Change Mortgage provider before/after extension

topspin

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Age: 31
Spouse’s/Partner's age: 34

Annual gross income from employment or profession: 83k Base - 33k Bonus & 28k equity
Annual gross income of spouse: 12k

Monthly take-home pay : 5,100

Type of employment: Private sector analyst

In general are you:
(a) spending more than you earn, or
(b) saving? b saving

Rough estimate of value of home: 560k
Amount outstanding on your mortgage: 283k
What interest rate are you paying? 3.8%

Other borrowings – car loans/personal loans None

Do you pay off your full credit card balance each month? Yes
If not, what is the balance on your credit card?

Savings and investments: 25k currently hopefully 60k by start of 2017

Do you have a pension scheme? Yes 7% of salary matched

Do you own any investment or other property? No

Ages of children: 1st on way

Life insurance: Yes


Hi

I am looking for some advice about an extension and changing mortgage provider.
Currently paying 3.8% in a 50%-60% LTV - however we are looking to extend hopefully in about a years time. The extension would cost roughly 120k and the plan would be to put 60k of investments towards extension and to get a top up mortgage of 60k for the remainder.

I think my issues will come when getting a mortgage for circa 350k as my base salary is 83.5 and my wife is currently self employed and will bring in roughly 12k - She will be looking after our imminent baby but will still be able to bring in circa 12k a year and avoid childcare costs. This leaves us below the 3.5 multiplier for 350k

Our current bank where very good at helping us take into account annual equity and bonus - however I feel the 3.8% is not the best value possible and would move - however I am unsure that any other bank would take into account bonus and equity.

I see it that we have three options
1. Stay with our current bank at 3.8% and get a new mortgage for 350k in 2017 to commence work on the extension and stay with current bank @ 3.8% into the future
2. Stay with current bank till we get 350k for the extension - then look to move to a bank with a cheaper interest rate
3. Change banks now to a lower interest rate and do my homework on what one is most likely to accept equity & bonus

Savings:
We can afford to live within our salary every month with bonus and equity go into savings - normally would be enough left over for 1k savings - my wife unfortunately isn't working currently due to a difficult pregnancy so haven't been saving as much

Any advice would be much appreciated

TS
 
This doesn't quite answer what you've asked, but we inquired about a future extension while getting our mortgage and were told that a big focus for the bank would be ensuring the work planned would add value to the house on the open market, that they would need someone to sign off on the work at each stage before releasing the money in trenches and would have an assessor appraise it at the end.

Do you have a good idea of how much value it will add to the house? Are there examples in the neighbourhood of similar houses with similar work fetching the same/more than what you're planning on spending? It is conceivable, depending on the work, that you may actually add value above and beyond the cost of the work and your LTV could reduce that way helping you get a better rate - otherwise, presumably your LTV will fall and you may find yourself paying more than the 3.8 you're on currently. At this point, an appointment with your own bank to discuss the possibility would at least give you an indication of what their restrictions might be - the impression we got was different banks have different tolerances for extensions, so that may be a separate factor to consider.
 
This doesn't quite answer what you've asked, but we inquired about a future extension while getting our mortgage and were told that a big focus for the bank would be ensuring the work planned would add value to the house on the open market, that they would need someone to sign off on the work at each stage before releasing the money in trenches and would have an assessor appraise it at the end.

This is true for more renovation jobs, including when a 'doer-upper' is purchased. The bank want to ensure the work will add the value to the house and only releases money in trenches.

The best option initially is to go to your current bank and talk it through with them. Once you understand their position, at least you can work on the alternatives and have something to compare it to.

Personally, if I was you take a dual approach on this
1. Go to your current bank, tell them what you would like to do and see what they say and whether they would release the extra funds to you and how they would do it
2. Approach a different bank with the same questions and see what they say. Up to you who you would pick, but I would suggest AIB or Ulster Bank initially. Bank of Ireland are also reasonable in scenarios like this (or at least when I approached them in the past), but you need to fix with them.

With a child pending though, I think you need to be careful around the timing of this discussion. The banks deduct money for dependants in terms of affordability, so its worth keeping it in mind.

I think you also need to give careful consideration as to doing a major upgrade on the house with a baby present. Its likely you will need to move out etc, and what would this mean for the family unit ? Don't under estimate the disruption the baby will bring itself :)

Finally, you may find your needs as a family change when the baby arrives, so may make sense to evaluate your living space once the child is 9-12 months and starting to be mobile. You might find you would build a different extension than you are considering now !
 
Many thanks for both pieces of advice.

Do you have a good idea of how much value it will add to the house?
\

Naively I was hoping for the cost of the extension would be added to the house value - but after reading other posts it is possible it won' quite cover it's own cost. Our aim had been to fund 50% in an effort to try and maintain our LTV rate


The best option initially is to go to your current bank and talk it through with them. Once you understand their position, at least you can work on the alternatives and have something to compare it to.

Personally, if I was you take a dual approach on this
1. Go to your current bank, tell them what you would like to do and see what they say and whether they would release the extra funds to you and how they would do it
2. Approach a different bank with the same questions and see what they say. Up to you who you would pick, but I would suggest AIB or Ulster Bank initially. Bank of Ireland are also reasonable in scenarios like this (or at least when I approached them in the past), but you need to fix with them.

Very sensible - I have asked for an appointment this week and will bare minimal give us a base idea to go off in terms of feasibility

I think you also need to give careful consideration as to doing a major upgrade on the house with a baby present. Its likely you will need to move out etc, and what would this mean for the family unit ?

Very true - plan would be to move in with my parents for duration of build - they are reasonably local - We where hoping to get an extension completed around the 12 month stage of the baby and before any additional children - as presuming disruption would be greater with two and later on in life

Many thanks for taking the time to reply

TS
 
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