Personal loan or additional finance?

MichaelaP_2

My fiance and I are going to re-do our kitchen and lounge flooring in our one bedroomed flat. It will definitely increase the value of the property (currently have red linoleum tiles!).
We are not sure how to finance this though: we can't raise the cash in the short term; so an option could be to raise additional finance through the mortgage; however we would have to pay this off over thirty years (with loads of interest). Or a short term personal loan...
The problem is that I MAY be unemployed from August this year as I am on a one year maternity cover contract and will not know if I could stay on until July.
In terms of the renovations, is there another way to look at the loan/finance?
Ideally I think we should take out a loan and pay it off over 12 months but any surplus cash may be needed to cover my expenses whilst potentially unemployed. We have postponed the renovations for six months already so want to get the project started.

Rafter

MichaelaP,

How long do you think it would take you to find another job at the same salary? If the answer is less that 3 months then I suggest you go ahead. If longer, then I'd think carefully about delaying the project.

If your credit rating is ok then getting an unsecured loan should be ok, although the bank may be nervous about your contract coming to an end and how you will afford to repay. Does your fiance earn enough to appy in their name?

Extending your mortgage may come at a lower rate, but you often incur lots of charges and as you say, you don't want to be paying for a new floor and kitchen in 30 years time when it has worn out.

I would suggest getting a loan for a bit more than you need and over about 3 years - that will give you access to better deals. Get one without repayment penalties or even something flexible - that way you can repay earlier if you can afford it.

Then, if you are out of work for a month or so, you will be able to meet loan repayments from the extra amount you borrowed.

Don't be tempted to take out Payment protection as a way of covering yourself if you are out of work. It probably won't cover you if you are on a short term contract.

Get back to me if you have any questions.

R.