More space needed - and quick
They love their home, but desperately need extra space for their new baby. They already have two young sons, Oliver, 3 and Ben, 5, and only have a small three-bed house. So it'll be a squeeze when number three arrives in May.

That's why Alison and Simon plan to convert their loft into an extra bedroom for the baby - and a play area for the boys.

Move or improve?
The Powells have decided that adding living space is a better option for them than moving - especially with house prices so uncertain at the moment.

And as well as saving on solicitor's and estate agent's fees (not to mention stamp duty), the work itself shouldn't cost the earth.

The Federation of Master Builders (FMB) says that a loft extension in a three-bedroom Victorian house in London will start from £30,000. The same job in the north would cost around £10,000 less. Once they've taken moving costs and stamp duty into consideration, having their loft converted should be cheaper than moving house.

And of course, they will hopefully increase the potential for profit when they come to sell.

But there's another side to this argument. It's always worth making sure that the money you're spending will actually increase the value of your home by at least the same amount.

And you don't want to end up having the most expensive house on your street - you could end up out-of-pocket when you come to sell.

Borrowing to get the job done
The Powells visit a mortgage adviser who explains that the cheapest way to borrow for their loft conversion is to take out additional borrowing (also known as an ‘advance') on their existing mortgage.

The adviser explains to Alison and Simon that the new total of the mortgage will need to be less than the value of their home - and that their mortgage lender may want to see estimates for work to be carried out before it grants the loan.

What are the options - and the costs?
Most lenders offer the option of a fixed or discount variable rate mortgage for advances.

If the Powells want their repayments to stay the same over a certain period, they should opt for a fixed-rate deal but avoid advances with extended redemption penalties.

However, a discount variable rate usually offers 1-2% percentage points less than the lender's standard variable rate.

Alison and Simon can choose to repay the additional borrowing over the remaining term of their mortgage - or sooner if they wish - but they'll have to watch out for any early redemption fees.

The lender may also want to see evidence that they've had the work carried out. Simon and Alison will have to pay a survey fee. The mortgage adviser also recommends they review their current mortgage to ensure they've got the best deal.

Getting a valuation
The Powells have their home valued by their lender and they get the go-ahead for the advance. They ask builders to quote for the work. Alison and Simon agree a price with a local building firm. The work gets under way.

A brand new room
Finally the loft conversion is done and baby Grace arrives just in time to go into the new nursery. Plus the boys are delighted with their new play room.