Borrow more money on mortgage

marco.mtr

Hi all,

I'm not sure if this is the right place to ask for some advice but I'd be very interested to have different perspectives regarding selling our house and pay off our mortgage.

We bought our first house in Bristol November last year and have been overpaying it every month so we can get a better deal after the two-year fixed rate period. We decided to overpay the mortgage by £250 per month rather than refurbishing it, which would probably cost us around £30k.

We bought the house for £210k and the current valuation is £221k. We are thinking about borrowing more money on the mortgage (£30K) for home improvements and stop with the overpayments so we can sell it in 2024 for a better cost and pay off our mortgage as we plan to move abroad indefinitely.

Do you guys think that it is wiser to borrow more money on the mortgage to refurbish the house or keep overpaying for the next 6 years? Unfortunately we can't afford to do both.

Thanks in advance,
Marco

00ec25

depends

what you see as 30k of refurbishment, a buyer may see purely as your personal taste, and so the buyer will offer on the basis it is going to cost them to rip it out and start again. Refurbishment does not guarantee you will get your money back or increase value.

if you borrow more at a time of rising interest rates you'll pay more

if you overpay at a time of raising interest rates you'll save more and can be certain of the value you obtain by doing so

G_M

What sort of improvements?

Often the cost of improvements s not fully reflected in a corrrespondingly higher property value.

£30K refurbishments might add £10K to the value.

TBagpuss

I think G_Ms question is key. What work would you plan to do to the house, and what research have you done about the likely effect of that work on the value of the property?

Is it an all or nothing choice, or could you (for instance) save some money to fund improvements and still make some over-payments, or prioritise some of the work so that you don't need to spend as much as £30k?

marco.mtr

Hi all, thanks for your responses. This is really making me think about what would be more beneficial in the long term. The house has some layout problems, mainly in the kitchen and reception area which are small and dark and don't seem to work at all for a small family. A potential solution is going open plan and reposition the kitchen to make the area airy and more practical - this would probably cost £12k. The toilets also need to be refurbished as the previous owner installed them and did a very poor job exposing all the pipework and making the tiled floor and walls uneven. The other repairs are mostly cosmetic as mentioned potential buyers might not necessarily see a great deal of value there.

marco.mtr

Hi TBagpuss,
The reason we are considering borrowing more money on the mortgage, which still makes me a bit uneasy, was because there was a house sale 3 doors down the road I'm on for a good price. The previous owner bought if for £170k, refurbished the entire house and sold it 1 year after for £250k.

chappers

Poor layout is somewhere you could make some money by improving, bathrooms and kitchens can sell houses but are a matter of taste, personally if this is a short term plan I think you would be better off just paying down the mortgage, however if you are going to be there for a few years then maybe you might appreciate the new layout yourselves and you may decide that's worth a punt.

thelem

marco.mtr wrote: »

We bought the house for £210k and the current valuation is £221k

marco.mtr wrote: »

The previous owner bought if for £170k, refurbished the entire house and sold it 1 year after for £250k.

Houses don't have a single correct price. The sale price achieved is affected by lots of factors including how well it is marketed, whether there are competing offers and how quickly the vendor needs to sell. Any valuation is only an estimate, and it may even be an estimate that is deliberately biased higher or lower.

It sounds like the house down the road was bought by a developer so they could do it up. Developers are looking to maximise their profit. When choosing their project they won't be very picky about the features of a house, but they will be very conscious of the price and will work hard to find a house that is under-priced. They will also be chain free and possibly mortgage free, which makes them a more attractive buyer and can help them knock some more off the price. If a vendor doesn't accept their cheeky offer they can just move on to the next house. The work they do will all be geared towards maximising the value added, and when they come to sell they will have the experience to get the best sale price. There is also always an element of luck, both in finding the bargain to buy, and finding a buyer willing to pay over the odds.

What I'm trying to say is: just because someone has made a profit on the house down the street, don't assume you will too.

Paying off the mortgage is the safe option. You might be able to add significant value with your £30k of improvements, but you might even reduce the value of the house. Remember it's your home too though. Are the improvements worth doing to improve your own enjoyment of living in it?

Moriath

Whats the point over paying a mortgage only to take out a bigger one on the same house?

Might just of put the over pay into a separate account and used it to do the refurb.

Or put the over pay into an account over the next couple of years and do some upgrades.

marco.mtr

Hi Moriath,
Overpaying is going to reduce the amount we owe and therefore we may be able to remortgage at a better deal November next year. With our current financial situation we would take years to save enough money to refurbish the house, that's why we are considering borrowing more money.

marco.mtr

thelem wrote: »

What I'm trying to say is: just because someone has made a profit on the house down the street, don't assume you will too.

Hi thelem,
You're absolutely right. We would hate to end up on a situation where we couldn't sell the house for the price that we would have wished. We would rather have a quick sell for a reasonable price and move abroad without having to wait months to close a deal.
The trouble we are facing is that the house has a very old decor and some layout problems and consequently it doesn't feel like home sometimes. Cheers