How to fund house extension

[NewLifeOrNot]

Maybe should go in the money topic but it’s specific to home extension/mortgage!

House is currently worth approx. £500k. Outstanding mortgage is £282,000. We want to do a two storey extension that would probably cost in the region of £150-180k (south east). Would this even be possible? Would the bank let us max out the mortgage? I’ve tried to look online but it’s confusing as I’m not sure about the LTV. After the building work the house would be worth around £700k so we’d probably just break even rather than add extra value over and above the extension costs but we’d get an extra bedroom and bathroom so wouldn’t have to move.

TIA

Sorry should have added that based on our salaries the online mortgage calculators all say that we’d be eligible to borrow up to £550k in terms of affordability/repayments but not sure how this works in terms of current house value and future house value after work has finished. I’m assuming they wouldn't let us borrow more than 90% of the current value of the home? So £450k-282k= additional £168k?

Yes they might lend it to you but they’ll want to know if on your salary you can afford the repayments

Are you sure it would be worth £700k after extension? House prices are often limited by house values on the street, we have a two storey extension on ours which was done before we bought it, but houses on our street without it aren't £200k less, more like £80k less. We’re in the southeast too.

@Overthebow yes definitely, there are about ten roads around us where all of the houses started off as three bed semis. The ones that haven’t been extended to 4 beds are around £450-550k and the ones that have been extended are all worth £650-750k. The plots are quite big and it’s a nice area so the cap on value seems mainly to be due to the fact that they’re semi-detached and not detached.

Also there is a massive shortage of 4 bed houses locally so the value is partly driven by that

Would it not be more cost effective, much less trouble and much quicker to just buy one of the already converted properties ? If you know thier value they are obviously coming up for sale so why put yourself in a difficult position. Your estimate of the costing for the work is likley to be an undershoot, and the hassle of the work and timescales could be a prolonged headache.

@DrySherry unfortunately because of school catchments etc they rarely come up for sale. Also in many cases the work has been done 10-20+ years ago and the houses are then still in need of new kitchens or bathrooms and decoration etc. Plus the cost of moving, stamp duty, solicitors fees etc would probably add £20k for which we would get nothing back. We figured that at least if we extended our place here we could have it exactly as we wanted, everywhere else has already been decorated to our taste and we wouldn’t incur other costs associated with moving.

Ooof actually I’ve just put the details into a house move cost estimator and it reckons it would cost £36k to move! Stamp duty alone would be around £22k.

It comes with a whole lot of headache, stress and you'll be a slave to your mortgage for ever more. I'd recommend lowering your expectations, and learning to be happy with the house you've got till you've saved the cash or paid off a much bigger chunk of the mortgage.

would getting the loft done work?
We got both on ours but it was many years ago when materials and labour were very cheap

I think you'll have to just ask. My bank should have lent me more when remortgaging (I wanted to extend too) - 60 LTV, under 3.5x salary - but they said no based on affordability. No idea why!

I’m a bit further on in a similar situation. We’ve just been approved a further advance with current provider and released equity to take our LTV up to 90%. House also valued at £500k. If you haven’t already I would go to a mortgage broker they will be able to go through everything and the best options.