There are multiple reasons people decide to get a house extension. It could be that your family has grown in size or you just want a new bathroom. However, what we cannot deny is that house extension adds value to the property. In the UK, getting a house extension increases property value by 5%. Now, we know the value of getting a house extension. It is time to answer the million-pound question “How to finance a house extension?”
There are several ways you can finance your home extensions. The method you choose depends on your circumstance. We are going to list out 5 ways you can finance a house extension.
- Adding on the mortgage for a house extension:
We are not talking about remortgage here. Remortgage is a whole other thing. Adding on your current house extension means borrowing more. Your current mortgage lender will give you more money to finance the house extension.
This will increase the sum you will owe your mortgage lender. You have the freedom of spreading the repayment over a long term.
- Remortgage for a house extension:
What is called remortgage? A remortgage is when you transfer your current mortgage to a new one. This is often done to raise more funds. Plus, the repayment structure also gets a facelift. You can spread the payments over a longer period
Remortgage is great for quick cash. One thing to remember, a remortgage is adding on top of your mortgage. The collateral for your mortgage was your home. This is risky. Failure to pay the amount borrowed will result in your house being repossessed by the lender. Consider the risks involved before signing up for a remortgage.
3. Use your savings:
Using your savings to finance your house extension is great. The reason it is great is because there is no borrowing involved. It is your savings; you will not be borrowing from anyone.
One thing to consider before you pull out your savings is the interest rate. The interest rate is not very generous to savers. To save the current amount, it will take you a longer period.
- Using a credit card:
It is lucrative to expense your house extension by a swipe of your credit card. But remember you still owe the fund. Using a credit card is great for immediate cash. The downside of it, this involves a lot of interest. So, approach with caution.
5. Unsecured loan:
If you are not a big fan of taking loans against your house, you can apply for an unsecured loan. Unsecured loans do not take anything as collateral. They are given based on the history of the borrower.
Since they do not take collaterals, the risk is high. Hence, unsecured loans have a higher interest rate when compared to secured loans.
We now know the ways we can finance a house extension. If you are looking for an experienced construction company, you can check out here. They also provide reliable suggestions for the most cost effective finance solution of your extension work.