Equity release with ongoing building work

[james_r_l]

Hi everyone

I'm looking at releasing some equity from my house in the Summer when my fixed rate ends to start purchasing BTLs. I'm currently building a side extension to the property which I am desperately trying to finish before the re-mortgage. If I can't finish the extension and hasn't been signed off by building control by the time I re-mortgage, would they assess the value as if there was no extension? Would it be best to finish extension and then re-mortgage?

Any advice would be greatly appreciated

Thanks

James

[Lilla D]

Hi James,

The short answer is: it's best to finish the extension, then remortgage.

Here comes the long answer.

When you remortgage to another lender, there will be a solicitor involved. They check your existing mortgage and the Land Registry, make you fill out questionnaire about your situation, get the money from the new lender, which they will then distribute between your current lender and you, then update the Land Registry.

Please note the "make you fill out a questionnaire" part. They normally ask you about any work that has taken place and lying (e.g. not telling them about the extension subject to building control sign-off) would count as mortgage fraud.

Even if the solicitor was not asking you about any works and didn't do a planning permission check, the new lender is likely to send out a valuer and they will notice the works and will ask you about the status of things, including building control sign-off. 

It is also entirely possible that the lender just does an automated valuation, i.e. no valuer goes out to notice the works. But the automated valuation wouldn't (couldn't) take into account any extension, as your house (on paper) is still what it was pre-extension works. As a result, you'd get a valuation based on pre-extension works, which is not what you're after, if I understood you correctly.

The problem with remortgaging before getting building control approval is that no "normal" lender will like it, so your only options would be bridging finance or taking a new deal from your current lender without releasing equity based on the lender's automated valuation. If you don't want to revert to the standard variable rate at the end of your fixed rate deal, then try choosing a deal option from your current lender which has no early repayment charge, so you can remortgage without a penalty once the building control approval is received or if you can't do that, then remortgage on like-for-like basis and take a further advance a few months later once the house is ready.

Does this help?

 

[james_r_l]

Hi Lilla,

 

Wow! Thanks so much for taking the time to explain it so clearly and in depth! I never thought about taking an advance with the current lender. Do you know if it's best to just contact them direct to see what they can offer or should I still go through a mortgage broker?

 

Thanks again for your time

James

[Lilla D]

Hi James,

You're very welcome

You can always contact them directly and see what they say, but a broker can do it for you as well as advise you about details you may not have thought about (e.g. how your income / outgoings situation may impact on your options) and look at alternatives for you. Most (admittedly, not all) lenders offer the same rates directly as via brokers, so you have nothing to lose.