Major Projects Profit From Extending Your House

Date Published:

28/05/2008

It's easy for costs to escalate, so sort out your finances carefully before you start planning your extension, and keep a close eye on the figures throughout the building process.

Most extensions are funded by adding to the mortgage on the property - taking equity out of your house makes sense, as the changes should add value to your home - or by taking out a personal loan. If you want a detailed breakdown of the costs, contact www.estimators-online.com for an accurate quote. According to them, the most common size of extension is 15 to 25 square metres, which costs between £21,000 and £33,000, excluding the interior fittings.

Further Advances

You could approach your existing lender about a further advance, which effectively extends your mortgage. What's on offer varies between lenders, but generally you can borrow a large percentage of your home's value for an arrangement fee of around £100. 'Lenders will only provide a further advance if the improvement is to the fabric of the building, so an extension is fine, but new carpets are not,' explains Stuart Glendinning, Managing Director of www.moneysupermarket.com.

Courtesy of Jefferson Smith

A Case Study
A Victorian terraced house in Clapham, south London.

What sort of extension did the owners want?
'They wanted to extend the property to its full width so they could create a kitchen-dining-family space opening on to the garden,' explains architect Matthew Heywood. 'They had extended their previous home without the help of an architect, but this time the owners were after something a bit more creative.'

How did you manage to achieve this?
'I designed a structure with two pitched roofs, one to the rear and one to the side. Both roofs are completely frameless - supported by glass fins - and the extension has two huge sets of high-spec double-glazed glass, so plenty of light floods in, which is important because the house is now so much deeper than it was originally.'

Remortgaging

Rates tend to be lower than those on personal loans and credit cards, plus repayment matches the term of your mortgage, meaning you pay less each month. Having all your debts in one place also makes budgeting easier. 'Before you dash down to your local branch for a further advance, consider switching your mortgage to another provider,' says Stuart. 'Remortgaging can save a lot of money by allowing you to take advantage of one of the competitive discounts or fixed rates available in the market.'

'If you are paying a standard variable rate (SVR) of interest on your existing mortgage and you are not locked into a heavy early redemption charge, almost certainly you can save a bundle by remortgaging to another lender. So great can the saving be you might even end up paying less on your new mortgage than you do on your existing one, even including the extra money for your home improvements.'

Personal Loans

Choose between a secured or unsecured loan. The former uses your home as security, so if you have a decent bit of equity in your house you can probably borrow more than with an unsecured loan. Bear in mind that rates tend to be variable, so make sure you can meet payments should rates go up, otherwise your home is at risk. 'Loans only really make sense for short-term borrowing, so use this method with caution and avoid taking a loan with an early redemption penalty,' advises Stuart. 'Loans generally have higher rates of interest and taking a homeowner loan may not make sense when you have the opportunity to remortgage.'

Credit Cards

These are unlikely to cover the full amount of the extension, but, if you are on a zero per cent rate, they could be a useful tool to tide you over as long as you clear the balance before any interest is payable. DIY store cards and finance packages also tend not to offer the best value.

Savings

If possible, this is the best way to finance your extension. 'The cheapest way to fund home improvements is to use savings and avoid paying interest,' says Stuart. Aside from where to get the money, you must decide how much to spend. Don't assume you'll get back the money you spend - so much depends on the state of the housing market when you come to sell.

Find out the average price of properties in your area and on your street, as this dictates the maximum value you can expect your house to achieve. Don't spend more unless you accept the extension is for you to enjoy while you live there, not to generate extra revenue upon resale. Once the extension is built, review your home insurance, otherwise you could find that you are inadequately covered.