How to Finance a Home Extension or Loft Conversion

Before exploring finance, get a realistic cost range. A rear extension in London typically runs from £40,000 to £120,000 depending on size, finish level, and structural complexity. A loft conversion ranges from £50,000 to £150,000. Having a credible ballpark — either from a contractor's estimate or a cost calculator — makes any finance conversation far more productive.

Costs to budget for beyond the build itself:

• •Architect and structural engineer fees (typically 8–15% of build cost)
• •Planning application fee (£258 for most householder applications in England)
• •Party wall surveyor (£800–£2,500 per notice served)
• •Building Control fees
• •Furniture, fixtures, and fittings if not in the build contract
• •Contingency of 10–15% for unforeseen works

The most common route for homeowners with equity in their property. If your home has increased in value since your original mortgage was taken out, you may be able to remortgage to a higher amount and use the difference to fund the build.

How it works: Your existing mortgage is replaced with a new, larger one. The difference between old and new mortgage is released as cash — which funds the project.

Profit of this approach: Mortgage rates are typically the lowest available form of borrowing. You spread the cost over a long term, keeping monthly payments manageable.

Watch out for: Early repayment charges on your current mortgage. Arrangement fees on the new deal. If you are in a fixed rate, check whether the savings justify breaking it early.

Rather than remortgaging away, you can often borrow additional funds on top of your current mortgage from your existing lender — without breaking the main mortgage deal.

This avoids early repayment charges and is faster than a full remortgage. The new advance is typically at a different rate to your original loan and is assessed on current affordability and loan-to-value.

This is worth exploring first — especially if your current fixed rate is competitive and breaking it would be expensive.

For smaller projects (typically under £30,000), a personal loan is sometimes the most straightforward route. No need to remortgage; approval is faster; no property valuation required.

The downside: Interest rates are higher than mortgage rates, and terms are shorter, so monthly payments will be higher for the same amount borrowed.

For projects above £50,000, the cost of unsecured borrowing usually makes remortgaging or a further advance more attractive.

For larger projects, some specialist lenders offer a staged drawdown facility — releasing funds in tranches tied to build milestones (foundations complete, first fix complete, practical completion).

This means you only pay interest on the funds you've drawn, which can be more cost-effective on a longer programme. It does require a more detailed project plan and may require inspection at each stage.

Several government-backed schemes can reduce the cost of energy-efficient improvements within your project:

• •Boiler Upgrade Scheme: £7,500 grant towards an air source heat pump. Best incorporated into an extension or refurbishment where the disruption is already happening.
• •0% VAT on energy-saving materials (solar panels, insulation, heat pumps) until at least 2027.
• •ECO4 scheme: For eligible low-income households — covers insulation and heating upgrades.

None of these cover the core build cost directly, but if your project includes green energy measures, they can reduce the specification upgrade from expensive to affordable.

Understanding how contractors structure payments helps you align your finance drawdowns with the build programme.

At RCB Design & Build, our contracts typically use a milestone-based payment structure:

• •Mobilisation deposit (typically 10–15%) — paid before works begin
• •Foundation / structural stage payment — on completion of groundworks or structural frame
• •First-fix stage payment — on completion of first-fix electrics, plumbing, and studwork
• •Second-fix stage payment — on completion of second-fix and plastering
• •Completion / snagging payment — retained until practical completion and sign-off

This protects you: you are never significantly ahead of the work completed. Avoid any contractor asking for more than 20–25% up front on a standard project.