Loan or use a re-mortgage for home renovation

drensta

Hi.

I bought a large studio flat at the end of 2012.
I would like to update the bathroom, kitchen and install gas central heating (there are only single electric heaters in the kitchen, bathroom and lounge area).

The kitchen and bathroom are old and in need of updating.
I have had a few builders around to inspect and they say all the work should cost approx. £8000

I am unsure whether to get a loan for this or get the extra money from re-mortgaging (my 2 year fixed mortgage comes to an end in December this year).

I don't really have time to save for this work as we expect to be living in this property for another 3 years or so before me and my wife want to start a family.

I have been to see my bank to ask about a loan and they say they would provide me £8000 over a 5 year period.
However, as my fixed term mortgage ends this year I may look at re-mortgaging to pay for this work.

What I am confused about is whether it is best to get a loan or re-mortgage to get the money.

I am thinking about re-mortgaging anyway to a 3-year fixed rate to try and get a better deal before the interest rates start rising. when the 3-years comes to an end this would be the time we would be looking for somewhere bigger.

However, the load would allow me to get the work started now and then be able to over pay the loan back but it may be more than 3 years before I pay the loan back.

Any suggestions about the best path?

jonesMUFCforever

You may find a personal loan easier to get unless you intend to re-mortgage the lot.

pmartin86

Over a typical mortage/loan then the loands tend to work out cheaper. Eg>

£8,000 loan at typical apr of about 6% over 5 years will see £9,279.74 total paid

£8,000 additional on your mortgage at 4% over 25 years will see £12,668.08 total paid.

thebritishbloke

pmartin86 wrote: »

Over a typical mortage/loan then the loands tend to work out cheaper. Eg>

£8,000 loan at typical apr of about 6% over 5 years will see £9,279.74 total paid

£8,000 additional on your mortgage at 4% over 25 years will see £12,668.08 total paid.

Not just that, but you can get personal loans at 3.9% with HSBC now too, so it works out even cheaper (£8,803 total paid over 5 years).