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

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

Q We at the moment have a mortgage loan of £122,000 and need to have to finish some dwelling renovations costing £25,000. We can afford to help save about £500 a thirty day period to place in the direction of the property renovations but it would just take us decades to preserve. Would it be worthy of overpaying the property finance loan and then borrowing the sum we want? Our mounted amount finishes in January 2024.
AW

A You’ve missing me. I really do not comprehend why you would overpay your house loan only to borrow it again at some place in the potential. I’m also a tiny fearful that because you have a set-rate offer there will be a restrict – normally 10% of the fantastic personal loan – on how significantly you can overpay. In your circumstance that means you could be restricted to overpaying £12,200 this calendar year but as that’s a little bit a lot more than twice the £500 a thirty day period you have heading spare, you are unlikely to breach your lender’s boundaries. But as I explained right before, why would you want to overpay except if it’s due to the fact your present property finance loan represents the optimum your loan company is prepared to lend you.

It is also unclear when you are planning to have the renovations done. If it’s as soon as probable, it might be an strategy to ask your loan provider if it is geared up to enhance your property finance loan by the £25,000 you will need to pay out for the work. If you can wait around a when – which in the present-day home loan local weather I propose is the way to go – you could take into account waiting right until your set amount arrives to an close and together with an extra £25,000 when you remortgage to a new deal.

The alternate is to have a search at the particular loans part at Moneyfacts.co.uk in which you can enter the sum you want to borrow and for how extensive. For a £25,000 bank loan more than five several years (60 months) you can count on to pay again a fixed amount of money of involving £450 and £500 a thirty day period.

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