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

Q We at present have a mortgage of £122,000 and require to complete some residence renovations costing £25,000. We can manage to help you save about £500 a thirty day period to put in direction of the household renovations but it would consider us yrs to help you save. Would it be well worth overpaying the home loan and then borrowing the quantity we need? Our mounted level finishes in January 2024.
AW

A You have dropped me. I do not comprehend why you would overpay your home loan only to borrow it back again at some issue in the foreseeable future. I’m also a little fearful that simply because you have a preset-fee offer there will be a limit – usually 10% of the excellent loan – on how considerably you can overpay. In your situation that means you could be confined to overpaying £12,200 this yr but as that is a little bit far more than two times the £500 a thirty day period you have likely spare, you are not likely to breach your lender’s limits. But as I reported just before, why would you want to overpay unless of course it is mainly because your current home loan signifies the greatest your lender is geared up to lend you.

It is also unclear when you are arranging to have the renovations accomplished. If it’s as soon as feasible, it might be an thought to ask your lender if it is ready to improve your property finance loan by the £25,000 you need to have to pay for the work. If you can wait around a even though – which in the latest property finance loan local weather I advise is the way to go – you could consider waiting around right up until your set amount will come to an conclude and like an excess £25,000 when you remortgage to a new deal.

The alternative is to have a look at the private loans area at Moneyfacts.co.united kingdom where by you can enter the quantity you want to borrow and for how long. For a £25,000 mortgage over 5 a long time (60 months) you can be expecting to pay back again a set quantity of among £450 and £500 a month.