Setting a budget for your home extension is essential to ensure you don’t overspend and leave yourself with an unfinished project. In this post, we’ll guide you through three simple steps to calculate your extension budget and ensure you can afford the development from start to finish.
Step 1: Identify How Much You Have Available
The first step to setting an extension budget is to identify how much you have available to invest in your new extension. This figure represents the absolute maximum spend you can make without having to start selling your valuable possessions. Calculate your available funds by adding your savings and property equity. Let’s call this figure “A.”
Step 2: Identify What Your Property Will Be Worth
The second step is to identify what your property will be worth after the extension is completed. This is crucial because you don’t want to overdevelop your property and end up with a home that is unmortgageable. To calculate this, search for sold house price data on websites like The Property Price Register or the Property Valuation guide. Calculate what your property is currently worth and what it will be worth once the proposed works have been completed. Let’s call this figure “B.”
Step 3: Choose an Amount You Feel Comfortable With
Now that you have figures for A and B, it’s time to decide on a budget. Pick the lower of the two figures and multiply it by 0.85 to give you a number that is 85% of what you can afford or what the potential increase in property value will be. This will leave a buffer should the unexpected happen.
For example, let’s say your available funds are €125,000 (A) and your property will be worth €680,000 (B) after the extension is completed. The lower of the two figures is A, so you’ll multiply €125,000 by 0.85 to get a budget of €106,250.
To conclude, setting an extension budget is crucial to avoid overspending and disappointment. By following these three simple steps, you can calculate your extension budget and ensure you can afford the development from start to finish. Remember to share your extension budget with your builder at the outset, so they can advise you on the most economical route to get the most bang for your buck. With a carefully planned extension budget, you can create your dream home without breaking the bank.
