Advice needed about additional borrowing for an extension?

jugglemum

Hi there
I am hoping for some advice! (I have moved this from the DFW board) We are a large family and have always struggled to balance our books. (I am keeping a spending diary at the moment so hope to post a SOA in a couple of weeks.) Until Christmas we had cc debts of about £15,000. Anyway, due to the repayment of a family loan we happily have paid this off. I know that we still must learn to live within our means to avoid it happening again.

We now have the option of borrowing £60,000 to add an extension to our house (we have got a really good quote). This would give us an additional bedroom upstairs (this would mean that all the kids could have their own room which would reduce bedtime squabbles). It would also give us an self contained bedsit downstairs which I could rent out - to foreign students, Mon to Fri renters etc. I would hope that this would pay for the additional mortgage payments.

The thing is - should we do it? Or can we not be trusted? What if it all went wrong and I couldn't get anyone to rent? I'm dithering. In the past, we would have just gone for it but now I don't know. Should we wait until we know we can live within our means? Also OH is probably due a big payrise soon - should we wait until then? But then the quote will have gone.

Any advice gratefully received.

Jugglemum

poppysarah

Is there a demand for renters for the type of room?
Could you put up with any problems from it?
Self-contained? Would that be completely sep and so a council tax of it's own?

Borrowing 60k for one bedroom sounds expensive.
Why not give it 6 months saving and see how you feel then?
(aim to save the amount of monthly repayments on 60k plus 10% - if you can't do that then it's a bad idea for sure!)

jaype

I'd hold off - you'll be in a better financial position and will have to borrow less (so less interest payments. Quote may look good but once you factor in what you'll REALLY pay back to the bank, is it?). Also, lots of housebuilding is stopping owing to the downturn in housing prices. Not to make light of their forthcoming misery (though they have had a good ten years up till now), but there will be a lot of builders shortly twiddling their thumbs if this goes on, so you will probably get as good a quote if not better later anyway as they'll be biting your hand off for work.

simpywimpy

I think £60,000 for a one room top and bottom to be far in excess of what you will get in return. Thats the cost of a mortgage in the north! I can't see how you would regain that repayment on a rental.

Apart from that, do you really want to borrow such a huge sum when you are just learning to get back on your feet? The kids having a room of their own is a luxury that you can really do without at the minute.

If you borrow and then can't repay, then you won't be able to pay your familty back for the loan they gave you. Think of the complication that would cause to the family..

Debt_Free_Chick

First off ....

Do your budget with the higher mortgage costs factored in. Ignore any rental from the bedsit, as you'll have to borrow the money first and then make the higher mortgage repayments whilst the work is being carried out. Clearly, you won't be getting any rental income until the work is complete.

This is a simple budgetting issue, in the first instance. So ....

can you make the higher mortgage repayments whilst the work is being carried out?