Securing the funds for your planned refurbishment should be the first step you take on the road to your dream home, says Gillian Upton
There is one silver lining to the current slowdown in the housing market and that’s the relative ease of securing funding. However, while the availability of funds is easier today than it was 12 months ago, the lending criteria has tightened, mostly thanks to the uncertainty over Brexit.
“Banks are beginning to be a bit more flexible compared to 12 months ago as they’re more open to property improvements than they ever were in the past,” says Jenny Tozer, Partner and Investment Manager at LGT Vestra.
More cynically, banks have realized that there is money to be made out of existing homeowners improving their homes and adding value to the property.
“BANKS ARE BEGINNING TO BE A BIT MORE FLEXIBLE”
Where to secure funding is dependent upon how much you want to borrow. If it’s a loft or new kitchen costing around £50,000 then it’s best secured through any high street lender such as a bank or building society.
If your plans are more ambitious, for a rear extension or an entire new living area beneath your home, connected with a side return to create a dramatic double-height space, then the sums involved will be well over £100,000. For projects such as these, a secured loan is the best option.
Increasing your mortgage is the most common form of secured lending, particularly as increased competition
means that there are some really good offers around. Your first port of call should be your existing mortgage provider, then benchmark against others.
You may be able to secure a second mortgage to sit alongside your existing mortgage – and avoid any penalty clauses from the existing mortgage – but this route does tie you into the same provider.
Equity release is another option although rates are still more expensive than a mortgage. Tozer recently priced one for a client at a rate of 3.2%, a premium against the lending rate of 1.9%, and the client declined. “He was going to hand over £287,000 over ten years as the rate compounds year on year,” she explains. She advises that equity release products are dependent on age, how long you plan to stay in your home and what you plan to do with your funds.
“It’s not the first port of call, but if you’re selling your home in ten years’ time it might be worth considering,” she says.
Her last piece of advice is not to over-refurbish your home. “Don’t be the most expensive house on the street as you won’t necessarily get the money back when you sell.”
COUNTDOWN TO YOUR DREAM HOME
Basement: Allow up to 40 weeks and a dent in your kitty of between £250,00 – £500,000 + VAT, but then you have a playroom, cinema, study, extra guest room, granny annexe or bar.
Side return and rear extension: For a super-duper new kitchen/diner from a side return and rear extension, allow 12-16 weeks and watch anything from £100,000 + VAT disappear from your bank balance.
Loft conversion: If you want that extra bedroom, study, roof terrace or master bedroom, it can be yours in around ten weeks and cost from £55,000 upwards + VAT.
A WHOLE HOUSE RENOVATION – COST COMPONENTS
Based on a typical south-west London home circa 160sqm or 1700 sqft
Professional fees: from architectural, interior design and project management to structural engineer, party wall and other surveyors. £50k-£100k + VAT#
Insurances/guarantees: from building renovation cover, non-negligent party wall and company guarantees to public/employer’s liability and professional indemnity.
Contact a specialist broker; expect 2%-4% of the build cost.
Loft conversions: subject to existing structure, scale of design, height to roof ridge and room type. £30k-£50k + VAT
Single storey extension: side return plus rear (30sqm) with a basic finish of white walls, electrics/plumbing. £45k-£60k + VAT
Basements: a watertight concrete box is approximately £3000psm plus fit-out.
Kitchens: cabinetry, worktops and appliances vary, driven by volume, brand and finish. £30k-100k + VAT
Outdoors: tiles, grass, decking, external lighting, plants, bin store etc. £10k-30k + VAT
Fixtures & fittings: separate this from the builder’s labour costs. Variable – the sky’s the limit
AV and IP: put cabling and infrastructure in place for today and tomorrow. £10k + VAT for basics plus TV screens, speakers, home cinemas.
Furniture: in case an update is required.
Contingency: for discoveries and extras. Allow 5%-10% of total budget.
VAT: builders and other firms quote net prices. Add 20% (unless a new-build).