Remortgage for Extension

Extending your home is one of the best methods of increasing its value. But if you already have a mortgage, funding the expansion can be challenging.

That’s where a remortgage for an extension comes in.

Remortgaging for an extension can help increase your home’s value and, at the same time, get you a better deal than your present mortgage agreement.

Please note lenders will use the current value for the remortgage application as any increase in value would of course be deemed speculative and not guaranteed. 

This article will examine what you need to remortgage for extension, how to proceed, and the factors you need to consider.

Let’s get started.

Factors To Consider Before Remortgaging For An Extension

The costs associated with home expansion can be high, and remortgaging for an extension can help by adding the extension cost to the remainder of your current mortgage amount.

However, when applying for a remortgage for an extension, make sure you keep the following factors in mind:

1. Equity Size

The most crucial factor to consider here is your equity in your home. Equity means the value of your ownership of the property after remortgaging. 

To calculate this, simply subtract the value of the mortgage from the total property price.  

The more equity you have, the better the deal you’ll get, as the lender will consider you less of a risk. 

2. Increased mortgage burden

When expanding your home and taking further funds from your property, you should also consider and analyse the increased mortgage debt.

Because when you remortgage for an extension, you’ll essentially be increasing your debt, which means extra monthly payments. So, you must be cautious and ensure you can manage the increased costs. 

So, ensure that you’ll be able to tackle the additional monthly repayments. Lenders will also calculate your affordability before granting the loan, and you should use any mortgage affordability calculator to do the same.

How To Remortgage For Extension

1. Determine The Extension Type

Extensions typically involve increasing your home’s living space by adding new construction or converting unused areas into living spaces. 

There are multiple types of extensions possible, such as:

• Loft conversions
• Dormer
• Double-storey
• Wrap-around
• Rear
• Basement

Depending on the extension type, you’ll need to calculate its associated costs and the overall remortgage amount.

2. Calculate Equity And LTV Value

Once you know the extension type, you can compare its value against the associated costs if you want to consider the level of capital appreciation it will add to the property. 

3. Determine If You Need Planning Permission

Usually, home improvement plans don’t require planning permissions. But, we recommend erring on the side of caution and double-checking with the local authorities. 

You might need planning permission for an extension if:

• You live in a special zone, such as near a national park or heritage site 
• Your extension takes up more than half the land around the property
• The extension is greater than half the width of the original property
• Your extension goes over the regulation height and width limits

4. Consult With A Mortgage Advisor

This is not mandatory, but it is recommended as a mortgage broker can help you with all of the above steps and more. 

Mortgage brokers can analyse your finances, compare multiple lender offers and select the best deal.

Should You Remortgage Before Or After Completing The Extension?

While most people opt to remortgage before the extension, some owners might also apply for a remortgage after the extension is over. 

This entirely depends on whether you can fund the project on your own and are okay with getting the money later.

However, applying for a remortgage after an extension can be risky. Extensions should increase the value of your property, translating into a better deal. 

But what if that doesn’t happen for some unforeseen reason?

Then, you might find your remortgage application rejected or have to accept higher rates. That’s why it’s best to consult an experienced mortgage advisor before taking the plunge.

Also lenders like to accurately allocate the funds that are being used when releasing a remortgage, so if you are looking to remortgage after the extension has already been completed, it may raise issues over this as the extension has already been completed so are the funds going to be used for another purpose. 

Mortgage brokers can help you with exact calculations in relation to the mortgage to best ensure that you don’t find yourself in a tough spot.

What Are The Advantages and Disadvantages of Remortgaging for An Extension?

Advantages

• Lower interest rates as compared to credit cards or unsecured personal loans in  many cases
• Spreads the cost of the extension over the entire mortgage term resulting in reduced monthly payments. 
• Has the potential to increase your property’s value

Disadvantages

• Fees associated with remortgaging
• Higher monthly payments 

Alternatives To Remortgaging For Home Extension

If you’re struggling to get your remortgage approved or don’t want to get another mortgage, then you can consider the following alternatives.

• Using your savings to finance the extension
• Pay for the extension by credit card
• Get a second, separate mortgage, a further advance or a secured charge loan
• Take an unsecured loan, but you’ll need to deal with higher rates and often reduced payment terms. 
• Get a bridging loan
• Opt for an equity-release mortgage deal if you are of a certain age. 

Frequently Asked Questions(FAQs)

1. Is it possible to remortgage for extension with a poor credit score?

Yes, it is possible. You just need to know which lenders offer such deals. A mortgage broker can help you in this regard.

2. Can I get a remortgage for an extension if I’m self-employed?

Yes, getting a remortgage for an extension is possible if you’re self-employed.  Several lenders offer extension remortgages for self-employed individuals with only a year of past income proof.

3. How long does it take to remortgage for an extension?

Depending on the lender’s processes and the application complexity, the remortgaging process can take several weeks to a few months. Tasks such as legal checks and property valuation can affect the time it takes to complete the process.

4. Is remortgaging for an extension possible if I have an interest-only mortgage?

Yes, it is possible, but you might be asked to switch to a repayment mortgage in exceptional cases.

Your home may be repossessed if you do not keep up repayments on your mortgage.

All content is written by qualified mortgage advisors to provide current, reliable and accurate mortgage information. The information on this website is not specific for each individual reader and therefore does not constitute financial advice.