Should we overpay the mortgage and borrow money for house renovations? | Mortgages
Q We at this time have a home finance loan of £122,000 and want to complete some dwelling renovations costing £25,000. We can manage to conserve about £500 a thirty day period to set toward the property renovations but it would consider us a long time to preserve. Would it be worthy of overpaying the mortgage loan and then borrowing the amount of money we need? Our fastened fee finishes in January 2024.
A You’ve shed me. I really do not understand why you would overpay your mortgage only to borrow it back again at some issue in the long term. I’m also a little nervous that since you have a set-amount deal there will be a limit – typically 10% of the fantastic bank loan – on how a lot you can overpay. In your situation that signifies you could be constrained to overpaying £12,200 this yr but as that’s a bit additional than 2 times the £500 a thirty day period you have likely spare, you are unlikely to breach your lender’s limits. But as I mentioned ahead of, why would you want to overpay unless of course it is due to the fact your existing home loan represents the utmost your lender is ready to lend you.
It is also unclear when you are arranging to have the renovations finished. If it is as soon as doable, it could possibly be an plan to talk to your lender if it is organized to maximize your house loan by the £25,000 you have to have to pay out for the function. If you can wait around a though – which in the latest home finance loan climate I advise is the way to go – you could contemplate ready until eventually your fixed level will come to an end and which include an extra £25,000 when you remortgage to a new deal.
The alternative is to have a seem at the individual financial loans part at Moneyfacts.co.united kingdom in which you can enter the volume you want to borrow and for how long. For a £25,000 bank loan above 5 years (60 months) you can hope to pay out back a mounted amount of concerning £450 and £500 a thirty day period.