Home improvement loan.

christologymum

Any help would be appreciated

Our house is currently on the market with a view to us moving to a 4 bed, although we currently havent had much interest. Weve a DIP from Halifax for up to £197k.

However we are now contemplating the idea of staying put and extending on ours.

However it is whether we can finance this.

Our house is worth £120k, outstanding mortgage £108, so not much equity. About 5k savings which we are adding to regularily and by time wed look to entend we'd prob have around 10k.

Our credit records are ok, no debt bar 2 cars on finance for me and hubby, equates to 23k, £470 a month.

Incomes 60k a year.

How would be best to finance this, im estimating well need approx 30k.

Could we get loan for 20k, affordability wise it would be better than borrowing 197k on a mortgage.

Potentially we also have access to 11k on credit cards if needed, although that would be a last resort.

Any advice welcome.

Tixy

As you do not have sufficient equity in the property then a personal loan would be the usual way to try to fund the extension.
Whether either of you individually or together jointly are able to get a loan for £20k will depend on how a potential lender views your affordability.
The other possibility might be to each look to borrow a £10k loan (assuming your income is roughly equally split).

The car loans will be factored in to a lender's affordability calculations.

Is the amount you are saving a month likely to cover the repayments on a £20k loan? Some lenders have a maximum personal loan term of 5 years, although some will lend for longer for home improvements. (but as an example assuming you could get a loan at say 6% over 5 years then the repayments would be £386 a month, but at 10% APR it would be £424).

christologymum

Thanks Trixy

Yes affordability wise we are ok, we currently save £1400 a month, and if we did move the repayments would have been £1100, and halifax were happy with affordability. We currently pay £500 for the mortgage so in effect we could service a monthly payment on the loan of £600 a month and would be the same as moving.

Obvioulsy we would rather not go that much. But yes personal loan of £10k would be ok. Nationwide keep offering hubby 10k loan at 5.9% although its only a quote but that should be ok.

Would I get 10k though as I only earn 21k and have 15k outstanding on car?
Thanks

Tixy

I would think it is fairly unlikely you would be able to obtain a £10k loan in your name alone.

To give you an indication, and without ending up with lots of credit application searches on your credit file, you could try applying to one or 2 of the lenders who only perform a soft search of your credit file. Nationwide and zopa are 2 that do soft searches, I think there may be another one of 2 who also don't know.

christologymum

Thanks again trixy.
According to Nationwide they will lend us 10k each individually. One at 5.9% one at 8%. Whats the likely hood of that being a yes, I have heard that sometimes they decline you at the final stage.

Tixy

It has been suggested on these boards that a quotation above 20%(ish) is likely to result in a decline when you make the full application.

Otherwise usually nationwide do offer at the quoted rate assuming there are no changes on your credit file in the meantime and that any paperwork they request stacks up (not that they often ask for supporting documents but it is possible).