Should we overpay the mortgage and borrow money for house renovations? | Mortgages
Q We currently have a home loan of £122,000 and have to have to comprehensive some residence renovations costing £25,000. We can afford to pay for to help you save about £500 a thirty day period to set in the direction of the home renovations but it would get us a long time to save. Would it be value overpaying the mortgage loan and then borrowing the amount of money we have to have? Our set price ends in January 2024.
A You’ve got shed me. I don’t realize why you would overpay your home loan only to borrow it back at some point in the upcoming. I am also a tiny worried that for the reason that you have a preset-rate deal there will be a limit – generally 10% of the remarkable bank loan – on how considerably you can overpay. In your circumstance that means you could be constrained to overpaying £12,200 this calendar year but as that is a bit far more than two times the £500 a thirty day period you have likely spare, you are not likely to breach your lender’s restrictions. But as I claimed before, why would you want to overpay unless it can be simply because your latest house loan represents the highest your loan provider is ready to lend you.
It is also unclear when you are arranging to have the renovations done. If it can be as before long as doable, it may possibly be an notion to inquire your loan company if it is prepared to raise your home loan by the £25,000 you need to have to pay out for the do the job. If you can wait around a whilst – which in the present mortgage loan local weather I counsel is the way to go – you could consider ready till your preset fee arrives to an stop and including an excess £25,000 when you remortgage to a new offer.
The alternative is to have a seem at the personal financial loans section at Moneyfacts.co.uk where you can enter the amount of money you want to borrow and for how extensive. For a £25,000 loan more than 5 yrs (60 months) you can expect to pay out back again a fixed sum of concerning £450 and £500 a month.