Should we overpay the mortgage and borrow money for home improvements? | Mortgages


Q We currently have a mortgage of £122,000 and need to carry out home renovations which cost £25,000. We can afford to save around £500 a month on house renovations, but it would take us years to save. Would it be worth it to overpay the mortgage and then borrow the amount we need? Our fixed rate ends in January 2024.

A You lost me. I don’t understand why you would overpay your mortgage just to borrow it at some point in the future. I’m also a bit concerned that because you have a fixed rate agreement there is a limit – usually 10% of the outstanding loan – on how much you can overpay. In your case, that means you could be limited to overpaying £12,200 this year, but as that’s just over double the £500 a month you have available, you’re unlikely to breach the limits. your lender. But like I said before, why would you want to pay too much unless it’s because your current mortgage is the maximum your lender is willing to lend you.

It’s also difficult to know when you expect to have the renovations done. If it’s as soon as possible, it may be a good idea to ask your lender if they’re willing to increase your mortgage by the £25,000 you need to pay for the work. If you can wait a bit – which in today’s mortgage climate I suggest is the way to go – you could consider waiting until your fixed rate is over and including an extra £25,000 when you repay to a new contract.

The alternative is to take a look at the personal loans section on where you can enter the amount you want to borrow and for how long. For a loan of £25,000 over five years (60 months), you can expect to repay a fixed amount of between £450 and £500 per month.

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