Overpay mortgage, home improvement, solar or leave in savings?

apositivethinkingcat

Hello!

I wanted to float an idea to a neutral audience. I have about £8k in savings I am considering 'investing' into the house in one way or another...

I have another emergency savings account elsewhere that is not being used here of about the same amount.

Most obvious idea: Overpay on mortgage as lump sum. Would save (according to MSE calculator) 11k in interest an about a year off the overall time. I already overpay £150 a month, part of me says put every penny on the mortgage, another part says maybe there are alternatives?

Alternative idea: Get solar panels. I found a supplier of high quality panels with a very high generated power. Just under £8k all in (inc installation and scaffolding and things, flat roof so costs more than usual installation). Free energy and feed in tariff. Panel lifespan 40 years. Pays for itself in 8 years. Good for the planet... no more big electricity bills... could pay off more overpayment with savings on bills...?

Alternative idea 2: Build a studio in the garden. Got friends who can help with heavy lifting and self build experience. Got a relative with all the tools. Have a big oversized shed at end of garden, permitted development allows a big studio to be built there instead. I could then use this to rent out as a photography studio? Use myself as a studio (I work in my living room), Rent out as an occasional airbnb visitor? And later use as a granny flat when needed by my mother. Or maybe a playroom for kids etc. Need to look into earning potential there. But would probably cost significantly less than the 8K to build (DIY)... leaving some Ks to pop onto an overpayment...?

Long winded there.

If this was you - what would you do?

Thanks for all your help.

ossie

As a neutral persona my reasoning to your questions would be....
Overpay Mortgage - Best option as getting rid of debt and making someone else rich on your loans looks stupid if you can can reduce the amount.

Solar Panels - Hmmm are panels guaranteed for lifespan and maintenance free? Weight structure on roof etc etc...

Garden Studio - House values reach a max whether Semi, Detached or Terraced. Will you get a feasible return?

I am no expert just pointing out my views!

edinburgher

Where are the numbers?

1) What's your mortgage rate?
2) What size of array? Have you got independent feedback as to quality, or just what the salesman is telling you? 40 year lifespan = way higher than I've seen quoted, payback in 8 years? Sounds overly ambitious and a bit unrealistic
3) Far too many variables to consider, probably the most difficult to assess as an 'investment' (and quite possibly the least suitable way to 'invest', as you'll struggle to figure out what value it will return for your initial spend)

While we can't advise you, we can share our thoughts based on the data and the rest is up to your research, attitude to risk etc.

Just some thoughts :beer:

hanging_on_in_there...

I'd pay it of the mortgage!

jodles16

Hello!

I would be tempted by the Solar Panels...perhaps not very MSE of me! If they are as good as they say would be beneficial long term if your going to stay there! I am def an eco person though so thats why!

Overpaying the mortgage is probably the best use of money for instant results, less money paid to the banks too!

Whatever you decide good luck!

Jodles

apositivethinkingcat

Thanks for the quick replies!

Yeah my 'sensible' head says put on mortgage. I think I might make a diagram with the mortgage and whittle it down (like the opposite of measuring a child's height but with the % I own of the house) so I get more of a physical reminder that putting more on it is doing something. It's not just numbers on a screen, but me 'owning' my living room or something...

Solar queries: They are panels generate a lot more power than other companies panels; they are supposed to be higher quality than usual ones so supposed to last a lot longer and are self cleaning etc. The guarantee is 25 years. It's a fairly large flat roof so 10 panels. They sent me loads of calculations based on the surveyor they sent which look sensible enough, include assumed loss of efficiency of the system of 1-2% a year over time which agrees with other sites I have looked at. I will research into it more. The specifications are: SunPower 327w Panels – 3.27 kW System. Other companies who quoted had 260w panels and wanted about £7k for the same amount of panels. Not many companies do flat roof systems suitable for my type of build. We have a combi boiler as well so can't use excess to heat water either. We work from home so use a lot of electric but maybe I need to put these on the back burner... the ROI as they say, might not be worth it, no matter how shiny they are.

