Home Conversion Finance
This section will look at the options that are open to you with
regards to financing the conversion 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.
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.