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Case Study - Should I move or should I extend?

Case Study - Should I move or should I extend?

My wife and I bought our house brand new in 1990. It has turned out to be a very comfortable and very practical place to live and we have excellent neighbours. For many years we thought about the possibility of selling our house and buying a new one (moving up the ladder). We also thought about the possibility of extending.

In this article I am going to cover the options as we saw it and our subsequent project to extend our home. You may also be in the same situation, thinking of extending or selling. Every situation is different but I hope by covering my project that some of the information here may be useful to you.

Watch the video to see how one home owner managed the process of extending his home

My situation in 2013

In 2013 we decided to consider in much more detail what the possibilities would be were we to extend or were we to move.

Our house was a 4 bedroom house sitting on a very small plot of land. Floor area approx 2000sqft. Generally in good repair and probably worth about £500k. Ten years earlier we had added a conservatory but other than that we had made very few changes. Many of our neighbours had renewed their kitchens and bathrooms. Many had also had all their windows replaced and most had replaced their oil fired boilers and oil tanks. We had instead always maintained our house very carefully and preserved it as a perfect example of a 1990 house. Our boiler still worked ok but was now 23 years old. Our windows were still all original but many had started to require small repairs in addition to requiring a coat of paint every few years.

House before the extension startedExisting house before extension

Regarding space, our home did have plenty of space but I had inherited various pieces of old family furniture from my dear departed aunt (bless her soul). The sensible thing would have been to have sold the lot but I am a sentimental person and I wanted to keep as much as possible of these old family relics.

Our financial situation was stable. I had a full time job that looked reasonably secure. The mortgage had been paid off quite a few years earlier and we had about £50k in savings. It was a very comfortable feeling to have savings in the bank but when I considered the rate of interest (and the tax on interest), I could see that the money in the bank was not actually keeping up with inflation. It should be noted that in the last 20 years the value of houses had gone up more than inflation so for us the money invested in our house had given us a better return than our savings in our bank account. But, it would be silly to just assume that the value of houses will continue to go up more than inflation every year for ever. Over all I think it is fair to assume that in the long term houses are likely to maintain their value. So, in 2013, looking forward, we had three options.

1. Stay put. Maintain existing house and carry out repairs when required.

2. Sell existing home and buy new home.

3. Stay put but extend with a loft conversion or a side extension or both.

Option 1. Stay put.

This was the easy option. Having no mortgage and having some savings in the bank would always help me to sleep at night. There was enough space in the existing house to live comfortably (but not if I wanted to keep my old family furniture). Looking forward the cost of maintenance would continue to be reasonable but two large items coming up would be the replacement of the oil burner and oil tank (£5k) and replacement of all the windows (£10k).

Option 2. Sell home and buy new home.

I could sell my existing home, take out a mortgage and buy a new home. How big a mortgage should I go for? For me I decided to consider a £150k mortgage with repayments of the full amount spread over 10 years. The goal being to have it fully paid off by the time I reached the golden age of 65.

The cost to sell the property (estate agents fees 1.5%, epc £50, floor plan £50, photography £50 etc) would probably be approx £8k.

The cost to hire a removal truck would probably be approx £1k.

It would also be prudent to have a contingency fund for jobs that would need doing on the new property (possible electrical problems, plumbing problems, roof problems, heating problems etc). Other things that may also need purchasing would be new carpets, curtains and possibly a new bathroom or a new kitchen etc. I felt that £20k would be the minimum amount to allocate for this.

In addition to the above costs there would also be stamp duty to pay on the new property.

Taking everything into consideration, it looked like the amount that I could afford to spend to buy a new house would be approx £649k.

  • Seling price of existing house: £500k
  • Selling fees (estate agent etc): -£8k
  • Removal cost: -£1k
  • Contingency for problems: -£20k
  • Existing saving in the bank: £50k
  • New mortgage: £150k
  • Total money available to buy new home: £671k
  • Stamp duty: -£22k
  • Actual money available to buy new home: £649k

So to summarise the situation, I could sell my existing home and buy a new home but I would have to pay out a minimum of £31k in direct costs and adding the cost of the contingency fund of £20k this would increase to £51k. In other words, in the process of selling my existing home for £500k and buying a new home for £649k I would lose approx £51k.

