Credit cards for home improvements

yellow218

Hi.

Hubby and I have always been pretty smart when it comes to finances. We were consious to use credit when we were students to build up our credit score, but always made sure we paid them off in time. Other than that (and student loans) we have never really used credit, and we're good savers saving for a house deposit and wedding simultaneously.

We do use a reward credit card for daily spending instead of using our debit card, we make sure we pay it off every month so don't get charged interest, but do get points (so we can treat ourselves in our favourite department store).

We bought our first home about a year after we got married, renting for 6 yrs until that point. We got good advice from parents and a mortgage broker before committing to buying our home and to consider what mortgage options were best for us. We were informed we had a very strong credit rating.

We ended up buying the worst house in the best area. It was certainly structurally sound and was liveable but needed improvement. We viewed this positively- a chance to do some diy and invest in our home. The house was priced accordingly but our mortgage was still relatively on the high side due to being first time buyers and having a relatively small deposit(only 10%). However I was mindful that we had tracked all our spending for three years previously and had researched well so we knew we could live there comfortably.

We do meet mortgage payments, bills and living costs within our income. We did used the majority of our savings as a deposit, and as I mentioned the place needed improvment. We thought about getting a loan (which was available to us) but this obviously charged interest, so we looked around a bit more, and found (on this site) some long term 0% credit cards. We have therefore completed most of the work required but have done so largely using credit cards (0% interest I might add). We have invested about £14k on the house so far, but I think it has been worth it.

We are conscious that the CC won't stay at 0% forever, and so we pay into a savings account each month so we can pay off the card before the term ends (stoozing i think its called?) we have direct debits set up to pay off the minimum each month.

We viewed this as 'good debt' as we can afford to make the payments and it has invested in the house. In the long term it will also help us financially as will increase the property value. According to Zoopla the house price has increased by £77k since we bought it 2 years ago (but this obviously does not take into account the improvements we have made.)

It also means we have a nice comfortable home and a sense of satisfaction from doing the majority of the work ourselves. (Helpful having best friends and relatives in the trade to do the bits we can't)

Now here is the predicament. Most of the improvements have already been completed (certainly the most costly have!) There is one more room I would like to complete soon- the bathroom. As mentioned we would do all the work ourselves (as far as building regs permits!) but the materials obviously come at a cost. I have estimated £2k for the materials.

Unlike some of the other projects, we can not do the bathroom bit by bit- we can't go without a shower or toilet. To do it in one go would mean we need that £2k available to us before we start.

I have a few questions and a poll (Poll answers 1,2,3- if you have other solutions id be very grateful)

1). Do I add the bathroom material cost of £2k onto a 0% credit card subsequently increasing my total debt (excluding mortgage and student loans) to £16k it?
2) or do i save up the £2k as cash. This would mean not 'paying off' for a couple of months. and subsequently the 'length' of debt remains (i.e. the amount of time needed to pay it off.
3)Or do I not take any action. Leave the bathroom as it is, continue to pay mortgage and CCs as planned, then save for the bathroom when I have less debt.


Further Questions
4) How much do you trust Zoopla's estimate of house prices?
5) My initial thoughts were to finish the house (and therefore the valuation would be higher), remortgage (to get a better LTV ratio) and reduce of mortgage payments. That way we can enjoy the home, but have smaller mortgage payments, and can therefore pay off the CC debt sooner. What do I need to consider when remortgaging?
6) if I had £16k on 0% interest credit cards (with evidence of payment etc) would this negatively effect my credit rating and therefore mean i couldn't remortgage anyway?
7) How much debt is too much?

Am I being impatient/greedy, or would it actually make sense financially to improve the bathroom now?

Thanks in advance

Biggles

If you're asking questions that will have many potential answers, it's best not to start off with polls that only permit three.

smifffy1989

4) How much do you trust Zoopla's estimate of house prices?

A very rough guide at best to be honest! Best way to get an accurate price is to get an estate agent in to give a valuation. We did this when we finished our renovations.


5) My initial thoughts were to finish the house (and therefore the valuation would be higher), remortgage (to get a better LTV ratio) and reduce of mortgage payments. That way we can enjoy the home, but have smaller mortgage payments, and can therefore pay off the CC debt sooner. What do I need to consider when remortgaging?

It may be an idea to pay down some debt to get yourself into a better position financially. But the main things you need to consider are fix or tracker and if you are going onto a fix then how long to you want to fix for.


6) if I had £16k on 0% interest credit cards (with evidence of payment etc) would this negatively effect my credit rating and therefore mean i couldn't remortgage anyway?

Possibly, I think this depends how much you earn in comparison to the debt.

7) How much debt is too much?

When It adversely affects your lifestyle because most your disposable cash goes on servicing the debts. Depends on the individual for me I think is it positive debt ie an investment or an actual need rather than a want.