If you’re thinking about extending your home then unless you’ve got plenty of savings, you’ll need to consider a few financing options. When it comes down to it there are three main ways of funding a home extension, or any other major home improvement for that matter.
One of these is increasing your mortgage. We’ve had a look around online and this seems to be recommended as the first port of call. We read a quote on the Moneywise website from Colin Payne of Chapelgate mortgage advisers. He said, “You apply to your existing mortgage provider and it will usually loan further money, taking your total borrowing to a maximum of 85% loan to value (LTV), which you will repay on top of your existing mortgage each month.”
Another option is to remortgage. You switch your loan to another lender, pay off the old one and start again with a new amount that includes the extra funds you need for your home extension. Basically the new lender pays off the old lender and the surplus you’ve borrowed gets paid direct to you. Maximum loan to value ratios apply again and will vary from lender to lender. You’ll also need to meet affordability criteria.
And then there’s a secured loan. You need quite a low loan to value ratio and you have to bear in mind that if you can’t make the repayments, you may have to sell your property to repay the loan. You can also look at unsecured loans but generally you won’t be able to borrow much more than £10,000 and that will be over a shorter term like five years.
On Moneywise Colin Payne of Chapelgate mortgage advisers said, “For higher levels of borrowing, the monthly payments are generally a lot cheaper on the three main financing options as the money can be borrowed over a far longer period.”
We’re not by any means able to offer any sort of financial advice and it’s important to note that all individual circumstances need to be treated as such. We say always take professional advice from a trusted financial adviser or mortgage broker before you decide how to raise the finance for your home extension.