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

Q We at present have a mortgage loan of £122,000 and want to complete some home renovations costing £25,000. We can pay for to save about £500 a thirty day period to put to the household renovations but it would take us several years to help save. Would it be really worth overpaying the property finance loan and then borrowing the amount of money we will need? Our fixed price finishes in January 2024.
AW

A You have missing me. I really don’t understand why you would overpay your home loan only to borrow it again at some place in the potential. I’m also a very little anxious that for the reason that you have a fastened-rate offer there will be a limit – ordinarily 10% of the excellent mortgage – on how a lot you can overpay. In your case that implies you could be minimal to overpaying £12,200 this yr but as that’s a little bit much more than two times the £500 a month you have likely spare, you are unlikely to breach your lender’s limitations. But as I claimed before, why would you want to overpay unless of course it’s because your present home finance loan represents the optimum your loan company is organized to lend you.

It is also unclear when you are arranging to have the renovations completed. If it is as before long as feasible, it might be an notion to talk to your lender if it is organized to increase your mortgage loan by the £25,000 you have to have to spend for the operate. If you can wait a though – which in the present-day mortgage loan local climate I counsel is the way to go – you could take into consideration waiting until your preset charge arrives to an conclude and which include an more £25,000 when you remortgage to a new offer.

The alternative is to have a seem at the individual financial loans portion at Moneyfacts.co.uk where by you can enter the quantity you want to borrow and for how extended. For a £25,000 bank loan about five years (60 months) you can anticipate to shell out back a set sum of involving £450 and £500 a thirty day period.

Want expert enable acquiring your new home loan? Use our on-line resource to research hundreds of specials from far more than 80 loan companies with the Guardian Home finance loan Company, driven by L&C.

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