Do I pay off mortgage or use savings to pay for Extension

Benson

I have a 78k mortgage with 12yrs to go on 4.99 (fixed term runs out next June)

I am desperatly saving to pay off the mortgage and by the time June comes I should have 20k to reduce the mortgage

However.......... we wondering if we should extend rather than move due to the huge stamp duty etc

So do I pay off some of the mortgage or keep the money ion savings in case we go for the extension as i am presuming that a loan of £20k will be higher than mortgage rates - or will they with the way things are going?

What seems the best idea?

IveSeenTheLight

Benson wrote: »

I have a 78k mortgage with 12yrs to go on 4.99 (fixed term runs out next June)

I am desperatly saving to pay off the mortgage and by the time June comes I should have 20k to reduce the mortgage

However.......... we wondering if we should extend rather than move due to the huge stamp duty etc

So do I pay off some of the mortgage or keep the money ion savings in case we go for the extension as i am presuming that a loan of £20k will be higher than mortgage rates - or will they with the way things are going?

What seems the best idea?

If your set on extending your property then I would guess that it would be better for you to use your savings to extend rather than take a loan out which will likely have a higher interest rate.

Do you really need to extend at this time?
Putting £20,000 into a mortgage at 4.99% will save you initially approx £83 per month to cumulatively save more each month

zekepes

It all depends when you are planning the extension.

If you haven't even started the planning process in June then I would whack it off the mortgage.

We had an extension done nearly 2 years ago and just got an extra mortgage for that. It was really simple and all done over the phone and internet (with egg). The stamp duty issue was exactly what swung us to extending (plus we love where we live and extending would make it more than adequate).

Really this is impossible to answer as it is a decison that is 8 months away. In 8 months I would pay 20K off the mortgage if you haven't even started the planning process. If you have got your plans done, planning approval, building regs and a builder all lined up then keep it in savings!

moneysavingwannabe

Hi,

We have saved £31,000 and are paying for our extension instead of the mortgage. We considered paying the mortgage cos only have just over £50,000 left but decided that paying for the extension would be better.

I have quite a poor ISA but it pays £50 a month interest on £12,000 so you might earn more in a better account. Prob not as much as you would gain by paying off the mortgage ...but you haven't got the hassle of finding the money plus aren't the rates going up on mortgages??

We are still overpaying by a small amount each month on the mortgage and will overpay asap. We are also adding to the extension fund by getting 0% cc which means we can leave some money in savings to earn interest while we save up enough to pay the cc before the end of the 15 mth 0% period by paying the minimum and squirrelling the rest away.

Remember planning permission takes a while to come through and trying to find a good builder isn't easy!! :mad:

Oh and good luck!!!

beachbeth

I think what I would say is have a good think about the sort of improvements you are thinking of doing. Some extensions add value to your house and so this could be a good thing to do.

However, we have seen extensions that people have implemented that have done absolutely nothing to add value to the house. For example, making one of your rooms a few feet bigger won't make any difference but adding an extra bedroom or living room will. Can you have a £10,000 extension and pay £10,000 off your mortgage so that you are doing a bit of both?

Benson

The xtension is the create a double garage (not got a garage currently) with another bedroom over the top to make 4 beds.

We are just in the process of having plans drawn up, doesn anyone know of any sites which can give advice on this sort of thing?