Use cash for home improvements or pay chunk off mortgate ?

debbycatz

I'm about to cash in my endowment policy (I've already switched mortgage to repayment 2 years ago). However, my house needs quite a bit of work doing still and I'm tempted to use the cash to improve the house (£7,500). Does this seem madness given how much interest one pays in total on a mortgage ? I think if I pay the full £7,500 off the mortgage I will be saving loads in interest but then I would need to borrow a substantial sum to get work done on the house.

So, my question is:- is it better to pay the lump sum off the mortgage then take a loan for house improvements or shall I simply use the £7,500 for the house improvements

Some advice from you guys would be appreciated

Mozette

It depends on what you can afford, obviously a loan of £7,500 over a shorter term than your mortgage would cost more monthly, I assume you would reduce the term of the mortgage rather than be paying less each month? Would there be any penalties for paying a sum off your mortgage? There are a lot of variables, but I would say it depends on how much you are able to pay each month. I dare say someone who knows more than I will come along, but those are my thoughts.

ailuro2

so the basic question is- short term loan or taking it away from the mortgage?

How much would a £7500 loan cost each month? you could use the money you will have from your endowment, and overpay the mortgage by the same amount as the loan payment would have been- hopefully getting you used to missing the £xxx pounds every month and when the 'loan' is paid off you carry on overpaying your mortgage.

Only if this is feasible with your mortgage, monthly outgoings etc. of course.

If you have a large amount of disposable income left, then you could consider a 0% deal on a credit card, but only if you KNOW you are really disciplined and could pay it off in time.

Kaz2904

I would say it depends on the interest rate on your mortgage and the interest rate of your potential loan. If the interest rate on your mortgage is lower than any loan you can get then I would use your money for the work and then overpay by what the loan should cost.