Best way to fund house extension and renovation

[galgal5003]

Your age: 37
Your spouse's age: 43
Partner's age if not married:

Number and age of children: 1, 21 months old


Income and expenditure
Annual gross income from employment or profession: 50,000
Annual gross income of spouse/partner: 45,000

Monthly take-home pay: 5,700

Type of employment - e.g. Employee or self-employed.
Employer type: e.g. public servant, private company.
Both enployees at private companies
In general are you:
(a) spending more than you earn, or
(b) saving?
(b) saving

Summary of Assets and Liabilities
Family home value: 280,000
Mortgage on family home: 60,000 remaining
Net equity: 220,000

Cash: 60,000
Defined Contribution pension fund: one DB pension (also pay AVCs, have two separate existing PRSAs), spouse has DC pension - value to be determined.we both worked on the UK so are contributing annually in order to be eligible to claim the full UK state pension
Company shares : €8,000 across ESPP and another work share scheme, spouse has approx €3,000

Total net assets: c €290,000 not including pension assets


Family home mortgage information
Lender: Haven
Interest rate 3.75%
Type of interest rate: tracker, variable, fixed.
If fixed, what is the term remaining of the fixed rate? Variable
If tracker, what is the margin e.g. ECB + 1%

Remaining term: (Original term is not relevant)
Monthly repayment: €380, we are currently overpaying by paying €750 per month instead of €380 and due to pay the mortgage off by Dec 2030 (assuming current overpayment strategy remains as above)

Other borrowings – car loans/personal loans etc
N/A
Do you pay off your full credit card balance each month? Don't gave a credit card

Pension information
Value of pension fund: I have a DB pension which will be based on my final salary (also pay AVCs, have two separate existing PRSAs),
Spouse DC pension value: €220,000
Both of us will be also due to receive full UK state pensions.

Other savings and investments:
Cash €60,000
Shares €11,000
Crypto €3,500 (value fluctuates wildly: invested approx €1,000 during Covid)


Other information which might be relevant

Life insurance: Both of us have through work 3 x salary


What specific question do you have or what issues are of concern to you?

We would like to do a fairly big extension/renovation job on our house. Plans being drawn up at the moment but we're estimating that it will cost around €250,000. We would to hear what you guys think. Are we overstretching ourselves too much? A very quick look on mortgage calculator websites gives us monthly repayments of c€1,500 per month (not including our current mortgage repayments). What's the best strategy to finance the project, given our existing mortgage also?

Thanks in advance.

 

[Monbretia]

Ignoring the affordability part of the question the only way to finance this is by doing a brand new mortgage, this is similar to buying or building a new house, you are going to need to apply for the amount extra you need plus the existing mortgage which will then be paid off out of the newly drawndown mortgage. I am assuming you need planning for this and because the amount being borrowed is bringing your mortgage to way over your existing house value I am also assuming the finished value will be well in excess of what it is now. So basically your application will be for 250 plus 60 and that will need to come in at under 80% loan to value of finished house.

When you get approval then it is most likely the money will be drawn down in stages as per your engineer/architect and agreed with bank with final amount being issued on completion. It really is very similar to building a house from scratch from a mortgage point of view. As you are taking out a brand new mortgage you are not tied in any way to your present lender.

 

[ClubMan]

So basically your application will be for 250 plus 60

Not necessarily - there are savings/assets available to reduce the amount that needs to be borrowed. I'm not exactly sure how much as the original post is a bit confusing on this point.

Mortgage on family home: 60,000 remaining

Cash: 60,000

Other savings and investments:
Cash €60,000
Shares €11,000
Crypto €3,500 (value fluctuates wildly: invested approx €1,000 during Covid)

Total net assets: c €290,000

A €250k extension/renovation on a €280k house sounds strange to me to be honest and maybe not the best way to spend such a large amount especially when you have to borrow it.

A very quick look on mortgage calculator websites gives us monthly repayments of c€1,500 per month (not including our current mortgage repayments).

You'll need to stress test this in order to be sure that you can deal with any possible future rate increases even if the trajectory for rates lately has been downwards.

Taking on such a large amount of debt with two young children and both of you in private sector jobs that may not offer job security and are not paying huge salaries should only be done after very, very careful consideration and analysis that shows that you can deal with any contingencies that may arise.

 

[niceoneted]

I’d be asking have you considered what you could get for €470K and would it tick the boxes house wise. If you’ve considered that and still looking at extension / renovations, could you project manage it yourselves to save on contractor fees.