Option 3. Stay put but extend with a loft conversion or a side extension or both.

The idea of possibly doing a loft conversion or a side extension was something that I had thought about off and on for quite a few years. The first difficulty was trying to figure out how much it would cost and how much it would increase the value of the house by. If we were to build an extension and a loft conversion both at the same time, it would be safe to assume that this would be a lot cheaper than if we were to do these as separate projects at separate times. Before figuring out the cost, I needed to figure out what I actually wanted. I needed to come up with a design.

My next step was to buy a beginner’s architectural design program off the internet for £35. I then spent quite a few evenings figuring out how to use this novel program. I spent a few more evenings measuring up my house and the boundary of my garden. In the software program I then created a model of my existing house and the possible floor plan for a two story extension and a loft conversion. I then calculated that this design would take my existing floor area from approx 2000sqft to 3000sqft.

Feeling very pleased with my initial design, I then discussed this with a friend of mine who was a builder. He worked out some approximate costs that indicated a likely price of £150k.

I then explored this possible project further. Planning permission was unknown but we hoped it would go through ok. We would need an architect to review my initial plans, make suggestions and then produce a more comprehensive plan suitable for building regulations approval. The builder would do all the building but I would have to do all the painting and decorating afterwards which would be quite a big job. The garden would be trashed during the build and so would need redoing afterwards but this was something that my wife had been wanting to do anyway. Solar panels on the roof and an air source heat pump could be installed (the existing oil fired heating system was 23 years old and in need of replacement). All the existing windows could be replaced as they were all 23 years old and would need replacing before long anyway. The existing kitchen was still in exceptionally good condition and only in need of minor refurbishing as were all the bathrooms. Our existing carpets and floor coverings were 23 years old and in need of replacement. My wife was also keen to make some new curtains. All these and a few more items added up to a further £50k.

So the cost to add a 1000sqft extension, refurbish the existing house, and do all the things to make our house comfortable for the next 25 years, would cost approx £200k. It was very difficult to know what the resulting increase in the value of the house would be but as it was going from a 4 bed to a 7 bed house, I made the assumption that the increase in value would probably be an extra £200 and so the value of the house would increase from £500k to £700k.

Choosing the best option

My wife and I decided that we would go for the loft conversion and extension. At the same time we would also redecorate all the existing rooms.

Extending into the loft of the houseExtending into the loft 

Our thoughts were as follows:

1. Selling our house for £500k and buying a new one for £649k would only get us a house slightly larger than our existing house.

2. Keeping our house and building an extension would give us a house that was 50% larger in floor space area.

3. The extension project would also involve a general redecoration and revamping throughout. Looking forward this would mean that future maintenance would be likely to be small.

4. The extension project would entail a lot of work but substantial work would also be required if we were to sell our house and buy a new one.

5. We have excellent neighbours and we are very happy to live where we are.

6. I needed more space for the family furniture.

7. Money in the bank was taking a very small decrease in value each year, whereas money invested in a house is likely to keep up with inflation over the long term.

8. My wife wanted a reason to build a new garden.

9. Yes and of course, we had both seen various episodes of Grand Designs on TV over the years and we were keen to carry out our own little grand design project.

In 2014 we applied for planning permission and a mortgage and we got approval for both without any problems. We appointed a builder who, as chance would have it, was able to start straight away. The project took 4 months to complete. Our neighbours were really patient with the disruption and gave us lots of support. Two of the neighbours also took on our builder after us for their own projects. We spent much of 2015 decorating the extension and redecorating the existing house. My wife made some excellent new curtains (with some help from one of the neighbours). In 2016 we redid the garden (my wife leading the project and me doing all the heavy work). The project was mainly complete by 2017 during which year I started restoring some of the old furniture (lots of wax polish here and there). Now pretty much all done. We are enjoying our new home and very much looking forward to the next 25 years.

The house with the finished extensionThe house with the finished extension

Article written by JJ Heath-Caldwell