Remortgage for an Extension

How to Remortgage to Fund an Extension

Remortgaging to fund an extension involves replacing your current mortgage with a larger one and using the additional funds to pay for the building work. The process is essentially the same as a standard remortgage, with the added element of borrowing more than your current outstanding balance.

Here is how the process typically works:

• Get extension quotes - Before approaching lenders, obtain detailed quotes from at least three builders. This gives you a clear picture of how much you need to borrow. Include a contingency of 10% to 15% for unexpected costs, which are common in building projects.
• Calculate your available equity - Subtract your current mortgage balance from the estimated market value of your property. The remaining figure is your equity. Most lenders will allow you to borrow up to 85% or 90% of the property value in total.
• Speak to a mortgage adviser - A whole-of-market broker can compare deals from across the market and find the most cost-effective option for your circumstances. They will also check whether early repayment charges on your current deal make it more sensible to take a further advance instead.
• Apply and complete - Once you have chosen a deal, the application process involves affordability checks, a property valuation and legal work. The whole process typically takes four to eight weeks.

It is worth noting that the lender will value your property in its current state, before any extension work begins. This means the amount of equity available is based on what the property is worth today, not what it might be worth after the extension is built.

Some homeowners choose to remortgage after completing the extension so that the increased value is reflected in the valuation. However, this requires having alternative funds available to pay for the work upfront.

How Much Does a House Extension Cost in the UK?

Understanding typical extension costs is essential for planning how much you need to borrow. Costs vary significantly depending on the type of extension, the location, the specification and the complexity of the build.

Single-storey rear extension

A standard single-storey rear extension typically costs between 1,500 and 2,500 pounds per square metre for basic to mid-range specifications. A 4 metre by 5 metre extension (20 square metres) might therefore cost between 30,000 and 50,000 pounds. Higher-specification finishes, bi-fold doors or structural glazing will push costs towards the upper end or beyond.

Two-storey extension

A two-storey extension is not simply double the cost of a single-storey, as the foundations and roof are shared. You can typically expect to pay around 50% to 70% more than a single-storey extension for the additional floor. A two-storey rear extension might cost between 45,000 and 80,000 pounds depending on size and finish.

Side return or infill extension

Popular in Victorian and Edwardian terraced houses, a side return extension that fills in the alleyway beside the kitchen typically costs between 20,000 and 40,000 pounds. Despite the relatively modest cost, these extensions can transform a narrow kitchen into an open-plan kitchen-diner and add significant value.

Wrap-around extension

Combining a rear extension with a side return creates a wrap-around extension, which maximises the additional floor space. Costs typically start from around 40,000 pounds and can exceed 100,000 pounds for larger or higher-specification projects.

Additional costs to budget for

Beyond the basic build cost, you should also budget for architectural and design fees, structural engineer fees, planning application fees if required, building control fees, and the cost of fitting out the new space with flooring, decoration and furnishings. These additional costs can add 15% to 25% to the overall project budget.

Planning Permission and Building Regulations for Extensions

Before you begin your extension project, it is crucial to understand the planning and regulatory requirements. Getting this wrong can cause serious problems, not just during the build but also when you come to sell or remortgage in the future.

Permitted development rights

Many single-storey rear extensions can be built under permitted development rights without needing formal planning permission. For detached houses, you can extend up to 8 metres to the rear (or 6 metres for semi-detached and terraced properties) under the larger home extension scheme, subject to a prior approval notification process. Permitted development also covers single-storey side extensions up to half the width of the original dwelling.

However, permitted development rights come with conditions. The extension must not exceed 4 metres in height, must not extend beyond the front elevation, and must be built with materials that are similar in appearance to the existing house. Properties in conservation areas, Areas of Outstanding Natural Beauty or National Parks have more limited permitted development rights.

When you need planning permission

You will need to apply for full planning permission if your extension exceeds the permitted development limits, if you live in a designated area, if your property is listed, or if permitted development rights have been removed by the local authority through an Article 4 direction. Two-storey extensions always require planning permission under certain circumstances, including when they extend closer than 7 metres to the rear boundary.

Building regulations

Regardless of whether planning permission is needed, virtually all extension work must comply with building regulations. These cover structural safety, fire safety, energy efficiency, drainage and ventilation. You will need to submit a building regulations application and have the work inspected during construction. A completion certificate is issued when the work is finished and approved.

It is essential to keep all planning and building regulations documentation, as your lender and any future buyer will want to see evidence that the extension was built lawfully and to the required standards.

How Much Value Does an Extension Add?

One of the biggest advantages of building an extension with remortgage funds is the potential to add value to your property. A well-designed extension that adds functional living space can deliver a strong return on investment.

