In December 2016, the average London property cost £473,073 compared to a national average of £205,937. If you live in London, you’ll be well aware of how expensive it can be to live in the capital and your home is likely to be considerably smaller than it would be if you’d chosen to live elsewhere.
Moving Vs Extending
If you do need more space, you may be considering moving to gain an extra bedroom or more living space. But taking next step up the property ladder can actually be quite a leap: the average asking price of a 2-bedroom home in Brixton is £495,000 but the average asking price of a three-bedroom is £695,000. Moving costs for such a move would be approximately £31,700 (£24,750 in stamp duty, £3,475 in legal fees and £3,475 in other costs). (To find out how much moving would cost you, check out the Rightmove cost of moving house calculator.)
These high costs can make extending and converting your current home much more appealing, especially if you love your home and its location. Not only will you have the space you crave but you’ll also add value to your property, whether you decide to convert your loft or opt for a one storey or two storey extension.
Funding Your Extension Or Loft Conversion
Converting your loft is often the easiest way of giving yourself an extra bedroom and bathroom. It will usually cost in the region of £20,000, whereas extensions cost from around £1,500 per m².
Unless you have enough in savings to fund the work, you’ll probably be looking at remortgaging or getting a secured or unsecured loan. Remortgaging is often the cheaper option by far, however you may need to consider any early repayment fees or set up fees.
Mortgage rates are at record low rates at the moment and a fixed mortgage for 2 – 5 years could be a great way of borrowing money to convert or extend and add space and value to your property. However, shopping around for the best deal can be time consuming and confusing, so you may find a chat with a mortgage broker is a the most effective way to find the best mortgage for you.
How Does Remortgaging Work?
In simple terms, remortgaging means switching to a new mortgage deal, either with the same lender or with a new one. At any one time around a third of all the home loans in the UK are remortgages.
When a lender looks at what you want to borrow, they’ll calculate your loan-to-value, by seeing how much equity you have in your property. The lower the loan-to-value you need, the better deals you’ll be able to get. (To figure out your loan-to-value yourself, you need to divide your outstanding mortgage amount by your property’s current value and multiple the result by 100.)
When comparing house prices in your neighbourhood to get an idea of your property’s worth, it’s worth remembering that asking prices often aren’t the same as selling prices so properties might go for less than they’re advertised.
Before you approach any lender or a mortgage broker, you should check your credit rating online. You can do this by visiting the Experian, Equifax or Noddle websites. If you have an excellent or good credit rating, then you’ll stand much more of a chance of being accepted for a remortgage than if you have a poor or bad credit score.
However, if your credit score does need a boost there are a number of things you can do. You can pay off any debts, close any credit card accounts that you no longer need (as lenders look at what credit is available to you, so if you have a credit card with £3000 available on it this could count against you), and apply for a notice of disassociation if your credit rating is linked to an ex-partner or other relative. You might also spot some mistakes on your credit file that you can ask to be corrected but one of the key things is to not apply for any other forms of credit in the months leading up to your remortgage if at all possible. This includes things like credit cards, mobile phone contracts and car loans.
Another factor to bear in mind when you apply for a new mortgage is your current circumstances. In the time between taking out your existing mortgage and now thinking about re-mortgaging there may be changes that will affect your eligibility.
If you’ve taken a pay cut or perhaps you’ve started a family and your partner isn’t working, or if you have additional expenses such as school fees or loans; these can be a barrier to re-mortgaging. Lenders may also have changed their criteria since you last applied for a mortgage and this may make it harder to re-mortgage.
Conversely, if you’ve been progressing up the career ladder and have more disposable income, and / or your home’s value has also increased, you may be pleasantly surprised by the mortgage products available to you. You may be able to do more jobs on your house than previously expected.
If you want a chat about re-mortgaging and the best way to proceed in view of your individual circumstances, please give me a call – 020 3355 4841 or email email@example.com
For more on re-mortgaging read this recent post – 5 Questions To Ask When Re-Mortgaging