Can I borrow £80,000 to build a second home on my corner plot?
Posted on 2 January 2014 by Tim
Hi, I own a house (with £180k mortgage) on a corner plot. The house is worth £220k. A number of other identical corner plot houses in the area have built a second dwelling onto their end of terrace house. I want to do the same. How easy is it to borrow money to carry out the work. I think it will cost £80k but will sell for £180k. Based on what the other houses have sold for. My plan was to build the second dwelling, and sell the current property I live in (primary residence) and the move into the new dwelling?
Many thanks for your enquiry. You are right that today many people are trying to maximise the potential of any extra land they may have. However, in your case I'm not sure that we can move forward with the project as you'd like to.
You are already quite highly geared on your existing property (just over 81%) and the initial loan to value on similar development projects typically is around 50-60% LTV, with the highest at 75%, which would usually be for the more experienced developer. Lenders would be reluctant to lend against your present home as there is only £30,000 equity, and that is based on the property being worth £120,000 as it's currently a corner plot.
If you have some funds of your own to get the project started, then that may give us some other options, and it would be worth speaking further.
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