Typical value increases:

• Single-storey rear extension - Can add between 5% and 10% to a property value, depending on the size, finish and local market conditions.
• Two-storey extension - Typically adds between 10% and 20% to a property value, as it provides significantly more additional floor space.
• Side return extension - Can add 5% to 15% to a property value in areas where open-plan living is in high demand, particularly in London and other urban areas.
• Adding an extra bedroom - Moving from a two-bedroom to a three-bedroom property, or from three to four bedrooms, can add considerable value. The price differential between bedroom counts in your area will indicate the potential uplift.

The value added depends heavily on the local property market. In areas where larger homes command a significant premium over smaller ones, the return on investment from an extension is likely to be stronger. In areas where there is less of a price gap between different-sized properties, the financial return may be more modest.

The quality of the design and build also matters enormously. A poorly designed extension that does not flow well with the existing house, or one that is built to a low standard, will add less value than a well-thought-out project. Investing in good architectural design at the outset is money well spent.

It is worth speaking to local estate agents before committing to your extension plans. They can give you an idea of how much the improved property might be worth, which will help you assess whether the project represents good value for money.

Remortgage vs Other Financing Options for Extensions

While remortgaging is the most popular way to fund a house extension, it is not the only option. Here is how it compares to the alternatives.

Remortgage

Releasing equity through a remortgage typically offers the lowest interest rates of any borrowing option, often between 4% and 6% depending on market conditions and your personal circumstances. The funds are repaid over the remaining mortgage term, which keeps monthly payments manageable. However, borrowing over a longer period means you pay more interest in total, and the debt is secured against your home.

Further advance from your current lender

If you are mid-way through a fixed rate deal and face early repayment charges, asking your existing lender for a further advance can be a smart move. You keep your current deal in place and add a separate loan portion for the extension funds. The rate on the further advance may not be as competitive as the wider market, but avoiding early repayment charges can make it the most cost-effective option overall.

Secured loan (second charge mortgage)

A secured loan sits behind your first mortgage and allows you to borrow against your equity without disturbing your existing mortgage deal. Interest rates are higher than first charge mortgages but lower than unsecured borrowing. This can be a good option if you have a very competitive existing deal that you do not want to lose.

Personal loan

For smaller extensions, a personal loan of up to 25,000 pounds could be suitable. The interest rate will be higher than a mortgage, but the loan is unsecured and repaid over a shorter term, meaning you pay it off faster and could pay less total interest. Personal loans work best for more modest projects.

Savings

If you have sufficient savings, self-funding your extension avoids interest charges entirely. Some homeowners use a combination of savings and borrowing to minimise the amount they need to remortgage. Even having a modest sum saved can reduce the borrowing needed and improve your LTV position.

The right financing option depends on your individual circumstances, including your existing mortgage terms, the amount you need to borrow and your attitude to risk. A mortgage adviser can help you compare the total cost of each approach and recommend the most suitable solution.

Tips for a Successful Extension Project

Building an extension is a significant undertaking, and careful planning is the key to a successful outcome. Here are some practical tips to help your project run smoothly.

Invest in good design

Hiring an architect or architectural designer might seem like an unnecessary expense, but good design can transform the outcome of your project. A well-designed extension will flow naturally from the existing house, maximise natural light and create functional, attractive living spaces. The design fee is typically 5% to 10% of the build cost and is money well spent.

Choose your builder carefully

Take time to find a reputable builder with experience in residential extensions. Ask for references, visit previous projects if possible and check that they have adequate insurance. Look for builders who are members of recognised trade bodies such as the Federation of Master Builders. Get at least three detailed quotes and be cautious of prices that seem too good to be true.

Agree a detailed specification

Before work begins, agree a detailed written specification covering everything from foundations to finishes. This reduces the scope for misunderstandings and helps control costs. Make sure the contract includes a clear payment schedule tied to milestones rather than making large upfront payments.

Plan for disruption

Building work is messy and disruptive. Depending on the scale of the extension, you may need to live without a kitchen for several weeks or deal with noise and dust. Plan how you will manage during the build and factor in the cost of any temporary arrangements such as eating out or using a temporary kitchen.

Keep a contingency fund

Unexpected issues are almost inevitable in building projects. Discovering poor ground conditions, hidden drainage or structural problems can add costs that were not in the original budget. Keeping a contingency fund of 10% to 15% of the total project cost can prevent financial stress if surprises arise.

Communicate with your neighbours

Let your neighbours know about your plans before work begins. This is not only courteous but can prevent disputes later. If your extension is built close to a shared boundary, you may also need to serve a party wall notice under the Party Wall etc. Act 1996, which requires giving your neighbours at least two months notice.