Bank loan or mortgage

mr_rob

We want to do some building work for a new kitchen. Estimate about £23000 of work. What is best option to fund this?
I have some savings to take within spitting distance of this, but feel uneasy with then having nothing (lol but what is the point of savigs?!)
We have thought about adding as additional loan on the mortgage (the % will be lower, sort of forget for many years (21yrs is current)) or my idea, to get a bank loan for around £17000 (higher %, less time, but repayment should be less in long run)
Am I right in my thinking, or would this just be a world of hurt? (I have no loans other than mortgage in my name)
If above is good, what are the best deals for me to check out?
Many thanks

[Deleted User]

Use your savings, and rebuild them with the money you would have spent paying back the loan.

Ebe_Scrooge

Deleted_User wrote: »

Use your savings, and rebuild them with the money you would have spent paying back the loan.

This, with bells on. It's by far the most sensible option - just be disciplined enough to make regular payment back to your savings account ( payments you'd have to be making on a loan anyway ). You won't be saddling yourself with unnecessary debt, and you'll also save a tidy amount in interest as well.

DCFC79

Use your savings, that's whats they are there for.

mr_rob

yeah guess so, just that feeling of not having any funds for stuff
(like new school for toddler next year etc)

MallyGirl

it is unlikely that all the funds will be needed on day 1. can you phase the work to keep pace with the funds you have?

somethingcorporate

Could you go half and half?

Leave yourself enough in the bank to feel safe but borrow not much to minimise the interest cost? (or use an interest free credit card if you can wangle it with the supplier).

afly

somethingcorporate wrote: »

Could you go half and half?

Leave yourself enough in the bank to feel safe but borrow not much to minimise the interest cost? (or use an interest free credit card if you can wangle it with the supplier).

This is what I would consider. Keep back 3-6 months worth of income as emergency funds and use a loan to bridge the remaining amount. You are effectively paying a premium to have the security of dealing with emergency situations if they should arise. (Some use high credit allowance CC's in reserve for this, I'm not a fan personally but it's another option)

The caveat of this approach is understanding that an "emergency" is job loss/accidents/bereavements/house falling down, not more expensive tiles or solid oak worktops

Don't forget also that cash in the bank can earn you money as well if you are savvy. Say you decide that you hold back £7500 which you then borrow @ around 5%. If you open up current accounts at TSB (5% gross up to 2k), nationwide flex direct (5% gross up to 2.5k), FD regular saver (about 4% gross staggard up to 3.6k), santander (3% gross up to 20k) etc, that cash will pay you close to the interest due on the loan limiting the cost quite a bit