Should we overpay the mortgage and borrow money for house renovations? | Mortgages

Q We at this time have a mortgage loan of £122,000 and want to full some dwelling renovations costing £25,000. We can find the money for to preserve about £500 a thirty day period to place in direction of the house renovations but it would acquire us several years to save. Would it be truly worth overpaying the house loan and then borrowing the sum we need to have? Our set level finishes in January 2024.
AW

A You have misplaced me. I don’t recognize why you would overpay your home finance loan only to borrow it again at some stage in the upcoming. I’m also a minimal fearful that due to the fact you have a preset-price deal there will be a limit – commonly 10% of the outstanding bank loan – on how significantly you can overpay. In your scenario that suggests you could be confined to overpaying £12,200 this year but as which is a little bit far more than 2 times the £500 a month you have heading spare, you are unlikely to breach your lender’s restrictions. But as I reported right before, why would you want to overpay until it’s simply because your latest mortgage loan signifies the optimum your loan provider is ready to lend you.

It is also unclear when you are preparing to have the renovations finished. If it’s as shortly as doable, it could possibly be an idea to ask your lender if it is ready to maximize your mortgage loan by the £25,000 you require to pay for the perform. If you can wait around a while – which in the existing property finance loan climate I propose is the way to go – you could consider waiting till your preset fee arrives to an close and together with an additional £25,000 when you remortgage to a new deal.

The substitute is to have a look at the personalized financial loans segment at Moneyfacts.co.uk in which you can enter the quantity you want to borrow and for how prolonged. For a £25,000 mortgage over five yrs (60 months) you can expect to pay back again a set quantity of involving £450 and £500 a thirty day period.