How did you finance extension/ home improvements

[glassbrightly]

We are looking at an extension and some other home improvements (new kitchen etc). None of it is urgent but it would significantly improve the ease of living in our host.

We have been saving for a couple of years and have just over a third saved of estimated costs. The extension won't be straightforward and will require planning permission.

We are in an expensive period of life (kids young still need full time childcare for another few years), but estimates we could save the full amount in 3 to three half years.

My normal approach would have been to wait and save but our mortgage needs reviewing and we have been asked if we want additional borrowing. DH is keen on this as given what we are saving we could
Cover this (though our mortgage is still large) and we can over pay in the same timescales to pay it off.

Just curious as to what others have done ? Also bear in mind we've obviously spend lots of time at home so I may be a bit obsessed !

Interest rates are low so borrowing is (relatively) cheap. If you wait and save you will accrue very little in terms of savings interest but labour and materials will almost certainly go up so you could end up paying more. If you are due to review your mortgage now and there are no hidden costs in borrowing more (LTV will be higher which might affect rate on offer) then it would seem to make sense, especially if you can overpay. We had a mortgage once which had an overpayment fund attached. We left the additional funds borrowed in the overpayment fund so it would offset the interest but knew it was there for a rainy day if required.

Additional borrowing against our mortgage. Saying that the house extension and renovation was vast, cost us around £220k but value has gone up more than that so was worth it - check your house price would go up significantly before borrowing though as you don't want to be in a sticky situation if you need to sell.
Good luck

You’ve already saved a third you say.

I’d think of that as a quarter given building costs often overrun.

Borrow 50% on the mortgage.

Start the design/planning process and save the other 25% whilst that is ongoing.

Wow thanks all I was expecting everyone to say save first !

@TheTeenageYears that's a really good point re costs - and we know we can fix the cost. I think we are at least 18 months off build given planning etc.

@custardbear our budget is similar (if not a bit more) ideally would add a third to footprint plus redo kitchen change where front door is and ready heating. Think we'll need steels in at least three areas.

@WhiskyWhiskersdottir we've planned for 25% over run.

Overall we're probably going to run at evens at best on investment versus house price, but it's our forever home and we are about 45% equity.

We are current planning an attic conversion and will be extending our mortgage to do the work. When we first did hone improvements we saved, but in recent years, the value of our property has risen and interest rates are low, so it seems to make sense. At the moment, the cost of building work is going up (at least round here) due to demand, so we feel this makes more sense in the current climate. We have managed to negotiate a fixed price contract.

Sorry, I would also add, that we have had estate agents out, and they have confirmed that the value the work would add to the house is almost certainly more than the quotes we have had, so we should be adding value to our home by doing this.

For bits and bobs we save or have had to borrow from family. For an extension we borrowed on our mortgage.

We personally saved but it took us a few years. With mortgage rates being what they are and savings rates being what they are I would look into the remortgage.

Get what you want sooner, enjoy it for longer. I am a saver through and through but I agree with the you say it's a third, more likely a quarter by the time you come to do it. Plus you have child care costs for the next few years which limits the amount you could potentially save.

Have a look at LondonandCountry, whole the market, no fee mortgage brokers who are recommended by MoneySavingExpert. There are calculators online I believe, you could crunch some numbers.

There are hundreds of local brokers also offering the same sometimes better service as the company mentioned above, I would absolutely recommend asking around!
MSE tends to recommend Whole Of Market advisers that don't charge a fee, rather than a certain company these days.

We had a ground floor extension and we used savings .

New kitchen (involving a lot of building work) and cellar conversion. Both on mortgage about 5 years apart. I overpay my mortgage now. Minor stuff from savings, major on mortgage. Absolutely do it

When we did ours 14 years ago we used a flexible 'overdraft' type mortgage to borrow what we needed and then overpaid it till it was all gone.

In your situation if your jobs are secure I would use the saving you have now and add the rest to the mortgage as long as you can overpay when funds allow. You will have the use of the new space a few years earlier and will not pay much extra as borrowing costs are low.

Go for it 😀

We're planning half savings, half from the mortgage which is currently 30% LTV so shouldn't have a problem.

One good thing to do if you are adding it to your mortgage would be to make a conscious effort to overpay if possible in the short term- If you were taking a 5 or 7 year loan that's one thing but potentially taking it into a 20 year mortgage you are spreading the debt over a long time which may well increase the cost to you

We did it ourselves and with friends in the trades, who just asked for cost price of materials.
Saved and paid cash, as we don't believe in credit.

We saved, but it's taken 10 years to replenish our savings from our last renovation. We're also fortunate to be mortgage free (inheritance)

Our savings have taken a huge hit so we will be back on beans for a while to build them back up again.

We borrowed on our mortgage. Interest rates are so low that the new total payment is the same as before almost and covers the extension as well as the original borrowing.

For those borrowing. Do you wait until the end of a fixed term, then borrow more? Or do you up the amount on your current deal during the term?

I've been looking and second charge looks a nightmare, as do early repayment fees. Standard variable is a rip off so I'm looking at a variable with no early repayment fee. It'll cost more than a fee free 2 year fix (due to an arrangement fee) but allows flexibility.

They'll get your money one way or another!

Rates are so good at the moment we booked a new rate and paid the early repayment charge

We had a loft conversion about 7 years ago to give late teenage sons more room and a shared shower room. I am glad we did as now they are still there working and saving for their deposits. Our extension cost £40k. We saved about £26k then my Auntie died and left me £4 which I added to loft fund. We got 3 quotes over next couple of months. We got architect in to draw up plans and he charged £2.8k. We saved another £3k during that time. Then we chose builders and agreed to pay in installments each week as work moved onwards. Work took over 2 months so by end we had saved up almost enough and I put food shopping and fuel on to credit card to free up enough to pay it off. Interest rates are cheap now and you.have low LTV so taking more on to mortgage makes sense in your case.

We saved for a while but reached a point where we were desperate for the extra space, if we'd waited until it was all saved then we wouldn't have had the benefit of the space whilst the children were still young. Increased our mortgage but checked carefully before hand that we wouldn't spend more in total than the house would be worth.

When you approach estate agents how do you get their time without actually selling?

We took out 2x unsecured loans with low interest rates.
We used the money we would have been saving for the extension to pay them off (much faster than any mortgage.)

This worked for us, but then we don't have a mortgage and didn't want one again....

@custardbear - I called a local agent and said I was trying to decide whether to move or extend. They came round and valued. I thanked them profusely for their time and said I'd be in touch when I had all the facts and figures to hand and had made a decision. I have no intention of moving but needed a valuation to plan how much I could potentially afford to borrow to extend.