This section will look at the options that are open to you with regards to financing the extension to your property. It is very important that you consider all the costs involved in having your extension built before proceeding with any extra financial arrangement. Also ensure that you can afford the extra repayments either on your existing mortgage or for the additional loan.
One of the most widely used options for providing finance for any improvements to a property is to re-mortgage. With this option you take out a new mortgage on your property which pays of the original mortgage and leaves you with some remaining funds which can be used to finance the improvements to your home. This new mortgage can either be with your current mortgage lender or with a new one. If you do change lender you could benefit from reduced interest rates and you may end up paying lower monthly repayments than with you previous, smaller mortgage.
When considering a re-mortgage you must always check with your current lender if you will be liable for any fees with regards the redemption of the mortgage. You may be liable to fees if you are currently in a fixed rate term, or you received a cash-back amount when first taking out the mortgage. These fees can add up to considerable amounts and it may deter you from re-mortgaging to another lender. However, even if you re-mortgage with the same lender you may still incur these fees, which is why it is very important to check out the small print on your original mortgage offer.
If you are not in a situation where you can re-mortgage with a new lender due to being tied in to a fixed rate, you may be able to organise an extra loan amount with your current lender. This may be in the form of an increased mortgage amount, or in most cases an extra secured loan. This extra loan is often offered at the same interest rate that you are currently paying on your mortgage, making it appear as an increased mortgage amount.
Remember that this extra loan amount is secured on your property in the same way as your mortgage. Therefore, your house is at risk if you do not keep up with the required repayments. There may also be arrangement fees and survey fees to pay.
If your current lender cannot help with an extra secured loan amount, try one of the companies featured in our Directory – these are finance providers who will most likely be able to help with an excellent package for that extra amount of money you require.
Depending on the amount required to make the improvements to your property, it may be possible to borrow the extra amount by means of an unsecured loan. This loan is not secured on your property, but the interest rates are, in general, considerably higher than standard mortgage or secured loan rates.
As with all financial matters it is very important to consider all the options available before opting for a particular solution when considering which way is best to raise the finance needed for your extension. Remember, the above details are only guidelines – you are advised to seek professional financial advice before taking on any extra financial commitment. Also, remember that the building costs as quoted by your builder will, in general, not cover all the expenses you will have when taking on an extension project. Your new room(s) will need decorating, carpet, furniture etc, and there may also be unforeseen costs during the building project.