loan for home improvements - best deals?

fast_track

We are about to have some substantial work done (much needed) on our bathroom. With all the reorganisation to the house - changing bedrooms round etc I think we will need to borrow about £5,000. My husband wants to add it to the mortgage but as it is a relatively small amount I think that works out an expensive way to borrow (14 years left on mortgage at 4.75%) Can anyone suggest a better, ie, cheaper way of borrowing without spending more than about £75 pcm on repayments?

Thanks

Debt_Free_Chick

If you can only afford to repay at £75 pcm, this loan won't be cheap, as without adding interest, it will take more than 5 years to repay. Adding interest would extend the term, so you would then be paying interest over much more than 5 years.

Are you sure you can really afford this? Is there anything in your budget you could cut back on to make higher repayments?

burbs_2

as debt free said if you can only afford to pay £75 a month on a £5000 loan it is going to cost you a fortune. you need to find more money for the repayments each month. i dont really see anyway that is going to work out cheap for you with those sort of repayment figures

MarkyMarkD

It's borrowing for a long time that is expensive, not borrowing on your mortgage. If you can't afford a higher level of repayments, the mortgage is almost definitely the cheapest way to borrow the money irrespective of the amount. Watch out for fixed application/arrangement/valuation fees, though, as these could increase the rate. I'm very surprised you could get a further loan at 4.75% - it's more likely to be at your lender's SVR of around 6.75% or so.

fast_track

The extra bit to the mortgage is already agreed if we want to take it. We could manage more but I don't really know what to expect to pay. We take the view that we live quite comfortably at the moment, don't want to do without what we can afford to do now, we can afford more money each month but don't want to suddenly get any big suprises if the interest rate jumps. However we do have to do the bathrom so I really wanted to know what is a better deal than adding the amount to the mortgage? Or if plan A is the best one after all?

MarkyMarkD

Add it to the mortgage, and overpay that part of the mortgage if you have surplus funds. Presumably the further loan element won't have repayment penalties.

fast_track

Thanks - that sounds like an excellent idea - we can't overpay for 2 years but in the interim we could put the difference into an Ing account and pay a lump sum when we change the mortgage again. I hadn't thought of doing it that way