Should we overpay the mortgage and borrow money for house renovations? | Mortgages
Q We now have a property finance loan of £122,000 and will need to entire some house renovations costing £25,000. We can afford to help you save about £500 a thirty day period to place to the house renovations but it would choose us a long time to help save. Would it be worth overpaying the house loan and then borrowing the sum we have to have? Our mounted price finishes in January 2024.
AW
A You’ve lost me. I do not understand why you would overpay your property finance loan only to borrow it back at some position in the foreseeable future. I’m also a small anxious that due to the fact you have a set-rate offer there will be a restrict – normally 10% of the fantastic mortgage – on how a great deal you can overpay. In your circumstance that means you could be restricted to overpaying £12,200 this calendar year but as that’s a bit additional than two times the £500 a month you have going spare, you are not likely to breach your lender’s restrictions. But as I reported right before, why would you want to overpay except it’s simply because your latest mortgage loan signifies the optimum your loan company is prepared to lend you.
It is also unclear when you are preparing to have the renovations done. If it is as soon as possible, it may be an plan to request your loan company if it is prepared to enhance your mortgage by the £25,000 you need to have to spend for the work. If you can wait around a though – which in the recent house loan local weather I counsel is the way to go – you could take into account waiting around till your preset fee comes to an conclude and including an more £25,000 when you remortgage to a new deal.
The different is to have a glimpse at the particular financial loans area at Moneyfacts.co.british isles wherever you can enter the sum you want to borrow and for how very long. For a £25,000 mortgage around 5 many years (60 months) you can be expecting to pay back back a preset quantity of amongst £450 and £500 a month.