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

Q We presently have a home finance loan of £122,000 and need to have to finish some residence renovations costing £25,000. We can manage to save about £500 a month to put to the property renovations but it would just take us many years to save. Would it be well worth overpaying the property finance loan and then borrowing the amount of money we need? Our fixed rate ends in January 2024.
AW

A You’ve dropped me. I really don’t understand why you would overpay your mortgage loan only to borrow it back again at some level in the potential. I’m also a small nervous that due to the fact you have a preset-level offer there will be a restrict – generally 10% of the exceptional mortgage – on how much you can overpay. In your scenario that indicates you could be minimal to overpaying £12,200 this 12 months but as which is a little bit extra than twice the £500 a month you have going spare, you are not likely to breach your lender’s restrictions. But as I reported ahead of, why would you want to overpay except if it is because your current property finance loan represents the highest your loan company is organized to lend you.

It is also unclear when you are organizing to have the renovations carried out. If it’s as shortly as attainable, it might be an thought to request your loan company if it is well prepared to maximize your home finance loan by the £25,000 you want to spend for the work. If you can wait a although – which in the present-day mortgage local weather I suggest is the way to go – you could consider waiting until finally your set fee will come to an conclusion and which includes an more £25,000 when you remortgage to a new deal.

The alternate is to have a glance at the personal loans section at Moneyfacts.co.united kingdom in which you can enter the amount of money you want to borrow and for how very long. For a £25,000 financial loan in excess of 5 years (60 months) you can count on to shell out back a preset sum of concerning £450 and £500 a thirty day period.