Home Improvement Loan

paye

Hi,

Me and the wife are looking to get our kitchen extended as we have out grown our existing galley kitchen and the kids are growing up fast.

Having worked everything out, our extension is going to cost us nearly £50k.

We were looking to finance the project with both savings and a loan.

I need to borrow around £25k, over a period of around 7-10 years.
Current deals I have seen from various lenders only offers loans upto 5 years and the rates are high.


Can I borrow additional money from my existing mortgage provider by way of releasing some of the £330k equity in the property. If this is possible what sort of rate would they offer and how does it work.
My current mortgage rate is 1.69%.

Any advise will be appreciated.

Thanks

Ebe_Scrooge

Unsecured personal loans are normally available for a period of no longer than 5 years - as you've discovered. Obviously there are exceptions, but that's the general rule of thumb.

It's certainly worth approaching your mortgage company - home improvements are one thing they generally are prepared to lend for. You'll likely be offered a much lower APR than for a personal loan (often it'll be at the same rate you're currently paying on your mortgage) - not least because the loan is secured against your property. For that reason, you do need to make absolutely sire you can afford the extra payments, and factor in things like "what if you were to lose your job" etc.

The other thing to consider is that by adding to your mortgage, the loan will be spread out over a longer period - if, say, you've got 15 years left on your mortgage, then the additional £25k will also be over 15 years. So the lower rate of interest may actually be negated by the longer term of the loan. But if you are allowed to make overpayments to your mortgage without penalties, then this is probably the way to go.

Obviously you need to do the sums, and you'll need to ring your mortgage company to see what they'll offer - but in principle yes, borrowing against your mortgage is certainly an option.

paye

Ebe_Scrooge wrote: »

Unsecured personal loans are normally available for a period of no longer than 5 years - as you've discovered. Obviously there are exceptions, but that's the general rule of thumb.

It's certainly worth approaching your mortgage company - home improvements are one thing they generally are prepared to lend for. You'll likely be offered a much lower APR than for a personal loan (often it'll be at the same rate you're currently paying on your mortgage) - not least because the loan is secured against your property. For that reason, you do need to make absolutely sire you can afford the extra payments, and factor in things like "what if you were to lose your job" etc.

The other thing to consider is that by adding to your mortgage, the loan will be spread out over a longer period - if, say, you've got 15 years left on your mortgage, then the additional £25k will also be over 15 years. So the lower rate of interest may actually be negated by the longer term of the loan. But if you are allowed to make overpayments to your mortgage without penalties, then this is probably the way to go.

Obviously you need to do the sums, and you'll need to ring your mortgage company to see what they'll offer - but in principle yes, borrowing against your mortgage is certainly an option.

Hi Ebe,

Many thanks for your post above, very much appreciated. I contacted my lender today, I have a telephone interview next week to run through details and from the back of that they will be able to advise what options I have available to me.

Thanks again.

paye

**Update**

Hi ,

I thought I'd update this post.

So in the end, I applied for a Sainsbury home improvement loan for £25k @ 2.9%, I got accepted straight away.

A week or so later the money was in my account, once the money hit my account I started having seconds thoughts and was thinking to myself what an idiot borrowing £25k over 7 years.

I can save that in 12 months by limiting a few perks. So I decided to return the money back to the bank on the same day and cancelled the loan agreement.

I would rather self fund the project instead of borrowing and then having sleepless nights .

My misses wasn't happy as she was looking forward to a new kitchen this year ( she didn't talk to me for about 2 hours lol ) but an extra 12 month wait will not hurt anyone.

I just hope the government extends the neighbour consultation scheme again in May. I had prior planning approval for a 6m extension with the condition it was completed by May 30th this year which is why I wanted to get it done.

The worst what can happen is I may have to apply for full planning and hope it gets granted :eek:.

But overall I believe I've made a wise choice.