Funding a House Extension

M

MarkM1

Registered User
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Hi,

I'm 1 year into a new mortgage of 270k for our family home. We're delighted with where we are living, and the house is a 1970's 3-bed semi, in a nice estate - crying out for upgrading.
We've priced an extension and would be looking at spending 70-80k, hopefully early 2017.
My question is how should I fund this.

Our current mortgage repayment is 1245 p/m, and we've been lucky enough to be able to save about 500 p/m into the credit union.
The reason we were putting the 500 p/m away was to show that we could repay a loan from the Credit union - to fund the extension (and also to try to build up our savings)

But, should I not just overpay my Variable rate mortage by 500 p/m - and then next year (2 years into the mortgage) - apply for a re-mortgage to fund the home improvements?
The credit union allow you to borrow over a max of 10 years @4.25%, but with a re-mortgage - this could be spread over 25 years or so.

Just looking for advice on which is the better route.
Thanks
 
if you definitely plan on spending the money on the extension, the interest you are saving against the mortgage is much higher than the interest you'd be earning in an savings account but the down side is (or at least might be) if for some reason you decide you need the savings for something other than the extension they are (or could be) tied up against your mortgage forever (see the thread below about getting over payments back).

the other things is, even if you over pay your mortgage there's no guarantee that the bank will allow you to remortgage, it's not as straight forward as it used to be, Banks (rightly so!) prefer lower LTVS to equity releases these days. but then again you probably would be in a good position to switch provider to a new higher LTV mortgage.
 
I wouldn't pay it off the mortgage, there is no guarantee they would fund the extension. What is your LTV at the moment and what would the extension bring your value to? The ideal obviously if you want to have the loan over a longer term is to increase the mortgage but that depends a lot on the value figures. At least by continuing to save with CU you are keeping your options open.
 
Monbretia said:
I wouldn't pay it off the mortgage, there is no guarantee they would fund the extension. What is your LTV at the moment and what would the extension bring your value to? The ideal obviously if you want to have the loan over a longer term is to increase the mortgage but that depends a lot on the value figures. At least by continuing to save with CU you are keeping your options open.
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Thanks Folks - good points about the LTV. I'd estimate it's about 65% now - and adding on the loan amount would put it to 85%, so there might be a bit of room. But again, as you say - putting savings into the CU keeps all options open for now.
 
Don't know about these days but years ago a top up mortgage for a purpose like this had to be below 80% LTV with some banks, can't see them being even more generous now unless the extension bumps up the value sufficiently to bring the LTV including the new loan down again.
 
Monbretia said:
Don't know about these days but years ago a top up mortgage for a purpose like this had to be below 80% LTV with some banks, can't see them being even more generous now unless the extension bumps up the value sufficiently to bring the LTV including the new loan down again.
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That was my experience recently. Banks wont go over 80% with a top-up mortgage. Also, the increase in value of your property after building an extension is usually less than the money it cost you to build it (especially if the house is in good condition already).
 
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MarkM1 said:
Hi,

I'm 1 year into a new mortgage of 270k for our family home. We're delighted with where we are living, and the house is a 1970's 3-bed semi, in a nice estate - crying out for upgrading.
We've priced an extension and would be looking at spending 70-80k, hopefully early 2017.
My question is how should I fund this.
Click to expand...

That seems like a high cost for an extension considering the size of a 3 bed semi. What square footage extension are you looking at? I guess it is quite large?
 
buckfast said:
That seems like a high cost for an extension considering the size of a 3 bed semi. What square footage extension are you looking at? I guess it is quite large?
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Hi - it's right on the 40 sqm limit - downstairs only. Price goes up as there is a downstairs bathroom, kitchen, utility room and a bit of glass I guess
 
in my experience €70-80k is about right for that kind of size for kitchen, UT, and bathroom - maybe including VAT but ex kitchen
 
Hi

I'm looking to renovate and the 4.25% rate seems very good. Can you tell me which credit union is offering that rate? My credit union offered me a rate of 5.5% on an amount equal to my credit union savings.
 
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