Showing my naivety – how do you finance house extensions? (mortgage content)

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  • Showing my naivety – how do you finance house extensions? (mortgage content)
  • Premier Icon ourmaninthenorth
    Subscriber

    We’re starting up the slow process of two related pieces of work: loft conversion and replacing the conservatory with a more solid structure to create an open kitchen diner.

    Anyway, less of the frilly stuff. I have to confess that I;ve attained 37 years (and a bit) on this globe, owned a couple of houses previously (and one where I had some work done – paid cash), but I have no idea how this is done.

    We have good equity in the house, so assume we’ll be able to borrow against that. And we’ll use some cash (but not much).

    So, how do I set about financing this during the build – I can’t believe the bank will hand over a load of money and say “off you go”. And I can;t believe a builder will wait until it’s finished to be paid.

    Educate me – what happens in the middle?!

    gogg
    Member

    In the middle, you’re like the rabbit.

    We all know what happens to the rabbit when it gets caught.

    Premier Icon footflaps
    Subscriber

    Talk to your bank / building society, but they normally agree a payment schedule with the final payment based on getting BC sign off etc. You’ll get some up front and other bits based on key milestones (if it’s a large project).

    peterfile
    Member

    I think it works in a similar way to a self build mortgage, e.g. drawing down upon sign off of key milestones.

    EDIT: doh, too slow 🙂

    jekkyl
    Member

    give your bank a ring, they do give you the money and say off you go generally but you’ll need to provide evidence of what the money is being spent on, so a builders quote usually. I’d advise to do it quick as regulation for banks & building societies is changing in april and the process will take you a lot longer. Before you ring the bank it’s useful to write down what your outgoings are as affordbaility tests are based on this. Don’t lie about any debts that you have coz they’ll know but on the affordability if things are tight financialyl things like childcare (which doesn’t need to evidenced or recorded) can be *coughs* can be zero coz you’ve got grandparents who do that right?

    Premier Icon ourmaninthenorth
    Subscriber

    OK. So the banks will entertain a scheduled drawdown? Interesting.

    n the middle, you’re like the rabbit.

    We all know what happens to the rabbit when it gets caught.

    This is what I’m trying to avoid – not prepared to do this if I risk being left holding the baby.

    Premier Icon ourmaninthenorth
    Subscriber

    give your bank a ring, they do give you the money and say off you go generally but you’ll need to provide evidence of what the money is being spent on, so a builders quote usually. I’d advise to do it quick as regulation for banks & building societies is changing in april and the process will take you a lot longer.

    Noted re April. Thanks.

    So, how do I set about financing this during the build – I can’t believe the bank will hand over a load of money and say “off you go”. And I can;t believe a builder will wait until it’s finished to be paid.

    Oh, they will if you’ve got good equity. We need to remortagage and we got a separate lump sum for an extension at the same time at the same rate – basically a mini mortgage running in parallel Or secured loanas I think the technical term is!).

    Basically as long as what you owe the bank isn’t more than what the house is ‘worth’ at the current moment and they’re happy you can pay it back then I’m sure they’ll love to dicsuss your requirements.

    Afternoon lhomme,

    Speaking as someone who was thinking about this a while ago, I phoned my lender (**** shysters) and while telling her a similar story to yours, she interjected with “I’ll just stop you there sir. Bank Of Ireland are not lending any further money at the moment. To anyone.”

    “Whaaa….but we’ve been with you since Bristol & West days. Never missed a payment. Never over-extended ourselves despite being tempted when self-certifying in the days of 5000% mortgages. What’s up?”

    “Well, you see, we have this massive loan to pay back to the EU.”

    “Oh right. So, no re-mortgages whatsover? Even for good credit ratings, shedloads of equity, all the things any lender would sensibly lend for?”

    “No, sorry.”

    🙁 Bastards!

    Sorry, not much help apart from you might as well check your lender is actually lending on existing mortgages before anything else. And, I’ve got it off my chest.

    Were looking at doing something similar. As far as we’ve been told so far the process goes a little like this…
    – Planning permission
    – Quotes for all the work
    – Current house valuation
    – Apply for new mortgage
    – Cash in the bank (as long as we’ve jumped through all the credit check hoops)
    As mentioned as long as your house is worth more then the money you plan to borrow, it ‘should’ be OK?

    Premier Icon ourmaninthenorth
    Subscriber

    DD – this is my fear. TBH, I do need to sort out the credit cards, which will be paid off later this week. That will leave us with just the mortgage, a car loan and the interest free purchase of my iphone….

    I bet you they turn me down ’cause I’ve joined the 21st century….

    Premier Icon ourmaninthenorth
    Subscriber

    Were looking at doing something similar. As far as we’ve been told so far the process goes a little like this…
    – Planning permission
    – Quotes for all the work
    – Current house valuation
    – Apply for new mortgage
    – Cash in the bank (as long as we’ve jumped through all the credit check hoops)
    As mentioned as long as your house is worth more then the money you plan to borrow, it ‘should’ be OK?

    That’s useful. We’re only just talking to an architect now, so it seems that any conversations right now with the bank may be too early.

    EDIT: crossed posts with peterfile. 🙂

    peterfile
    Member

    EDIT: crossed posts with peterfile.

    Aye, sorry, just realised that i wasn’t vague enough! It’s public info but still not keen on having the link made between my inane ramblings on here and either my company or BOI! 😳

    We’re only just talking to an architect now, so it seems that any conversations right now with the bank may be too early.

    Worth having the conversation. When we did did they asked how much we wanted and we just went “erm, ooh, how about £xx thousand?” and they just said okay without quotes or anything else. Cash sitting in the bank before the architect even put pen to paper.

