Fixing new mortgage deal part way through extension?

[spydie]

We are part way through extending our house.... out current fixed rate mortgage is up at the end of July and we've been invited to refix now to have it all set up for when current deal expires.

We're financing the extension through additional borrowing on the mortgage (although a seperate loan and on a 5 year fix, which we plan to pay off by) but this has pushed our total LtV to 90%.

Not too sure whether to fix now, given that the GE is next month, or wait until build is done, as (hopefully) the house will be worth more and we can reduce the LtV. With a lower LtV we'd probably be able to reduce the term of the mortgage too.

Any wisdom here? I'm slightly risk averse and do wonder if it would just be safer to fix now!

Personally I'd be waiting for better LTV.

2 things to bear in mind. You will probably need to go with your current lender because if you're starting from scratch, you'd need a whole new valuation and if you're part way through, you may find your house is not mortgageable (eg no working kitchen / bathroom etc) or its worth less than what it would have been worth before you started.

It also depends what time gap you're going to have between the end of the fixed rate period and when the extension is finished, and what difference (extra) you'll have ti find per month once you move onto the SVR.

For us, it was worth waiting. We borrowed an extra amount to finish the extension (about £30k) on a 2 year deal, even though we had only 1 year left on our (main) mortgage. I think our LTV at that point was about 85%. We're remortgaging now (all finished) for the whole lot, and even though there are penalties with paying off the additional (extra) we borrowed, its only 1% of £30k.

We're now looking at an LTV of about 55% so rates are much lower (looking at 0.99%) so depending on how the numbers work, I'd wait.

Yes, if we fix now it's with the current lender.

Building work should be done about the same time the current fix ends. So any period on the SVR will be as long as it's takes to remortgage. We had already factored this into our finances and is affordable. I've also just had a promotion at work which sees a 20% increase on salary, so it's easily affordable now.

It's hard to speculate on what the new value might be though.... We have a very unique character cottage, we are doubling the downstairs area and adding a big kitchen diner, WC plus shower and seperate utility room (v small kitchen has been knocked down). Our location is sought after plus we have one of the very few spots in the village that is set up a private drive and away from the road. If I look at other properties round here that are remotely similar I get an idea of what we could be looking at, yet when we had it valued for additional lending recently we were surprised at the surveyors valuation which was 5% less than our already conservative figure based on local house prices. So if we do wait, I'm worried we might still get a rubbish valuation, and we won't be much better off!?

Loads to consider

Banks will always be cautious when valuing - its in their interests unfortunately!

It's one thing knowing asking prices for similar properties in similar areas & knowing the sale agreed price - would be a better indicator.

Greybird it was based on sold prices and then we knocked a bit more off. But, I don't know if it didn't help that we've only been here 18 months and I didn't point out to the surveyor that the house had needed quite a bit of work so the price we paid was quite low, nor what we had done in that time.

I think lender's valuations are conservative and if it is unique / there are few comparables, it might be tricky. Ours was different in that we were adding a bedroom (plus an ensuite) upstairs as well as additional space downstairs so knew we'd go to a whole new level of value (as a 4 bed 2 bath, rather than 3 bed 1 bath). I think where you're looking at a ground floor extension, its not quite as easy. Have a look at the rates and play with numbers, interest rates are likely to rise at 0.25% increments, use the valuation you got recently + what the build cost of the extension is (not kitchen and internal fittings) let's call that £Xk, then a second figure which is that £Xk plus say 25% of the build cost, and see what rates you could get now for those values. Do you have a friend or sister / mum that might give you an objective opinion - I am the same in that I think my house is better than others because of X, Y and Z, but whilst I think everyone wants X, Y and Z, in reality they may not. And they may not add value in the way I think they do.

Its all a bit complicated isn't it?

Cross post - the valuer will look at what you paid but the basis of the valuations will be comparables. So it wouldnt be a case that your recent valuation was only based on your purchase price + regional price increase. Also works you've done prior to the extension won't necessarily have added any value.

We fixed part way through an extension. The original plan was for the build to be finished by the time we needed to fix, so we would have got a better deal. However, the build has massively overrun by about 6 months, and the mortgage was set to be £200 a month higher than what we had been paying if we didn't fix, vs £50 lower if we did, so a no brainer really. We did go with our current lender as thought the valuation with a new lender would be complicated.

I think we are going to wait until we are done....!

If, as PP suggests, looking at build cost added to most recent valuation, that would drop us to a LtV of 80%. So even if a valuation is less we should hopefully be able to still get 85%. Looking at rates, it's not a huge saving but enough to shave off a fair few years by keeping our monthly payments the same.

If we fix now we will be paying £50-£100 extra a month, which is fine, but by waiting we might be able to reduce the term. Plus we'll have more options by being able to look at other lenders too.