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

Q We at the moment have a mortgage of £122,000 and need to full some property renovations costing £25,000. We can find the money for to help save about £500 a month to place in direction of the home renovations but it would consider us decades to conserve. Would it be really worth overpaying the mortgage and then borrowing the quantity we need to have? Our fastened price finishes in January 2024.
AW

A You have missing me. I do not fully grasp why you would overpay your house loan only to borrow it back at some point in the upcoming. I’m also a tiny concerned that simply because you have a mounted-price offer there will be a restrict – usually 10% of the outstanding mortgage – on how substantially you can overpay. In your scenario that indicates you could be confined to overpaying £12,200 this year but as which is a little bit extra than two times the £500 a thirty day period you have likely spare, you are unlikely to breach your lender’s limitations. But as I stated right before, why would you want to overpay until it is because your present-day mortgage signifies the utmost your lender is geared up to lend you.

It is also unclear when you are scheduling to have the renovations completed. If it’s as shortly as possible, it may well be an plan to request your lender if it is prepared to increase your property finance loan by the £25,000 you have to have to shell out for the operate. If you can wait a when – which in the current home finance loan local weather I counsel is the way to go – you could consider waiting till your set level comes to an end and which includes an more £25,000 when you remortgage to a new offer.

The option is to have a appear at the personalized loans part at Moneyfacts.co.uk where by you can enter the amount of money you want to borrow and for how extensive. For a £25,000 mortgage above 5 decades (60 months) you can anticipate to pay out again a set total of in between £450 and £500 a month.