Add to mortgage or use savings?

dnkforums

Hi,

Just having a senior moment for what is best to do so hope someone can help.

We are having an extension at the moment which will cost about £14k. We have savings to cover it and it would put a dent in them but we'd still have enough to pay the mortgage balance off (about 35k now) if we had to. We wanted to do up our bathroom / sort some other things out which would bring a total cost of about 20k.

We are considering borrowing this 20k against the property on the existing offset mortgage; the mortgage was originally for 110k against a property value of 160k and the property is now worth about 210k.

However, does this make sense?

If we lend against the property, the APR is 1.1% so I think we pay £1.07 for every £1 borrowed.

I'm the sort that prefers not to borrow but I also would like to take advantage of the very low interest rate we have as well as keeping some money back as it's in ISAs etc (although they are earning very little).

Any advice would be appreciated.

ViolaLass

You'd be borrowing, not lending.

If you can get a higher rate of interest on your savings, I would use the mortgage.

dnkforums

I get constantly moaned at about the borrow/lend thing

I think our mortgage rate is just over 0.5% at present so we should be able to better that with ISAs.

In which case, your advice makes total sense.

[Deleted User]

For how long is your mortgage rate 0.5%?
Keep in mind that at some point soon base rates will increase and savings rates with them.