Extension costs and how best to cover

We moved into our current home in 2013. We have an extension on our house was very badly built before we moved in to the house back in 2006. We have had an architect in recently who gave their professional opinion that the best way forward for us was to demolish the original extension and build again from scratch, which some alterations to the design. We have been quoted in the region of about 120-130K to get this done. However we currently do not have the financial means to get it done with savings. We are currently with Avant mortgages, have about 250K left to pay on our mortgage and the most recent valuation we had on the house was in the region of 600K. What would be the best approach for us to take in terms of taking out a loan for this, its likely that we will have to lend about 80-100K. On of our friends mentioned equity release, maybe re-mortgage, get a loan from the credit union? I'm sure this is a pretty common dilemma is someone has advise it would be much appreciated.

Peloton said:

We moved into our current home in 2013. We have an extension on our house was very badly built before we moved in to the house back in 2006. We have had an architect in recently who gave their professional opinion that the best way forward for us was to demolish the original extension and build again from scratch, which some alterations to the design. We have been quoted in the region of about 120-130K to get this done. However we currently do not have the financial means to get it done with savings. We are currently with Avant mortgages, have about 250K left to pay on our mortgage and the most recent valuation we had on the house was in the region of 600K. What would be the best approach for us to take in terms of taking out a loan for this, its likely that we will have to lend about 80-100K. On of our friends mentioned equity release, maybe re-mortgage, get a loan from the credit union? I'm sure this is a pretty common dilemma is someone has advise it would be much appreciated.

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I believe the cheapest way to fund if relying on financing is through an Equity release as it will be treated like a mortgage which offer longer durations and lower rates compared to personal loans. Personal loans generally are a max of 10 years and rates of ~6% upwards.

However, I am not sure Avant currently offer Equity release. You should check with them, and speak to some of the Irish banks to see if they offer equity release on a property with a mortgage not under written by them. Perhaps engage a broker to see if this is viable as they should be able to tell you if any banks offer it. In your situation you have a lot of equity which may prove beneficial.

The other aspect is to plan your finances, the builder isn't going to start tomorrow and when he does start he will take payment in installments rather than upfront. This may allow you to close the gap with your savings etc.

In my case I took an equity release and part funded with savings, however my final spend is a good bit higher than budget so be prepared for that.

It’s pretty common to pursue a remortgage for the purposes of building an extension.

Your capacity to do so would depend on a number of factors including your borrowing capacity, your payment history and whether you are tied to your current lender. It may be an opportunity to switch lender.

Consider the amount you would owe, taking into account your current mortgage balance and the additional amount you would need to borrow. Consider how you could repay the new balance and over what time span. Shop around for the best deal.

I would get a second opinion from a builder and another architect and say you want to retrofit. Architects always want to demolish- much better for them.

I'm in a very similar situation regarding value and Prudential cost of extension. Bought in 2012.
Based on above comments I looked up equity release. Is the info on this article accurate? According to this you need to be over 55, and would be looking at around 5% interest.

I understand you can hold off on repayment until your house is sold (probably after death), but I'm not sure that is a great deal considering you'll be adding interest in the interim...

My current mortgage interest rate is 2.35, fixed for 4 more years.
At the moment I'm thinking, re-jigging mortgage to borrow 80-100k, but am worried about increase to interest rate.

DavyD_83 said:

Is the info on this article accurate? According to this you need to be over 55, and would be looking at around 5% interest.

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It's a different thing. You're looking for a mortgage 'top-up' or a remortgage.

The article you linked is about how older people can borrow against their home, without making payments, until they sell their home or die.