Equity release/credit card

Latsie

Hi, Bit of advice please. Last year I bought my housefor £350k with LTV of 75% on a 5 year fixed. We have subsequentlydiscovered that we need to spend around £40k on the house (rewire, new boiler,knocking a wall down, new radiators, new plumbing system, new kitchen,plastering, damp treatment .. anyway you get the idea). I am trying to thinkwhat is the best way of me raising the funds for this £40k project. I donot have any savings (as I used that to buy the house in the firstplace). I could be wrong but I believe I have 2 options;



Option A – Wait for my 5 year fix to end in October2018. I’m assuming when I take my next mortgage product out the housewill get revalued. According to Zoopla my house is now worth £375k (afterjust 15 months). I know Zoopla is not necessarily a good basis to judgehouse prices but for arguments sake with property prices rising by 8% in myarea lets take a conservative view and assume my house will be worth £425k inOctober 2018. By October my LTV will have decreased to what percentage Ican’t say (the maths are tricky) but am I right to assume I can take someequity out of the house so I can carry out the £40k. Is this calledequity release – how does it work?



Option B – The problem with Option A is that really thismeans I need to get the work done in the winter of 2018/19 and the problem is Ihave a young family and if the old boiler packs up ..well it’s not worththinking about. All the work is connected really (or else you just end upspending thousands on plastering all the time) so it must all be done atonce. I guess option B is to take a personal loan out for £25,000 (themaximum I believe) but that means an interest rate of at least 7.2%. Icould get a 0% credit card for say £7,500 at that’s about it….but I still won’tbe able to raise £40k.



I’m thinking the best bet is for me to save for 2 years andhope the old boiler doesn’t pack in and then look into option B. Ifanyone has any thoughts on this above I would be delighted to hear your viewson the best course of action. For the record I could probably afford topay around £700 per month if I did have to take a loan/credit card out. Thanks

[Deleted User]

I would agree that the best strategy is to save as much as you can. You say you can save almost £8,500 each year, which means you will have most of the money by the end of 2018 in any case.

cakeforbrains

Somebody more 'in the know' will be along in a minute, but option A is called 'remortgaging' I believe.

If your main worry is the boiler could you get some kind of boiler insurance or look into replacing only that?

£7500 is a large limit to expect on a credit card, depending on what your circumstances are.

If you have £700 to put into savings, that's about £17k over 2 years, which is nearly halfway there!

Tixy

Latsie wrote: »

but am I right to assume I can take someequity out of the house so I can carry out the £40k. Is this called equity release – how does it work?

Whether you may be able to remortgage and borrow more money at that point will depend on a lot of things, not just how much your house is worth at that point. So whilst it may be a possibility I wouldn't make any decision assuming that you will be able to.

However it sounds like if you are waiting until October 2018 then you'd have the majority saved anyway by then and it wouldn't be worth looking at a remortgage for the small amount you might still be looking to borrow.

I agree with your idea to get saving now and reassess in a couple of years. The boiler insurance/boiler cover idea is also worth considering - do shop around for this though as places like British Gas are unlikely to be the cheapest option.

Foxy-Stoat_3

Latsie wrote: »

Hi, Bit of advice please. Last year I bought my house for £350k with LTV of 75% on a 5 year fixed. We have subsequently discovered that we need to spend around £40k on the house (rewire, new boiler,knocking a wall down, new radiators, new plumbing system, new kitchen,plastering, damp treatment .. anyway you get the idea).

Sounds like you bought a peach, or a lemon.

Does all the work really need doing all at once, or could you stagger it, have you got quotes from local builders/electricians/plumbers for the work?

You MAY be able to remortgage in a few years time, assuming your house value has gone up and your lender thinks that you can afford to repay the extra amount, but you may not be able to.

Best to buy £700 worth of Premium Bonds a month and get a chunk of the work done when you have saved up say £10K....or you may get a big win!

Latsie

Yes all the work has to be done at the same time really as we need a completely new plumbing system throughout the house along with a new boiler. New radiators too. All that upheaval and you'd want to get the rewire, damp treatment and new kitchen done because as mentioned I will just spend lots of time and money on plastering. British gas won't even cover our current boiler because it is so old. We have received a few quotes and £40k seems to be the figure. Thanks for all your comments...I better get saving.

pmartin86

If you can afford 700 quid a month why not just buy a new boiler and CH system outright? I've recently had a new boiler and a full new CH system in my house for just short of £2,500. You can then worry about the rest, less essential stuff.

Foxy-Stoat_3

Latsie wrote: »

Yes all the work has to be done at the same time really as we need a completely new plumbing system throughout the house along with a new boiler. New radiators too. All that upheaval and you'd want to get the rewire, damp treatment and new kitchen done because as mentioned I will just spend lots of time and money on plastering.

You can get the kitchen done, the most expensive room in the house, after the plumbing and re-wire surely, assuming you actually need the place re-wired.

Latsie

House needs a full rewire.
New central heating and new boiler means all the plumbing system has to be replaced along with radiators. We are on an old system so it needs to be done at the same time.