July 24, 2024

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

Q We now have a mortgage loan of £122,000 and need to finish some home renovations costing £25,000. We can afford to pay for to preserve about £500 a month to place towards the home renovations but it would take us many years to conserve. Would it be well worth overpaying the mortgage loan and then borrowing the amount of money we require? Our fixed rate ends in January 2024.
AW

A You have shed me. I never have an understanding of why you would overpay your mortgage only to borrow it again at some position in the long term. I’m also a small fearful that simply because you have a mounted-amount offer there will be a limit – ordinarily 10% of the outstanding personal loan – on how much you can overpay. In your scenario that suggests you could be minimal to overpaying £12,200 this year but as that is a little bit additional than twice the £500 a month you have likely spare, you are not likely to breach your lender’s limitations. But as I mentioned just before, why would you want to overpay unless of course it’s because your existing home loan represents the maximum your lender is geared up to lend you.

It is also unclear when you are scheduling to have the renovations carried out. If it is as shortly as feasible, it might be an notion to request your financial institution if it is well prepared to enhance your house loan by the £25,000 you need to have to shell out for the perform. If you can wait a when – which in the existing mortgage loan local climate I propose is the way to go – you could think about waiting right up until your preset fee will come to an conclude and which includes an excess £25,000 when you remortgage to a new deal.

The different is to have a seem at the own financial loans segment at Moneyfacts.co.united kingdom wherever you can enter the quantity you want to borrow and for how extended. For a £25,000 loan above 5 yrs (60 months) you can anticipate to pay back a preset total of concerning £450 and £500 a month.

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