Annual gross income from employment or profession: 70k
Annual gross income of spouse: 40-45k
Rough estimate of value of home: 400k
Amount outstanding on your mortgage: 425k
Savings and investments: savings of 35K
.....given the falling house prices we may trade up sooner ie. 2-3years and hope to rent this house out.
Out of curiosity, how would you buy a new house without selling your old one ? If house prices fall further your negative equity will grow. After what we are going through now, I can't see any banks lend you more money to buy a second house.
How much will the extension cost , if you can afford it without an additional loan, I would probably go for it, as being the only solution to getting you a bigger house, and reading from your post you like the location, you just need a bigger and more up-to-date home.
I am in a similar situation and if I had all required funds for the extension I would do it. Trading up will you cost you probably almost as much in stamp duty alone as an extension.
In terms of your renovation plans, is the renovation really necessary, or could it wait until you do an extension ?
I also know your feeling about pumping money into an asset that will only be worth less in value, but I consider it no longer as an asset but as a home in which I will (have to) live a lot longer that I might have envisaged when I bought it. That is why I today spent another 1000 euros on its infrastructure.