Garden building: Return based on house values would be if we were to sell rather than pass the house down the family. So it's more what I could use it for and rent it out as. Would be taxable earnings as not rent a room scheme if outside? Even if access is through house?

So it's a spend less and make less situation, with less certain returns... I wonder if all the permitted development will tighten up in the future (in years, not tomorrow) so is it better to build now while it's all easy and paperwork free?

Maybe I should get the basic shell of the garden building up, no electrics or water attached, no divides inside, usable in the daytime, only costs the price of wood / insulation and elbow grease (we already have foundations before you ask - whoever put up the big shed was seriously over zealous). And put the rest on the mortgage.

Might make me feel like I've 'gotten something' although I know that the best gift of all is less debt, something tangible like a garden office is always nice! Now to make that house % diagram...

Thanks again! ^_^

Spidernick

We are in the process getting a studio for our garden (as we are in a similar position to you and our mortgage rate is very low, so not worth paying off), but will be paying a lot more than £8K. You don't seem to get anything decent for that sort of money from what we've looked at. We want something that can be used all year as an extra bedroom to all intents and purposes.

Do you have a 'slush fund' in case of emergencies? The recommended amount seems to be three months' worth of net pay. If not you might want to consider holding onto the money.

apositivethinkingcat

Thanks for the reply Spidernick,

My rate is 3.24% but I have a big debt. So I think it's winning and I have to be mostly sensible.

I do have an emergency fund, about 8K now as well in case of serious illness or something. I pretend it isn't there so I don't touch it.

My garden room would be built by me and friends. Foundations in place already. It would just be the cost of the materials for the actual building. I would get doors and windows and anything else humanly possible all second hand, skip diving, reclaimed things, look out for building materials being thrown away. I would also sell the big shed that is there (as they cost about £700 new) so whatever that's worth second hand that would offset as well.

I'm guessing yours is being built by builders from new materials? And will probably be way more impressive than my plans ^_^

edinburgher

To be honest, you sound like you've researched the solar panels thoroughly. Considering you've got an EF, I'd seriously consider them if you're convinced that the numbers add up (expected outputs, what FIT payments you'd get etc.). You'd actually be guaranteed for longer than you'll get FITs (currently 20 years).

The reason? Removing an expense from your budget is an incredibly powerful thing. Paying off the mortgage is a great idea, but to quote you 'I have a big debt'. You're reducing your electricity costs dramatically, developing a small income stream and reducing your dependence on your utility company

Just remember that they're a depreciating asset, so be prepared to replace them. £20/mth over the guaranteed life of the panels should do it.

apositivethinkingcat

I need to look at the maths on what we pay out in electricity... it does vary though as I rented out bedrooms to students for a bit who are here a lot with TVs and PCs all on all the time, we are hoping the next lodgers will be less electricity consuming (due to having jobs rather than being in studying). What if it only saves us £20 a month or something? That's a bottom line I need to keep a better eye on.

I really love the idea of solar panels. I might start a savings account for them from now as the next thing. I asked the company if they do finance options to spread the cost, but the sales man said that they aren't worth it for the customer. Honest man. One of the reasons I think the maths and paperwork might also be optimistic realistic - rather than totally over inflated. I also suggested putting them on our garage to the side but he said it wouldn't be worth it and not to buy more panels than his original quote if we wanted the best ROI.

I will look into what the garden room would cost in bare materials - check my initial back of an envelope was on target. Since I have offers of free labour & tools use, would be silly not to consider. Then maybe do a few K onto the mortgage, and anything left into a future solar fund and that be my next goal?

I will still be overpaying £150 a month onto the mortgage either way - so will hopefully keep making a small dent in that too.

Right, bedtime ^_^

Thanks again!

tootallulah

I would up the emergency fund to £10k, pay £5k off the mortgage and begin saving for the solar panels. Meanwhile I would start gathering the materials for the future shed, doors windows etc storing them in the existing shed. Give yourself a reasonable schedule to deliver the panels and then the shed. It sounds like you are in your home for life so ultimately solar will benefit you.