The question…
We are thinking about adding an extension to our house to create an extra bedroom and extend the kitchen. We have been quoted £65,000 or thereabouts – on average – by three builders.
I wondered whether it would be possible to get a remortgage for this amount of money. Fortunately, we are due to remortgage in February and I can see the rates are very attractive. Our house is probably worth circa £345,000 and we have equity of around 30% in our home at the moment.
Thanks so much for your help!
Jeni says…
How exciting! By my maths, you owe around £240,000 on your mortgage. If you increase your borrowing by £65,000, it’ll take your loan-to-value (LTV) to just over 85%.
Generally, lenders are very open to remortgaging and giving you extra borrowing, particularly for home improvements like this. However, you will find you have more options if you keep the total borrowing up to or below 85% of the property value, and the pricing will be more competitive.
Assuming your property’s current value is £345,000, 85% LTV would mean a new increased mortgage of £293,250, which is a little short on what your builders have quoted.
As this would be the most cost-effective way to borrow the money, perhaps you can make up the shortfall with savings or a personal loan? Good luck!
To see more of this month’s readers’ mortgage questions and Jeni’s responses, click here.
Jeni Browne is sales director at Mortgages for Business. If you have a mortgage question you would like Jeni to answer email kate.saines@emap.com
