12th August 2015
I think that we can all agree that moving house is expensive and an enormous upheaval, especially in London where prices have increased exponentially writes executive mortgage & protection consultant at John Charcol and Mindful Money columnist Alistair Hargreaves.
Once you have factored in Stamp Duty, solicitors costs, estate agents fee for selling your current home and other sundries you’ve racked up a tidy bill in professional costs and taxes.
Which is why more people are opting to renovate and extend as opposed to move – yes, this is still expensive and hardly convenient, however it can often be a cheaper solution to finding more space.
So it was heartening to see that within the budget the Government is to allow householders in London to build up to the level of their neighbour’s home.
At the moment permissible development, in the majority of London boroughs, allows you to extend three metres out at the back of your property on a semi or terraced house; you can extend by up to four metres on a detached property, and to add a dormer bedroom in the loft facing out on your garden.
When the new rules come in to effect (an exact time-frame has not been disclosed) they will allow you to also add a second floor extension, as well as the above, as long as the finished building will not be taller than your neighbours. I would therefore expect to see an increase in enquiries from clients regarding arranging finance to pay for extensions.
There are three ways in which you may be able to increase your borrowing if you are planning on extending your home;
1. A remortgage – this is suitable if you are coming to the end of your locked in term with your current provider, or if you currently have no early repayment charge. I would look to place you with a brand new lender, to obtain (hopefully) a better rate and raise capital. Usually a lender will offer you free legal work and a free valuation to help with the switch.
2. A further advance – this is a further loan from your existing mortgage provider. I would usually consider this if a client is locked into a deal and there is an early repayment charge to pay; or if a client has an excellent lifetime rate that they do not want to relinquish. Essentially, it’s a top up on borrowing – often these are quicker to arrange as some lenders do not require a physical valuation.
3. A second charge loan – this is where we have a second lender coming in above your existing mortgage provider. I use this option when your current bank is unwilling to lend you more funds – this can be because they have stopped lending altogether, but the client wants to stay on the current product; or maybe they have tightened up their criteria and now the client does not fit. Sometimes with clients on interest only we find their current lender will only agree to the extended loan if the entire debt is put on repayment. To avoid paying an early repayment charge, or to avoid having the whole loan on repayment, we look at a second charge for the top up.