Re-mortgaging for home improvement?

ZoeMinx

Hello all

We are currently planning to have some very overdue and necessary work done on our house and quotes are coming in around 30-35k, and we thought borrowing against the house would be the best way to fund it.

Unfortunately we don't have a huge amount of equity, after 10 years of mortgage we owe 75k (property estimate according to local agents is 110k)

The best a mortgage broker could suggest was a new 90% loan for another 25 yr period at 5%. I'm reluctant to switch as our a) existing mortgage is only 2.5% andb) I was hoping to be mortgage free by the time I was a pensioner! Under his suggestion our monthly payments would go up £150 a month which we could afford but the thought of how much extra we will pay overall is scary.

Do you think there is any way to keep our existing product and borrow the extra another way? We're not loaded but have reasonably good incomes (both work fulltime for average wages). I am aware that we ultimately are putting more in than perhaps the property is worth but we are very happy here.

Apologies for an 'ask' as a first post. I wasn't sure of etiquette, but will be sure to look around and post helpfully!

Jimbo1976

There are a couple of issues here.

1) Your reluctance to lose your existing rate. If you want to keep this then you need to speak to your existing lender about getting an additional mortgage loan, which is typically called a further advance. it is likely this will be at a higher rate than your existing mortgage. The term of your further advance can be less than your existing term but won't normally exceed it.

2) The cost. Did you think borrowing an extra £30-£35k would be cheaper than £150pm? there is always a balance between the term and the cost. Making the loan last longer makes it cheaper in the short term but more expensive in the long term. There are lots of mortgage calculators around, so you can play around with the figures.

ZoeMinx

Thankyou

Yes, I can see that maybe I am pushing it a bit, and ultimately if the higher rater full term mortgage is the only way to secure the funds then we can and will go for it.

I guess I just wanted to make sure we hadn't missed another, cheaper, way. I'm not as financially savvy as most of you here!

We can afford to pay up to £300 a month more at least (we finish monthly repayments on another loan very soon), so the prospect of borrowing over 15 rather than 25 years may be do-able. I will contact our exisiting lenders again to see what they can offer. I hadn't realised any 'further advance' would be at a higher rate though, thanks for the heads up.

Of course, as they only lend up to 85% we will still have to secure the rest of the money (10k? 15k?) another way.

As I think more about it, the field does narrow towards the complete remortgage, I just want to be so sure. It's such a big sum.

Brock_and_Roll

The cheapest and least risky option is of course to put these extra £300s to one side and pay for the work piecemeal - i.e save up £10k then get the roof done etc.

Jimbo1976

Speak to your existing lender and see what they will offer you. As the bulk of your borrowing would still be at 2.5% with only the new borrowing at a higher rate, this is likely to be the cheapest way of borrowing. Once they have given you a figure for the extra cost of the borrowing you can compare this with total remortgage options supplied by your broker where you move all of your borrowing to another lender.

I would be very very wary of basis all of your projections on the value of the property based on what estate agents told you. You need to look for recently sold prices on sites like rightmove and zoopla as these will give you a much better figure than the one the estate agent has plucked for no where hoping to secure your business.

ZoeMinx

Hmmm, yes it does seem the agents were stretching the truth a little...

I would like nothing more than to stagger the work but the truth is we haven't played it very clever really. The property already has a terribly built extension on the back which we have put off replacing the 10 years we have lived here (weddings and babies taking priority). It's now downright dangerous and needs to be done as one big project and fairly quickly. I will have a look at revising the quotes to see if any aspect of the work could wait though.

I'll get in touch with current lenders, and may be able to approach family for help borrowing the shortfall, depending on what that may be.

Thankyou for ongoing posts. It's a useful sounding board here, since I prefer not to talk money with RL friends and my OH is as much in the dark as me.

ZoeMinx

Just wanted to update.

I took onboard the advice offered and we have reassessed the work we want to have done. We've decided it's not realistic to go in for the full extension work and put so much money into an entry level (100k ish) property. We now plan to remove the exisiting structure and improve the kitchen and bathroom.

Our existing lenders are loaning a further 16k over the remaining 15 years at our 2.5% rate which is fantastic for us. Just another £100 a month which we can find comfortably with room for interest rate fluctuation.

As perverse as it might sound to spend money making the house smaller, it will mean safety, and we would be able to sell the house in the future should we choose.

So thanks all :j