No matter how much money or how little you have spent in the creation of your home extension, there comes a time when you will eventually have to pay for the work you did or had done. Of course, the smaller the extension is, the less of a problem you will face, but in every case, you will still have a number of options at your disposal. Such options may range from paying for such a project through personal savings to various forms of lending and borrowing.
Regardless of which step you select, the first thing you will need to do is to create a budget that is the right kind for the task. It should be detailed and should guide you through exactly how much money you will eventually need to borrow. This is key, as you will not want to run out of money half way through a project.
Private or commercial?
Once you have figured out how much money you are going to have to put down, and presuming that you have discovered that you will not have enough in savings to cover that amount, then your next step will be to figure out how and where to borrow the money from a person or an institution. What you do at this point will depend on a number of different factors, such as whether or not the home extension in question involves your home.
If the extension involves your home, then you will continue to live there. However, if you are extending a property that is not yours for residential purposes, then you might be working on a developmental project, such as improving a property so you can turn a profit on it during the sale. Extending and then selling a property is not an uncommon practice these days and popular amongst builders.
Commercial developers will be able to access a number of different financing options that will consider the final property values once construction has finished; this is something you typically will not be able to get typical providers such as building societies and banks to do.
A number of commercial developers are private investors. They make their money through loans to developers once they have examined the viability of the project in question. They will provide large sums of money through daily or monthly interest rates. Other lenders may be financial institutions that focus on the provision of funds for development projects.
Make use of existing equity
If you are improving your own home, then you will probably want to get the money by extending the mortgage you already have; this is called a re-mortgage. It releases your home’s equity due to the increased value of your home. You borrow the money you need and pay it back through your mortgage. In some cases, you might not face a significant increase in your monthly payments. When you come to sell your home you will pay back both mortgage charges together.
It was not too long ago that borrowing against your mortgage was difficult and rarely done, but the rules have been changed to make it much easier these days, so you can even play a number of lenders off each other when trying to find the best deal. Watch out for deals that feature low introductory payments, as these periods will inevitably come to an end.
The problem with those situations is that you might fancy yourself earning more money at the ends of those periods but if you aren’t, you might be stuck with much higher monthly payments that are much harder to pay. Be sure you know what you are getting into before you sign any papers.
You can also get additional loans beyond your mortgage, including loans from banks, specialist lenders, or building societies. These can be secured or unsecured loans, depending on whether they are secured against your property or not. Separate loans are generally over shorter terms than mortgages and come with higher repayments. Consider the pros and cons of each option.
This guest post was written by Andrew Potter from My Online Estate Agent. My Online Estate Agent is a UK low cost estate agent and charges a fixed fee to advertise on Zoopla and many other top UK property portals and provides all the online tool and guides you need to sell or let your property.