Funding an extension

[Ecrire]

If you aren’t a person who’s saved for decades for an extension (single storey wraparound 30 sqm ish extension to the rear and side) which of these financing options would you go for - on the understanding that the minute the work is complete you go to your mortgage lender for extended borrowing on the mortgage for new value of house -

1. Spread across a few 0% credit card money transfer offers + some savings
2. Personal loan for home improvements + some savings.

Monthly payments cheaper on Option 1, but both options perfectly serviceable. Main issue is - when we go to mortgage lender to consolidate these debts once extension finished based on new valuation of house will Option 1 look “messy” in lenders eyes even though effectively both Option 1 and Option 2 would be wiped out/consolidated by extending mortgage borrowing? In effect to us it doesn’t really matter but we wish to do whatever will make the credit file and affordability look good to the mortgage lender post extension. I mean surely they would comprehend that what’s showing up on file as CC repayments or loan repayments is effectively being wiped/consolidated with the mortgage based on new value of house?

Planning permission is already secured.

ill add that remortgaging upfront isn’t possible as this relates to a new house we are purchasing - so new mortgage starting - a house that needs work straightaway and the price reflects that.

Just been through this, either way they will view it as debt consolidation, and they don’t like that

Can you shed a bit more light on what you’ve been through (without personal details obviously!) and why you felt they didn’t like the fact that you extended the property this way? Did they not agree it had added value to the house?

I chose Option 1 for the cost effectiveness, twice (two different homes.) The lender wasn’t twitchy about it at all when it came to remortgage: they came to revalue the property, acknowledged that the extra borrowing I was applying for had been for the improvement work, and issued as normal. The lender may approach more cautiously if your additional borrowing takes you into a significantly higher LTV and / or the value of the property hasn’t increased in line with what you actually spent on renovations (which can be a risk if something doesn’t go to plan), but it wasn’t my experience either time that they “didn’t like it.”

You will need to check that your trades and suppliers accept credit card payments, and also be pretty good at keeping a handle on your costs - because it does take a little more oversight when you’re juggling different payment methods.

I just had a friend say the same thing roughly as you above. We are very debt-averse and our only debt has been the mortgage so far, and CC used and paid off in full each month.

We are very adept at shopping around for 0% rates etc and manage things very effectively.

So naturally trying to really properly plan and think through this and to us also it looks like making use of the 0% offers and then using our usual moving around or approach bank once job finished is best way to go.

I've mixed those on previous renovations. I've also used 0% finance offers for some of the purchases, kitchens and appliances for example.
Never had a twitch about it from the bank when remortgaging.

Grateful to hear these.

I'm just amazed you can fund an extension on a credit card 0% or otherwise, building costs are sky high! We've just been quoted 75k incl vat for a loft extension
The more 0% cards you have the fewer your options to move it when 0% interest rate runs out so personally I'd choose the security and peace of mind of an unsecured loan.

When we had an extension done, it was all done by bank transfer. Builders don’t take credit cards as it would cost them in fees. So you’ll need the money in the bank in my experience and are you really putting say 50k on a card?!

Are you absolutely sure the extension will add the same amount to the value of the house as it costs, and your mortgage company will accept this? Because it would be a real bummer if you spent £50k and when you came to remortgage the bank thought you had only increased the value by £30k and so were only willing to lend an extra £25k. That’s what I would worry about.

A 30m2 wrap around extension is going to cost upwards of £80k for the basic build - that's a lot to be putting on credit cards, do you have that capacity? Windows, doors, kitchens, flooring, paint etc will all be on top of that too.

This sounds risky and unwise either way!

I'm expecting close to 160k all in for a slightly larger extension (not down south). I didn't even know you could put that much on credit cards! I'm using a 0% for the contingency and the kitchen.

We’ve decided yesterday on not using the 0% money transfers on credit cards but a standard unsecured home improvements loan which we are very comfortably able to service till we remortgage.

Sounds like a sensible decision OP. Just make sure the loan is big enough/flexible enough to cover potential cost overruns. Construction work is much, much more expensive that it used to be.

Good idea.

Are you able to just borrow more money in the first place when you take out the mortgage? Like for example now I can log in and ask to borrow more for home improvements on my mortgage account.

Or are you at the top of what they’ll lend?