Home Improvement Borrowing

terry.h

I'm posting here after reading around the other areas of the MSE forum and it's made me think that what I want to do is a bad idea.

Basically I need to do some improvements to the house, one of the jobs is urgent and must be done now. The rest could wait a little while but will need to be done pretty soon before it ends up costing even more money to sort.

In order to get all of what I need to get done over time, it would cost me around £2000 more compared to getting it done in one hit by one company now.

I've taken out a loan for these improvements, with a total interest of around £800.

I have savings but not enough for all the work and using up all savings leaving me without any emergency fund doesn't seem like a good idea.

The total I have to pay out on monthly outgoings (with new loan) is still only half my income, so I will over pay when I can.

Is this a bad idea? I know debt is never good but it will also increase the value of our home.

[Deleted User]

Some actual figures would be useful, such as income, the required loan, outgoings. What term is the loan over and what's the rate?

You should have a fair bit in savings if you have well over half your income left over each month. I'd suggest using some of those to pay for the work, whilst keeping an emergency buffer.  You can then rebuild these with the money saved on the loan.

terry.h

I don't have enough in savings to carry out all the work, and if I wait I risk a) more work needing to be done and b) having to get people back more than once which will cost more.

The loan is 8.5k over 5 years at 3.2% - I would rather have a lower monthly payment that I can overpay now and then, just for my own peace of mind

Income is just under 2k per month and all outgoings with the new loan would be just under 1k.

[Deleted User]

It's an extremely long term for such a low amount. Especially with a spare grand each month. 

I would plan a far more aggressive strategy to minimise the debt, such as using at least some of your savings and your disposable income.

terry.h

Deleted_User said:

It's an extremely long term for such a low amount. Especially with a spare grand each month. 

Agree, but who knows what could happen.

The rate wouldn't change so when I can repay more I will do (while also saving some) but I wouldn't want to commit to a higher payment and then can't pay it. I can overpay as much as I like without penalty.

I want to know that what I have in savings can pay all my outgoings for 6 months should the worst ever happen.