Market factors and economic trends suggest there is financial and practical merit to extending your home rather than moving home. Purchasing a home generally involves selling the property, finding and purchasing another and also physically moving all our possessions from one home to another. There are easier choices and the most popular is extending the residence.
Before moving home, homeowners need to systematically evaluate all the factors. School districts tend to be a major consideration but there are others. Quality of life considerations, community support services and of course personal finances. Moving home is rife with short and long-term expenditures.
One fact has become clear. The cost of moving homes are rising while the cost of extending the home is decreasing. Add to that the much more complicated and stringent mortgage loan and credit policies and buying a new residence in the UK is a process that needs to be completely understood before looking.
The Cost of Moving
Moving home is more than an intimidating task. Moving home is expensive. The task of moving home is physically and financially draining and time consuming.
Financially, a report from Lloyds TSB indicates that moving home relocation costs have increased by 70 percent in the last ten years. In England’s South East, the average cost to move home in 2013 was £16,500. Add to this the rising stamp duty on more expensive homes and moving home is a burden. On a home that costs £500,001, the stamp duty will add £20,000 to the cost of relocation.
Help to buy programs have eased the down payment requirement for purchasing new homes for qualified buyers. The program has also helped to increase the value of your current residence. UK real property values have appreciated greatly in the last 12 months.
However, the mortgage application process is stringent, certainly much more stringent than it was prior to 2008. Many candidates for home loans that were approved in those years would not be approved today.
Gone are the days of low document, self-verified applications. Today, the mortgage application process is cumbersome, lending bank credit requirements are stringent and assessors are guarded.
London & Country’s David Hollingworth offered his analysis of the mortgage marketplace; “Mortgage availability remains constrained. Existing borrowers are not immune – those seeking further advances may struggle more than those looking for a homebuyer loan.”
At the same time that the cost of moving is rising in the UK, the cost of building extensions is lowering. Local municipalities are recognizing the trend and are easing and streamlining the extension requirements. For homeowners that want to add extend 8 metres from detached properties or 6 metres from semi-detached property and terraced homes, government has agreed to lift the planning permission requirement for the next three years.
This support for contractors has been a boon to the building and remodelling industry. In a nutshell, it is easier than ever to plan and build your extension that will increase the value of your current residence that has already realised a substantial gain in equity. Extending your home is an excellent way to increase the value of your home and of your portfolio.
Interior Design Planning
Whilst an extension may seem like the best option financially, you also need to be careful with how it will fit into the overall feel and functionality of your home. Whilst adding an extra room to your living space will always be beneficial, it might also allow you to reconsider the whole makeup of your space.
Perhaps your extension will be best served as a kitchen, or perhaps an extra bathroom? Is there an opportunity to add another bedroom to your home?
These are all questions that you need to ask yourself before commencing with the project.
To get the very most from your time and monetary investment into your extension, it is always a good idea to consult with an interior design specialist.
Financing Your Extension
The cost of re-mortgaging and extending certain home loans is only slightly higher than in the past. The marketplace is competitive but the credit terms can be imposing, much like the credit terms to acquire a new home. However, it is generally easier to qualify for a home extension than it is to qualify for a new mortgage.
The biggest challenge is often the valuation of your current home. If you purchased at the height of the housing boom in 2007, valuations may come in lower than expected. This, of course, would affect how much you can sell your residence for in the event you plan to buy another. It could affect your ability to borrow to build an extension but will not carry as much weight.
The lender will be interested in what the value will be after the extension rather than what it is valued at presently. There are a number of financial products available to provide the financing necessary to extend.
You may want to consider flexible and offset loans, remortgaging or extending your mortgage right along with the cost of the extension. Short-term loans are another cost-effective possibility.
It is important that the homeowner not be afraid to challenge valuations. Know the property values of the homes around you and know the valuation of homes with floor plans like the extension will offer.
Another factor that the homeowner must consider the cost of the new loan. When choosing which way to finance your extension, be sure to understand all costs related to closing the new loan.