Financing and Phasing House Redevelopment

[foxyloxy333]

Hi there,

We purchased our house last year and although it is liveable everything needs replacing. We are very much 'camping' in the house at the moment.

We have met with an architect and are in the first stages of agreeing the layout for possible side and rear extensions. As far as I can see the project can be broken into 5-6 discrete phases. Touch wood, we should have the money to do 1 of these phases a year without borrowing any additional funds. The final stage which would hopefully be a double storey rear extension will be expensive and take more that a year's savings to finance.

Our mortgage will be up in October next year and my hope is that we will be able to release some of the equity we should then have in the property - I have had the house revalued and the low level cosmetic changes we have done plus the market increase is around 7.5%.

We have the money to do a phase now. This could be converting the loft (it is already badly converted, not to building regs - whole thing needs doing now), landscaping the garden, extending into the garage, or extending into the alley that runs down the side of the house.

Which phase do you think would add the most value to the house? My gut reaction is to do the loft first but seeing as there is already a space there, my worry is that we would miss the opportunity to add as much value as we can and then be limited with how much we can remortgage for. I know the rear extension is the big one but we don't have the funds for that now.

Does anyone have experience of this or any advice? Did anyone do low-level cosmetic work just for the sake of the remortgage?

Thanks is advance,

HM

I think it depends on the lender.

We have been in our house for 5 years, we had a mortgage with Nationwide. In their case, they use their own House Price Calculator (available online) to value for remortgages - they don't carry out another survey, nor do they take account of our little pocket of the region which has shot up in value. They would only consider major alterations if I wanted to argue that the house was worth more than their Calculator. So in answer to your question, we have carried out cosmetic work but it's not classed as adding value by our current lenders remortgage process. We remortgaged with another lender, and because it actually involved a new survey etc, it was valued much higher. But it was a bit of a faff and it's still over a year away for you - I wouldn't necessarily bank on there being much equity and being able to get at it.

To answer your other question, I'd look at how the garage and loft were treated when the square footage of the house was calculated. As I understand it, garage area is included if it's adjoined to the house. Similarly even though the room is not a proper room (according to building regs) was the space included? I think the best way of increasing value is to add square footage so I'd say the extension into the alley sounds most likely to add value.

The only thing I would say us that splitting it up into various chunks might actually make it more expensive (e.g. would it not be more cost efficient to say extend into passage / garage at same time? ). Is it worth waiting to do it together (and to only have to live through the mess once?)

Thanks. That's really helpful advice.

The garage is detached so I'll check that out.

Yes it'll work out more expensive that way but we just wouldn't be able to wait the 5-6 years it would take to save for all the work to be done. The house is very run down e.g. we have birds living in the wall cavity behind our bed, the hot water only works with the heating on, damp, leaking shower etc. Plus the min £10K it would cost to rent elsewhere for the min 6 months it would take to get everything done.

Thanks again.