What’s The Best Way of Financing a House Extension?  

A home extension is a popular choice for a homeowner needing more space. You may want to update the home to improve the resale value. Some consider DIY ways to extend home premises. However, DIY may not provide you with the results you seek. Having trending rooms with futuristic requirements boosts the home’s value. If you want to finance a home extension, read ahead. There are multiple options to consider. The article discusses the best ways to finance house extensions.

6 best strategies to finance a home extension

House extension means extending a property that already exists there. It is a process of increasing the floor size. You can do this by adding another or increasing the existing room scale.  Extensions require one to sacrifice the outdoors. It could be the landscaping or the beautiful garden.

There are different types of house extensions to consider. Check Front and rear extensions, Single-storey extensions, Two-storey extensions, side extensions, and Conservatory house extensions.  Here are some strategies to finance the house extension:

1)     Understand the costs of financing extension

Before considering the best modes to finance the need, understand the costs. According to facts, “it costs around €1350-€2250 per square metre to extend the boundary.” However, the pricing of your house depends on the house type, location and the extension type.

For example, if you want to extend your bathroom, it may cost higher than the average rate. It is the additional costs that exceed the total costs. Factor costs before financing the home extension.

2)     Home extension loans

Whether considering a loft conversion or adding a small store room, these loans may help. It is a cheaper option to finance an extension with a credit card. It is cheap on the interest and overall costs. However, the paperwork may be time-consuming. Legal loan providers ensure the best assessment to ensure affordability.

You may get home extension loans in Ireland from verified providers economically. Yes, if you can repay the dues timely. You can get up to €50000 for your needs. Moreover, the facility to spread payments helps one pay comfortably. These are unsecured loans that prevent you from losing your very home.

The increase in the property after renovation may offset the interest charges. Thus, you may enjoy a potential return on investment with the loan.

3) Check Second-charge mortgage rates

Second-charge mortgages are ideal for individuals sharing more than 80% of the equity in the property. Equity is the amount in your home that’s mortgage-free. For example, your property costs €250000, and you have €75000 as an outstanding mortgage. It implies you have €85000 as equity.

 A second charge mortgage is another mortgage on the same property. You can get this one with the new or the existing lender. It is a cheaper option than an unsecured personal loan. However, you risk losing your property if you default.

Therefore, choose a longer repayment period to pay comfortably. It may imply high-interest payments. Paying comfortably is better than losing the property. Second-charge mortgage comes with the best perk- you can get up to €5m for your needs.

4)     Remortgaging

If you are on a Standard Mortgage Rate ending its term, remortgaging may help. It includes taking out a new mortgage with affordable terms. You get lower interest rates and monthly payments. It may help you finance the costs of a house extension. It costs less than what you currently pay. However, it may not be effective if reaching out at the end of the mortgage agreement.

Alternatively, re-mortgaging helps consolidate debts in one affordable mortgage payment. It makes day-to-day living easy. However, just like a second charge mortgage, non-repayment affects finances. The provider may claim the collateral if you default on the loan.

5)     Personal loans

Personal loans are the facility that helps one finance any requirements quickly. You can use it for home repairs and financing the extension. It is an unsecured loan so you don’t pledge the property. Individuals with good credit scores and finances may qualify for better rates.

The interest rates and costs may be competitive. However, personal loans have a positive impact on your credit scores. It helps you build a healthy credit history and repairs one. You get repayment flexibility with personal loans in Ireland’s marketplace.

Precisely, you can re-schedule the payments if your financial situation changes. Identify and compare the APR, repayment term, penalty costs and interest rates. It will help you fetch affordable loans. You may get up to €30000 for a home extension. It is ideal for small re-adjustments in residential property. You can repay the dues within 5-7 years.  Furthermore, identify the early repayment charges (if any). It prevents you from paying more than the actual costs.

6)     Bridging finance

One of the most common bridging loan usage is to purchase a new property before selling an existing one. Most property buyers prefer to renovate the new property as well. Thus, if you are planning to sell the house and want to renovate it first, bridging finance may help. You can use it to construct or extend the property area. Selling the house after renovation increases the value by 4x. Moreover, you get potential buyers seeking an advanced living setup.

Bridging finance is a secured way of financing the house extension. You must pledge property as a homeowner to get the funds against. You can get up to 75-80% of the property value as the first charge mortgage. It is quicker than traditional secured loans or mortgages. You get the money within 1-2 days. However, you must pay the dues within 12 months. You can either pay the interest amount in instalments or with the principal later.

These are of two types- open and closed bridging finance. The latter one comes with a fixed date to repay the dues. Individuals with seasonal income may consider open bridging loans. It helps them pay the dues when the money is available. Usually, one pays the loan with the sale of the existing property.

Bottom line

Planning and extending your home need not be complicated. Knowing and working on the best ways to finance helps you. The above-listed options may help you choose the best one. Consider the circumstances, renovation urgency, and mortgage liabilities before financing. It will help choose the right option.

Analyse the terms of interest rates and the additional costs to finance home extensions. Don’t forget to understand the impact of extension on the house value. Opt for only renovations that boost it.