23/02/2024 10:43 AM

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

Q We currently have a home finance loan of £122,000 and will need to total some property renovations costing £25,000. We can find the money for to preserve about £500 a thirty day period to put in direction of the residence renovations but it would take us years to help save. Would it be truly worth overpaying the mortgage loan and then borrowing the amount of money we want? Our fastened rate ends in January 2024.

A You have missing me. I never comprehend why you would overpay your home finance loan only to borrow it back at some stage in the upcoming. I’m also a little anxious that mainly because you have a fixed-price offer there will be a limit – generally 10% of the superb bank loan – on how a great deal you can overpay. In your scenario that indicates you could be limited to overpaying £12,200 this yr but as that’s a little bit extra than 2 times the £500 a month you have going spare, you are unlikely to breach your lender’s limits. But as I claimed right before, why would you want to overpay until it is simply because your present house loan represents the utmost your loan company is prepared to lend you.

It is also unclear when you are scheduling to have the renovations done. If it’s as soon as possible, it could be an thought to talk to your loan provider if it is ready to maximize your house loan by the £25,000 you will need to spend for the perform. If you can wait around a whilst – which in the existing mortgage loan local weather I suggest is the way to go – you could consider waiting until finally your fastened rate comes to an stop and which include an additional £25,000 when you remortgage to a new deal.

The choice is to have a appear at the particular financial loans portion at Moneyfacts.co.uk where by you can enter the amount you want to borrow and for how extensive. For a £25,000 bank loan in excess of 5 years (60 months) you can assume to shell out again a preset quantity of among £450 and £500 a month.

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