Options regarding home improvements

Chumpalot

Morning all,

I've been a lurker for quite a while and the information on here has been very helpful to me. Thank you.

I'll try and keep this as short as possible and get right to it.

My wife and I moved into a property in south-east London almost 3 years ago. We were desperate to get onto the ladder at the time and underestimated how much work (and money) our house would take to get it how we wanted. The upstairs is pretty much done and we'd like to get the rest of the house done so we can start to enjoy our purchase a little bit more.

We would like to refurbish the downstairs. New kitchen, internal walls rearranged etc. The work is probably going to cost around 35k-£40k. We have a reliable builder on-board who we've used before.

We have £10k saved currently. This is sitting in a low interest (.25%) account.

I have had a look at secured loans. Paragon are offering a 4% option. 35k over 20 years @ £209 p/m. This seems to be the best offer of this type of loan.

In terms of outstanding debt, I have one personal loan with Hitachi @ £222 per month. There is £4k left on this currently. We have no other debt (apart from the mortgage).

The house as it stands is actually a little bit depressing to live in at times. Winters are pretty bad if the temperature dips and we have often found ourselves wearing coats in the kitchen whilst cooking. This isn't because we can't afford the heating. The heating system downstairs is simply not able to heat the house sufficiently. This is mainly due to a poor lean-to structure at the rear of the property. All of our heat is lost out here.

What other options are there available? We have another year and a bit to go before our fixed mortgage offer ends. If I were to go down the loan route I'd like to cover the outstanding Hitachi loan.

My wage after tax per month: £4000
Wife's wage after tax per month: £1950

Any help is greatly appreciated. Thanks for taking the time to read.

Cheers
David

DrEskimo

£209 over 20yrs is just over £50k....you really want to give £15k of you money to a finance company...?

With the greatest respect, I would take a look at your outgoings and see where your money is going. You have a decent income and in 3yrs only managed to save about £270 per month, and have had to take on a personal loan as well.

I would work on getting debt free, working up a tight budget and cut back on spending, and then spend a year or two putting away much more of your income each month and pay cash for the work.

Chumpalot

Thank you for your reply.

I really would like to avoid giving anybody £15k if at all possible. I would rather get a personal loan of say £25k and take advantage of a lower interest rate and make up the rest with cash. I am simply exploring options here.

I should have given slightly more info in my original post. We were married in September 2018 and since moving in we saved heavily to pay for the wedding outright (which thankfully we managed to do). We tightened our belts quite a bit let me assure you! The 10k we currently have has been the result of savings from this year.

Cheers
David

robber2

I'd do 1/4 to 1/3 of the work now with the money you have saved and do the rest over the next few years. You can pay for it with the £2.5k ++ of savings you will have accumulated each year.


Rob

DrEskimo

Chumpalot wrote: »

Thank you for your reply.

I really would like to avoid giving anybody £15k if at all possible. I would rather get a personal loan of say £25k and take advantage of a lower interest rate and make up the rest with cash. I am simply exploring options here.

I should have given slightly more info in my original post. We were married in September 2018 and since moving in we saved heavily to pay for the wedding outright (which thankfully we managed to do). We tightened our belts quite a bit let me assure you! The 10k we currently have has been the result of savings from this year.

Cheers
David

Ah OK, that changes things! Just continue saving for a bit longer. As above, you can start some things now and just continue the build as and when you get funds in. If you have to, see if you can get a £10k loan at 3% and also use that with the £10 savings to give you enough to start the heavy lifting. That will only cost around £450 over 3yrs in interest.

Chumpalot

The only problem with doing part now and part later is that I'd essentially have to employ the builder twice (or however many times). It'll be cheaper of the works are done in all one go I'd imagine.

I'm going to explore perhaps a personal loan over a shorter period and then topping that up with cash. If we can get to £15k by the time the work starts that would be a good amount I think. We won't be tying ourselves into anything too long term either that way.

Thanks for the help.

DCFC79

A secured loan for 20 years, just consider if this the right move.

Chumpalot

DCFC79 wrote: »

A secured loan for 20 years, just consider if this the right move.

Indeed. That's why I'm thinking a shorter term loan and try to save as much cash between now. Initially I wanted to pay everything everything up front. Is remortgaging out of the question given the amount involved?

Cheers

DCFC79

Chumpalot wrote: »

Indeed. That's why I'm thinking a shorter term loan and try to save as much cash between now. Initially I wanted to pay everything everything up front. Is remortgaging out of the question given the amount involved?

Cheers

Could be an option but not something I know about, a mortgage advisor might be what you need.

djphig

You could potentially look at remortgaging if you're not in a fixed rate with early repayment charges. A 2nd charge mortgage (secured loan) could be an option for you.

Paragon are a good lender but there are a couple ever so slightly cheaper that you may qualify for depending on your credit profile & equity available in your property.

Just because you take a secured loan out for 20 years doesn't mean you have to keep it for 20 years. The average time a person keeps a secured loan is 4 years. Most pay it off by remortgaging in the future

Chumpalot

djphig wrote: »

You could potentially look at remortgaging if you're not in a fixed rate with early repayment charges. A 2nd charge mortgage (secured loan) could be an option for you.

Paragon are a good lender but there are a couple ever so slightly cheaper that you may qualify for depending on your credit profile & equity available in your property.

Just because you take a secured loan out for 20 years doesn't mean you have to keep it for 20 years. The average time a person keeps a secured loan is 4 years. Most pay it off by remortgaging in the future

Thank you for your reply.



That was the initial idea. I think a remortgage is out of the question given the fee to exit our current plan stands at around £5500. We'd add value to the house by doing the works and then in around 7-8 years (or whenever we decide to sell) the loan would be swallowed up by the increased equity in the property (providing prices go up obviously).

I'll have a look at some other lenders. Paragon was the best I could find at the time before getting distracted by work

Thanks