The short answer
You borrow more against your home, either by switching to a new mortgage or by asking your current lender for a further advance, and use the extra to pay the builder. Lenders want a realistic budget, drawings and often quotes. Because a modular maker usually asks for a larger payment before the factory starts, arrange the money before you sign.
Most extensions are paid for from savings, from borrowing against the house, or a mix of both. This article is about the second route. It explains how it works; it is not advice on whether to borrow, and a regulated mortgage adviser can look at your own position.
Two ways to borrow against the house
A remortgage moves your whole mortgage to a new deal, often with a different lender, and borrows more at the same time. It makes most sense when your current deal is ending anyway, because leaving early can mean an early repayment charge.
A further advance is extra borrowing from the lender you already have, alongside your existing mortgage. It avoids leaving a fixed rate early, though the extra borrowing may be on a different rate.
Either way, the lender looks at your income and outgoings and at how much of the house’s value you would owe once the new money is added.
What a lender usually asks for
- A total budget for the work, including fees and VAT.
- Drawings, and planning permission or proof that none is needed.
- Sometimes a builder’s quote, and sometimes a valuation of the house as it will be after the work.
The modular extension cost calculator is a reasonable place to start the budget, but a lender will give more weight to a written quote for your house.
Timing with a modular build
This is where modular differs from a brick extension. A traditional builder is usually paid in stages as the walls go up, so the money is drawn over several months. A modular maker typically asks for a bigger share before production, because it is buying materials for a room that only fits your house.
That means the borrowing needs to be in place, and the money in your account, before you sign the order. A remortgage can take several weeks from application to completion, so start it while the drawings are being finished rather than after.
Things to check
- Fees. Arrangement, valuation and legal fees can add up; set them against the saving on rate.
- The term. Spreading the extra over a long term lowers the monthly cost but raises the total paid.
- Your contingency. Borrow enough to cover 10 to 15% for the unexpected, or have it in savings. Going back to the lender halfway through a build is slow.
- Who you deal with. Check that any adviser or lender is on the FCA register.
Other ways people pay
Savings, a personal loan for a smaller project, or a mix of savings and borrowing are all common. MoneyHelper, the government-backed guidance service, has free information comparing them.