Options for financing this extension?

[QueenOfDuisburg]

Hi all,

Driving myself crazy here. We have just had planning permission approved for an extension which would create a much needed 4th bedroom for our 3-bed semi.

The problem is the cost of extending is more than the amount of equity we have in the house. We have around £80k equity and quotes for the work are coming out around £110k.

The value of the house once a 4th bedroom is added will be considerably more than the cost of the extension (they are incredibly sought after in this area and almost impossible to find).

If my husband and I wanted to move to a property £120k more than the one we own now, we would have no issue getting a mortgage for that amount. But we desperately don't want to leave the area and, as above, bigger houses just don't exist here.

Of course, I understand no bank is going to give us a mortgage for more than the current value of the property, but if we can prove we can afford higher repayments (and/or that the added value of the extended property will be more than the loan amount), is there any way of financing this sort of project? I've looked and looked but can only find loans against the equity in the house (or remortgaging, obviously) - but that's just not enough.

Please be kind. Completely new to this and clueless!

You will most likely need to have a combination of lending in order to finance:

• remortgage
• unsecured loan
• credit card

Then at the end of the project, remortgage again based on the new value and increased equity (if your income allows higher lending).

Risky strategy, and personally I wouldn't do it. Unfortunately, your only option may be to wait a few years whilst you save/increase equity.

Bit risky given builds are almost always over budget but yes like Cosmi says you could do a combination of mortgage, plus unsecured personal loans plus as many credit cards as possible plus 0% finance where available e.g. kitchen and furniture.

Then remortage when finished on a higher valuation.

How much can you save a month and when is the build due to start? If it isn't for another year you could save a significant amount by then anyway?

When I had to do an unexpected minor renovation c£15k after I moved into my house, having spent every penny on the house all about £5k I got a couple of 0% credit cards and put all my 'normal' spending (and as much stuff for the reno e.g. materials) as possible on the CC to free up cash to be able to be paid to the builder via bank transfer. Every month the build goes on you get another pay cheque as well... which is helpful.

Thanks for your comments. We will have to make some phone calls, sit down and seriously think if we want to have that amount of debt spread across so many loans/credit cards. It does all feel risky - I have always been very risk-averse with money and I'm not sure I'd be comfortable with it!

Yes, we are saving like crazy and the build wouldn't actually start for another year (good builders around here are booked up for at least the next 1 2months so that's non-negotiable)! So we will have saved some extra by then. I hadn't thought of using credit cards for normal spending (which we don;t do much of anyway with this looming)!

Lots to think about! Thank you!

Also look at tasks you can do yourselves eg painting - get those taken out of the equation. If needs be, you can always finish of later. A friend of mine still has an ensuite room it's currently just a glory hole of junk. Their extension was done about 7 years ago but they didn't have the funds to finish everything off, so they got the builders to plumb to the ensuite and capped everything off in the ensuite. So it's there for when they want to get it installed and finish it off. She keeps saying one day they'll get it don However they did all the decorating (2 rooms affected and an additional room plus the non-suite as she calls it) which saved a bit off the quote, and her DH did all the landscaping outside too.

But by the time your builders have got going, and allowing for the time it'll take, if you really tried hard would you then have enough saved up? Also think about 'stuff' you have that will need to go due to the space disruption of extending - can you sell and raise some cash there

£110k for a 4th bedroom seems crazy. It will never in a million years add anywhere near that much value to the property. I appreciate that is not why you are doing it but really needs to be given some thought.

I presume this is some sort of double storey extension but how about doing a single storey extension? or convert a garage?

@JellyBabiesFan

£110k for a 4th bedroom seems crazy. It will never in a million years add anywhere near that much value to the property. I appreciate that is not why you are doing it but really needs to be given some thought.

I presume this is some sort of double storey extension but how about doing a single storey extension? or convert a garage?

Adding one bedroom increased the value of our place by £100k.

Also look at tasks you can do yourselves eg painting

Oh man... painting takes SO long though. Especially over bare plaster when you have to mist coat, and do all the woodwork.

Unless you are really good at decorating (and really really like it / are really really run out of money) I would get decoration included. That professional level finish really makes the look.

Thanks again for replies.

To clarify - to main point of the extension is to add an extra bedroom (which is double but only small!) but the build also includes a thin side extension and a small extension to the kitchen. We are also knocking through some walls/adding some walls in places, so there is more to the cost than just the bedroom. We are also increasing the size of what is currently a tiny box room to a double size, which again will add some value to the property.

In our area 3 bed semis (as mine is now) go for around £330k - the same houses extended to include a 4th bedroom go for around £450k. Personally I think this is ridiculous but we live in a family area with a severe shortage of decent sized family houses so they really do sell for a lot, and very quickly too (although we have no plans to sell at all).

@JellyBabiesFan - thank you - we actually are converting our current garage as part of this project. Ideally we wanted another living area/space for guests to stay, but we have definitely considered converting this to be the 4th bedroom instead. In some ways it feels like a no-brainer as it would save us thousands and we are otherwise essentially paying thousands for an extra living room (we will already have one, plus an open plan living space in the kitchen).

@Ariela - thanks, I hadn't really thought much about this but we could essentially leave a couple of the newly built areas as 'shells' at first and maybe deal with finishing the job further down the line. DH knows quite a few decorators etc who I'm sure we could get some decent rates from.

@JellyBabiesFan

£110k for a 4th bedroom seems crazy. It will never in a million years add anywhere near that much value to the property. I appreciate that is not why you are doing it but really needs to be given some thought.

I presume this is some sort of double storey extension but how about doing a single storey extension? or convert a garage?

In my area it adds about 150 -170 depending on standard of fit / type of extension.

Agree you need a combo
Save aggressively and if you can source materials yourself do (warning: it is A LOT of work and you need to be really on it)

I would focus on getting the build itself right. Leave Painting, fancy doors, fitted wardrobes etc they are nice to haves. Also skip fancy windows and pointless juliette balconies (just why?) Etc.

Do you have family who might loan you a bit - like £10-£20K - then you could pay them back when you remortgage?

The other problem you will have when it’s finished is that the mortgage valuation will be nothing like what you would sell it for