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

Q We at the moment have a home loan of £122,000 and require to comprehensive some property renovations costing £25,000. We can manage to conserve about £500 a thirty day period to put in the direction of the home renovations but it would acquire us a long time to conserve. Would it be really worth overpaying the mortgage loan and then borrowing the total we have to have? Our mounted level ends in January 2024.
AW

A You’ve shed me. I never recognize why you would overpay your home finance loan only to borrow it back at some stage in the foreseeable future. I’m also a very little nervous that for the reason that you have a set-fee deal there will be a limit – generally 10% of the fantastic bank loan – on how significantly you can overpay. In your scenario that means you could be restricted to overpaying £12,200 this yr but as that’s a bit far more than two times the £500 a thirty day period you have going spare, you are unlikely to breach your lender’s restrictions. But as I mentioned just before, why would you want to overpay except if it’s because your latest mortgage represents the utmost your financial institution is organized to lend you.

It is also unclear when you are preparing to have the renovations performed. If it is as quickly as possible, it may well be an notion to ask your loan company if it is geared up to maximize your mortgage loan by the £25,000 you require to spend for the get the job done. If you can wait around a although – which in the recent mortgage loan climate I suggest is the way to go – you could think about waiting right until your preset price will come to an conclude and such as an excess £25,000 when you remortgage to a new deal.

The choice is to have a glimpse at the individual loans section at Moneyfacts.co.united kingdom exactly where you can enter the total you want to borrow and for how lengthy. For a £25,000 personal loan over five several years (60 months) you can expect to pay out back again a preset sum of concerning £450 and £500 a month.

Want skilled assist discovering your new home finance loan? Use our on the internet software to lookup countless numbers of deals from far more than 80 loan providers with the Guardian Home finance loan Provider, driven by L&C.