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 present have a house loan of £122,000 and need to entire some residence renovations costing £25,000. We can afford to save about £500 a thirty day period to place to the house renovations but it would acquire us yrs to help save. Would it be value overpaying the mortgage and then borrowing the sum we want? Our mounted rate ends in January 2024.

A You have lost me. I never understand why you would overpay your property finance loan only to borrow it back again at some level in the future. I’m also a small fearful that simply because you have a mounted-amount offer there will be a limit – commonly 10% of the superb bank loan – on how a lot you can overpay. In your situation that suggests you could be constrained to overpaying £12,200 this calendar year but as which is a bit additional than 2 times the £500 a month you have likely spare, you are not likely to breach your lender’s limitations. But as I stated prior to, why would you want to overpay until it’s because your present mortgage signifies the highest your lender is organized to lend you.

It is also unclear when you are arranging to have the renovations carried out. If it’s as before long as possible, it may possibly be an notion to ask your financial institution if it is prepared to enhance your home finance loan by the £25,000 you need to have to pay out for the function. If you can wait around a while – which in the existing home loan local weather I counsel is the way to go – you could look at waiting around right until your preset price comes to an close and like an additional £25,000 when you remortgage to a new offer.

The alternate is to have a appear at the own loans part at kingdom wherever you can enter the volume you want to borrow and for how very long. For a £25,000 mortgage around five several years (60 months) you can expect to pay back again a fastened amount of involving £450 and £500 a month.

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