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A home extension is a popular choice for a homeowner who wants more space, but doesn’t want to move house. If you’re in this camp, it’s good to know there are lots of ways to finance a house extension depending on your budget and plans.
What is a house extension?
A house extension is a building project that works to add living space on to your house, either by adding a new structure or converting a non-living space.
There are a few types of house extension:
The main aim of an extension is to add space – but building work could also add value to your house.
How much an extension adds will depend on the type of work you do – not all extensions will add the same value. For example, an extension which adds a bedroom and en suite could add 10-12% to the property value, while a conservatory could add up to 7%.
There are lots of factors that determine a home’s value, so there’s no guarantee an extension will add value to your home. There’s a chance the cost of the work could be higher than the value added.
There are lots of different types of extension:
Home improvement loan
A home improvement loan is one option for funding a house extension. A home improvement loan offers the flexibility to fit repayments around big life changes.
This type of loan type is unsecured, so you don’t borrow against your property.
If you have some cash to spare, then using this to pay for your house extension can make sense.
This way, finance options aren’t a barrier – and you’ll pay no interest. Of course, you’ll need to have the cash to start with.
The average cost of a single storey house extension is £1,700 - £2,000 per square metre of new internal space, but you may also want to budget for the cost of things such as decorating and furniture.
Remortgaging your house – moving your mortgage to a new lender or deal – is another way to borrow money to fund an extension.
This method comes with risk, since you’ll borrow money against your home itself, so could lose your home if you miss repayments. You may also need to pay an early repayment charge if you remortgage during your agreed term.
Borrow more from your current lender
Instead of remortgaging, you might be able to borrow more money from your current lender. Additional borrowing could be used to fund an extension, but you need to confident you’ll be able to keep up to the repayments, or your home could be repossessed.
A 0% or low-interest credit card can let you borrow money for home improvements. It’s a method usually suited to smaller house extension projects, or to cover decorating costs.
It’s important to be comfortable with repaying the whole amount during the interest-free period, to avoid accruing interest on the money borrowed. Speak to a financial adviser before putting major building work on a credit card.
Planning permission can throw up some barriers to building an extension, even when finance is taken care of – so it’s good to know where you stand from the start.
Not every type of house extension needs planning permission. Anything that falls within your permitted development rights is usually exempt from planning permission rules.
You may be able to skip the planning permission process if your extension will:
Other rules apply – these are set out by the HomeOwners Alliance Loft conversions that don’t go beyond the existing roof slope will often be exempt.
Your permitted development rights are likely to be strict if you live in or near to a: