New Mortgage or pay cash

Scoobywrx

Hi ( first post today)

We have been mortgage free now for about 4 months, which is a huge relief as I was made redundant last May.

So now we have decided to extend into the loft and create an extra two bedrooms.

Cost for our conversion will be around £40000 - 45000

Now how to finance this. We'll I guess there are many ways but these are my two thoughts

We have an endowment that matures in two years time. This will have a value of around £33000
Also we have investments that can be cashed to make up the difference.

So I thought to take out a 2 year fixed rate mortgage for £45000 then after the two years, cash in the endowment and pay off the remaining balance of the mortgage with this and the other cashed investment.

Reason for not cashing in investments now is that they are performing well at the moment and mortgage fixed rates are low.

Look forward to any input

dano17439

why don't you just wait 2 years to do the extension until you have the cash to do it?

Scoobywrx

Our twins boys need their own space so would like to start soon

kerri_dfw

I would work out what interest you would be paying if you were to do it now on a mortgage as opposed to waiting 2 years for the maturity. If it were me and I'd just finished paying my mortgage, I'd wait the two years. But then it depends on the age of the boys. If they won't be at secondary school until the endowment matures, I'd hold off.

tunnel

Scoobywrx wrote: »

Hi ( first post today)

which is a huge relief as I was made redundant last May.


So I thought to take out a 2 year fixed rate mortgage

Normally the 2 words highlighted above don't go together, how do you intend to pay the mortgage payments? Surely you need an income or is there something you've left out?

Better wait for your investments to mature

dimbo61

If you do decide to do this then consider an offset mortgage!
You take out the mortgage and then put the Mortgage money into the offset account.
As and when you need the money to pay builders,plumbers,materials etc you just draw what you need.
If you have spare funds you just rebuild your savings in the offset!
When an endowment or other savings mature just bung it in the offset.
Most mortgage lenders have a minimum term of 5 years! But if you are fully offset NO INTEREST TO PAY
PS I LOVE OFFSET mortgages :-)

Yorkie1

dimbo61 wrote: »

PS I LOVE OFFSET mortgages :-)

I've never known you suggest anything else

Thrugelmir

Yorkie1 wrote: »

I've never known you suggest anything else

Even though offset mortgages often carry an interest premium. :eek:

dimbo61

Yes Gents you are both right but with the YBS the difference between there fixed rate deals and offset fixed deals is 0.2%
If the OP has a job and can get a mortgage I still think an offset would suit them!