Home extensión but no funds- loan or remortgage?

[SenoraSurf]

We want to build an extension on our home (single story) of ~10m2 to increase the size of our living area. Estimated cost is between £10-12k (we renovated our home ourselves so we would be doing a lot of it as DIY apart from external brickwork and roof).

We don't have the money saved in the bank, have an outstanding mortgage on our home but no other debts (2 years into a 5 year fixed rate mortgage deal).

How do we fund this? Personal loan? Borrow against the house? We are a bit lost with where to start.

Thanks

From an interest rates point of view additional borrowing on your mortgage would be the cheapest way, as long as you have a low enough LTV for additional borrowing. I did this a few years back to extend my house and it was easy enough.

What would be the cost of remortgaging and is there anything else that needs doing that needs that kind of money? For instance, we want an extension but the windows need replacing as does part of the roof. We are waiting for our current mortgage deal to expire then are remortgaging then for everything. We have a broker though so he talked us through the pros and cons.

Also if you add it to the mortgage, you could try overpaying what you would have paid on a loan thereby building a buffer

If your lender will allow you to remortgage that's the best option as it'll cost you a lot less.

Mortgage, it doesn't matter about the fixed rate as this will be a second mortgage rather than a new bigger mortgage (at least that's how mine worked and I did it at the same time as agreeing a new rate).

For that amount I would have a personal loan , you can get some good deals now depends on how quickly you can / want to pay it back.

Interest on mortgages is much lower than personal loans. It would spread the cost over many years so the extra monthly payment would be v low but you could overpay to bring the borrowing back down.

A personal loan has a higher interest rate and is done over a shorter period of time so you’d need to commit yourselves to a few hundred of payment every month.

Just did a quick look on Tesco , 10 grand over 3 years is 290 a month and you only pay 447.00 back in interest . Not bad

For extending or enhancing a property I would add to the mortgage as it becomes all 'one asset' with a long life.

For buying a car or holiday etc. I would never add it to a mortgage as most likely the 'item' will need to be replaced or been consumed long before your mortgage is completed (unless you only had 3 or 4 years left on your mortgage)

Thank you all for sharing your advice. I'm going to call our mortgage provider tomorrow and find out the logistics of adding it onto the mortgage. Will also check out loans as then I will have a direct cost comparisons

I initially thought mortgage option would be a no no (I would never add to the mortgage unless it was reinvesting in house) but am pleasantly surprised by the support for this option.

We could pay it back over 3 years so I think I'll end up going for the lowest interest option.

Thank you again.

But you are investing in your house by building an extension! Confused...