How to fund house works

[Deleted User]

I am buying a property, it could do with a new bathroom/toilet and kitchen. I worked out it would roughly cost 15-20k.

Now I could save money up over a few years, but obviously I would rather have the new fittings sooner. I would also like to overpay on my mortgage.

Would anyone recommend taking out a loan to fund these works?

newsgroupmonkey_

[Deleted User] said:

I am buying a property, it could do with a new bathroom/toilet and kitchen. I worked out it would roughly cost 15-20k.

Now I could save money up over a few years, but obviously I would rather have the new fittings sooner. I would also like to overpay on my mortgage.

Would anyone recommend taking out a loan to fund these works?

Isn't this exactly what loans are for?

[Deleted User]

newsgroupmonkey_ said:

[Deleted User] said:

I am buying a property, it could do with a new bathroom/toilet and kitchen. I worked out it would roughly cost 15-20k.

Now I could save money up over a few years, but obviously I would rather have the new fittings sooner. I would also like to overpay on my mortgage.

Would anyone recommend taking out a loan to fund these works?

Isn't this exactly what loans are for?

Yes  but what I mean is, 

Is it a false economy to being paying off a loan while also over paying on a mortgage. Is it more effective to pay for the works directly and not overpay on the mortgage? I made the assumption I'd pay more interest on the mortgage if I didn't overpay than what I'd pay on a loan.

eddddy

Deleted_User said: 

Is it a false economy to being paying off a loan while also over paying on a mortgage. 

You need to compare the interest rate on your mortgage against the interest rate on a loan.

• If the interest rate on the mortgage is lower than the loan - you should stop overpaying the mortgage and use the money for the house works

• If the interest rate on the mortgage is higher than the loan - you should carry on overpaying the mortgage and take out a loan for the house works

For example:

• If the interest rate on your mortgage is 3%
• and the interest rate on a loan would be 5%

It's cheaper to use the 'mortgage money' than using the 'loan money' - so stop overpaying.


But, if say you have a 0% spending deal on your credit card

• The interest rate on your mortgage is 3%
• The interest rate on spending on your credit card is 0%

It's cheaper to use the 'credit card spending money' on your credit card than using 'mortgage money'. 
(But 0% deals on credit cards sometimes incur an up-front fee, which makes the calculation more difficult. And you'll be hammered badly, if you haven't repaid by the end of the 0% period.) 

newsgroupmonkey_

eddddy said:

It's cheaper to use the 'credit card spending money' on your credit card than using 'mortgage money'. 
(But 0% deals on credit cards sometimes incur an up-front fee, which makes the calculation more difficult. And you'll be hammered badly, if you haven't repaid by the end of the 0% period.) 

Unless of course you stooze. In which case you might have to find 1.5% odd over 2 years, which is still miles cheaper than a mortgage.

Up-front fees tend to be when you do a balance transfer. If you were to do all the works "ON" the credit card, then you don't have those fees.