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3 Ways You Can Fund Your House Extension

house extension

in Property

With the housing market still in a state of change and the economy still playing hardball with our finances, choosing to extend your home might just help make the abode of your dreams a reality, without the expense of moving. Planning an extension is a great way to add value to your home, as well as creating more space for you and your family, but unless you have a substantial sum already in savings, finding the cash to make it a reality can be tough.

Remortgage

Unlocking the value in your home to fund your extension can be one of the cheapest ways of raising the capital you need. Mortgages tend to be offered at much lower rates than any other form of borrowing, so if you haven’t got the money, this is usually the first avenue to investigate.

Be aware, though, that since the crisis in banking, many lenders are much less inclined to lend high percentages of the property value, so the amount of equity you have in your home will often play a key part in whether this strategy will work for you. Also be aware that before any money is lent, many lenders will require a home valuation which will cost in the region of £100.

Even though your home will be worth substantially more at the end of the work, many lenders are shy of loaning out money based upon something that is going to happen in the future. Once your extension is built you will probably be able to have another valuation done and, if you are unable to remortgage for the payments up front, you’ll be able to remortgage at this point to pay of the loans you have used.

Personal loan

With the loans market being highly competitive, there are often attractive offers on personal loans – if you have a good credit record that is. If you are unable to secure a larger mortgage up front, these can be an excellent way of getting the money into your account to use for the project, which you can pay back instantly once your home has been re-valued at the end.

Home improvement loan

Somewhere in the grey area between personal loans and mortgages sits the home improvement loan. This type of loan is based on the value that your property will be worth once your extension is complete, and the cost of these loans sits between the other two – more expensive than a mortgage but often cheaper than a personal loan.

This type of loan can be excellent as a bridging loan to get the work done, which can be paid off in full from your mortgage once the house is re-valued. However, the loan is secured on your property, so it is essential that you keep up the repayments throughout the term. Just like the remortgage, you might be asked to have a valuation done before the money is agreed, so expect to pay £100 up front for the privilege of this.

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