There comes a time in every homeowner’s journey when they start to ponder the potential of their home, often leading to the laborious and potentially costly task of redecorating. However, redecoration can only add so much value to your home. If you really want to improve your property value and give your home a new lease of life, an extension could be just the ticket.
Adding an extension to your house is a great way to customise your home, increase your living space, add value to your property, and make your home more comfortable. However, financing such a project can be a daunting task.
Here, you’ll learn how to sensibly finance a house extension, with expert insights on how to apply for a homeowner loan, apply for a mortgage, and more.
What to consider before building an extension
Before you start planning how to fund your extension, there are several factors to consider. First and foremost, you need to decide what you want it to achieve. Are you adding an extra bedroom or a larger living room? Do you want to create an open-plan kitchen/dining area? Understanding your goals will help you plan and budget accordingly.
You also need to think about the impact of the extension on your existing property. Will it affect the natural light or block any views? And how will it affect the energy efficiency of your home? These are all important considerations to make.
Finally, you should consider the overall cost of the project. Extensions can be exponentially more expensive than other home renovations, so it’s essential you have a realistic budget in place before you start and stick to it rigidly. This will help you avoid overspending and ensure that you can finance the project without it becoming a liability.
Do you need permission for an extension?
In most cases, you will need planning permission for a house extension. The rules and regulations vary depending on the size and location of the extension, so you should check with your local planning authority or council before starting any work.
In some cases, you may be able to build under permitted development rights, which means that you can carry out certain types of development without the need for planning permission. However, there are restrictions on the size and location of the extension.
How much value does an extension add to your home?
Adding an extension to your home can significantly increase its value. According to research, a well-designed and executed extension can add up to 20% to the value of your property.
However, the value added will depend on several factors, such as the quality of the build, the location of the property, and the size of the extension. If in doubt, speak to a local estate agent to get a good idea of the potential value that an extension could add to your property.
How to fund an extension
There are several ways to finance a house extension, including personal savings, loans, and mortgages. Personal savings are an excellent option if you are independently wealthy and have enough money to fund the project without affecting your financial stability. However, most people will need to explore other financing options.
One of the most popular financing options for house extensions is a secured home extension loan. A secured loan is a type of loan that is secured against your property. The amount you can borrow will depend on the equity in your home, and the interest rates are typically lower than unsecured loans.
However, with any secured loan your home is at risk if you can’t keep up with the repayments, so it’s not a decision to take lightly.
How to decide which financing option is best for your specific needs
When deciding which financing option is best for your specific needs, there are several factors to consider. These include:
Your budget: How much money do you need to borrow, and can you afford the repayments?
Your credit score: A good credit score can help you get better interest rates and more favourable terms.
Your equity: The amount of equity you have in your home will determine how much you can borrow.
The length of the loan: How long do you need to repay the loan, and what are the repayment terms?
Speak to a financial advisor or a mortgage broker to get expert advice on the best financing option for your specific needs. They can help you understand the pros and cons of each option and guide you through the application process.
In addition to secured loans, you may also want to consider other financing options, such as remortgage or a personal loan. A remortgage is a long-term loan that is secured against your property and can be an excellent option if you need to borrow a particularly large amount of money for an ambitious extension project. However, the application process can be lengthy. Plus, if you are already have a mortgage with a fixed rate, you may wish to keep this rate in place and there could be Early Repayment Charges on your existing mortgage. Personal loans are another option, but they typically have higher interest rates than secured loans. They are unsecured loans, which means that they are not tied to your property. This can be advantageous if you don’t want to put your home at risk, but it also means that interest rates will be higher, and you are unable to borrow as much.
Take time to research and compare different financing options before deciding. This will help you find the best deal and ensure that you can finance your house extension without overstretching yourself financially .
A challenge worth investing in
Financing a house extension can be a challenging task, but there are several options available to help you fund your project. Secured homeowner loans are a popular option, but it’s important to consider all available options and speak to a financial advisor or a mortgage broker before making a final decision.
With the right financing in place, you can manifest the home of your dreams and add significant value to your property. Just remember to ask questions at every stage of the process and always research before pulling the trigger.
If you want to learn more about homeowner loans, or speak with one of our trusted mortgage partner, please get in touch.