    Worth having the conversation

    Which was what I was advising. Our conversation meant that we now have to try and re-mortgage with a different bank who is lending money for re-building projects. With you being a lawyer though, I’d assume they’ll chauffeur the cash round in the boot of a RR Sport…no? 🙂

    wrightyson
    Member

    You could just go got a personal loan depending on the project value.

    Premier Icon ourmaninthenorth
    Subscriber

    With you being a lawyer though, I’d assume they’ll chauffeur the cash round in the boot of a RR Sport…no?

    In one of those chavmobiles? I’d send it back..!

    (Mrs let’s the side down – university type with fixed term contracts. In all other areas of our lives, I definitely let the side down).

    Our conversation meant that we now have to try and re-mortgage with a different bank who is lending money for re-building projects.

    While I know it’s possible to have more than one liability secured on a property, I’m slightly amazed that anyone’s actually lending on that basis these days. TBH we’re with a state owned bank (Natwest) so it’s entirely possible we’ll get told to whistle as well..!

    I’m slightly amazed that anyone’s actually lending on that basis these days.

    TBH, it’s not looking good for us. Two self-employed types, with no realistic guarantee of income. We’re positively sub-prime!

    Premier Icon ourmaninthenorth
    Subscriber

    You could just go got a personal loan depending on the project value.

    Depends on whether we do the whole lot at once or in phases. Expensive either way.

    Would this be something then repaid via a remortgage or just remain as a separate debt – am thinking about effect on credit for buying cars etc in the future.

    soobalias
    Member

    so you only have a mortgage, car loan, credit card(s) and just got a phone on finance.

    sorry, you were asking for advice on what again?

    how to? just ask the bank, they will gladly oblige
    should you? i dont know the details of your finances, but at first glance, i would say no.

    Premier Icon ourmaninthenorth
    Subscriber

    TBH, it’s not looking good for us. Two self-employed types, with no realistic guarantee of income. We’re positively sub-prime!

    I’m surprised the bank didn’t tell you that you only had yourselves to blame for the entire financial crisis!

    Premier Icon ransos
    Subscriber

    We saved up.

    just got a phone on finance

    I’m guessing he upgraded his phone on a new contract, y’know like most people in the country…

    mortgage content

    We saved up.

    😕

    For the two big bits of building work we’ve had done I gave the builders a big chunk of cash at the start and some more when they were done and I was happy with it.

    peterfile
    Member

    We saved up.

    Probably not a very effective use of the money if it’s a medium/large scale improvement. Tying up that level of cash, which might be better invested elsewhere, isn’t necessarily the right answer just because you gain some sort of satisfaction of not financing the works.

    Premier Icon ourmaninthenorth
    Subscriber

    so you only have a mortgage, car loan, credit card(s) and just got a phone on finance.

    sorry, you were asking for advice on what again?

    how to? just ask the bank, they will gladly oblige
    should you? i dont know the details of your finances, but at first glance, i would say no.

    Interesting. Mortgage is no more than 50% purchase value (taken on 19 year term 3 years ago). Credit cards will be paid off this week. Phone’s on 0% interest – done because an iphone costs the same whether as cash in a lump or over 10 months (simple cashflow maximisation). Car wil be paid for next year.

    Suggests we should go and do the budget suggested above to make it easier for the bank to say yes.

    EDIT: I get free calls/data from work. I can use work supplied blackberry or buy my own handset. I’ve gone for the latter.

    Premier Icon ourmaninthenorth
    Subscriber

    We saved up.

    Have contemplated it. It’s what my in-laws and a good friend would do. The approx value of what we’re thinking of doing puts it into the future by enough years that borrowing now and getting the use of the changes to the house feels like a better alternative. And we’ll always have the option to overpay on the repayments.

    Still plan to be without a mortgage by mid-50s. Before if we can.

    wrightyson
    Member

    If you own nigh on 50% of your house then a simple remortgage would be well within reach. However are you tied into an existing deal? If so some lenders will do a further borrowing deal, setting up a loan running alongside your current mortgage. This will then hopefully finish at the same time as your current deal and you can then remortgage for both amounts.
    With that kind of equity you should have no problems either way.

    Premier Icon ourmaninthenorth
    Subscriber

    However are you tied into an existing deal?

    Yep. Another 2 years.

    If so some lenders will do a further borrowing deal, setting up a loan running alongside your current mortgage.

    Ah, interesting, so that might be at a separate rate/lender’s SVR?

    Premier Icon footflaps
    Subscriber

    Years ago I took a loan out to buy a car and then remortaged to pay off the loan, so I only had the load for a few weeks, which cost bugger all in interest. It just tidied me over between seeing the car and sorting out a mortgage increase.

    wrightyson
    Member

    Yes we did look into it and it was an option with nationwide at the time.
    We subsequently had a change of plans and didn’t need the extra. Don’t discount a personal loan though, it may work out cheaper if there’s a set up fee etc with a normal mortgage type lender. If the deal is affordable over say five years then you could remortgage for the existing mortgage amount and subsequent unsecured loan.

    Premier Icon paladin
    Subscriber

    Got money from c&g a few years ago for an extension, had plenty equity but the money they gave us is on a separate mortgage to the original (higher rate).

    Premier Icon ourmaninthenorth
    Subscriber

    Cheers all. First job is to chase up the architect.

    Premier Icon miketually
    Subscriber

    A good few years ago*, We got extra cash for home improvements from our existing mortgage provider. They called it a home owner loan at the time, I think; same % as mortgage but just over five years.

    More recently, when we remortgaged at the end of out tie in we just asked for the new mortgage to be for more than we owed on the old one, with the cash paid to us.

    With such a low loan:value ratio, I’m sure your provider would give you a second product running parallel to the current one.

    *pre-global-economic-catastrophe-oopise

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