the house will be worth what you expect, and you meet the necessary criteria to remortgage.

mandy: "Just a word of warning that banks lend on the basis of current value, not what it might be worth when its extended and they wont lend over the purchase price (you may find some may go to 90 or 95% as a max)."

This is absolutely right. We had a lot of equity based on the current value and so could get a mortgage for the extension based on current value and still come within an acceptable LTV.

Some lenders do offer further borrowing on the basis of a "with works" value. However they will only give the money up to a specified % of the current value, then release the rest after completion and revaluation. So you would still need to fund some upfront (or have builders who are willing to wait for payment.)

Be wary of unsecured borrowing to fund, then relying on further borrowing to pay back the loan, as lenders may not look favourably on borrowing for debt consolidation, and may only offer a lower LTV for that purpose.

We did have a lot of equity when we remortgaged which I'm sure helped ix borrow the exta bit.

Saved up

we got a loan, but our extention only cost 15k we've planned it so the loan ends when our fixed rate ends so we should be able to remortgage with a higher ltv and not have to take the loan into account...we'll be rich

Savings

Thanks for all the replies so far, it's very helpful. Think the best thing for us would be to find out a rough estimate of cost from builders and plan the savings vs mortgage options, I used one of the online extension calculators but it actually came out cheaper than I was expecting so I'm a bit dubious about that tbh. Thanks again :)

We're just starting an extension. We have some savings and currently no mortgage. So we are taking out a small mortgage and using our savings.

savings.

Savings

Saving (currently!)

Our house needs two major building jobs, a new kitchen and a loft conversion. We've saved up to pay for the kitchen and when that's done (and the value of the house has hopefully gone up accordingly) we will fund the loft conversion by remortgaging.