Extension Funding

[random2011]

We are in the process of applying to our main lender to release equity in our home to fund an extension to begin early next year. I am budgeting approx 100k for this work going the direct labor route. My question is if the equity release is the best option as not sure home improvement loads stretch to 100k. One option could be a 75k Home Improvement loan and fund the 25k ourselves with savings. I anticipated I would need that 25k for fitting it out with furnishings and kitchen etc. Currently with BOI so there variable rate is 4.15%. Not sure if I could fund this with a different lender without transferring entire mortgage over which I dont want to do as I'm currently on a 2.4% Fixed Rate.

Also the bank are asking for a surveyors/architect report on the costings. I do not have this but my architect could provide one. Is this absolutely necessary. I'm not at a stage to provide this as I have not yet approached tradesmen for official quotes.

 

[ClubMan]

Well, the interest rate on a mortgage/secured loan will generally be lower than on a non-secured home improvement loan but you probably also need to look at the total interest costs over the term of the loan. I'm not sure if there may be other ancillary costs to a secured/equity release loan (e.g. legal costs? increased mortgage protection life insurance policy premiums? Etc.)?

 

[Brendan Burgess]

Certainly the easiest will be to get the additional loan from your own bank. The fact that you already have a good bit of it at 2.4% suggests that switching now would not be a good idea. (But it depends on the amount of your existing mortgage and the remaining term at 2.4%).

Is this absolutely necessary. I'm not at a stage to provide this as I have not yet approached tradesmen for official quotes.

Do you need quotes? Can the architect not give it to you?

 

[Monbretia]

Extra borrowing on a mortgage basis is going to be the cheapest, no personal or home improvement unsecured loan will be cheaper. Unlikely that savings on maybe legal or insurance costs could make up for the rate difference over the term.

If it's an additional separate mortgage to the existing one then there is no reason you can't pick a shorter term for it if you want to, however even if you pick the same term then you could also make extra payments anyway to reduce the term.

 

[random2011]

Certainly the easiest will be to get the additional loan from your own bank. The fact that you already have a good bit of it at 2.4% suggests that switching now would not be a good idea. (But it depends on the amount of your existing mortgage and the remaining term at 2.4%).



Do you need quotes? Can the architect not give it to you?

Yes the architect will provide these.