To loan or mortgage

deskmonkey16

Hi everyone,

My wife and I have been in the fortunate position of living loan and mortgage free for over 15yrs now. We are wishing to overhaul our gardens and patios etc. and are also contemplating creating two garden rooms. One for my home hybrid office and the other as a craft room. As we've been out of the loop with regards to loans and mortgages for such a long time we are uncertain which is the best way to go to pay for the garden rooms and garden refurb. Is this something that is best with a loan or a new mortgage? For info we are both in our early 50's and have secure full-time jobs with no plans to take early retirement.

Thank you

m

[Deleted User]

It'll depend on the amount you're looking to borrow and your circumstances, particularly income and anticipated payback period.

Ebe_Scrooge

It depends to a large extent on the sums involved.  As a very broad rule of thumb, most lenders won't give more than about £15,000 as an unsecured loan.  That's not set in stone, just a rough guide.

Aside from that, an unsecured loan will generally have a higher APR than a mortgage, by the very fact that it's unsecured.  A mortgage will be cheaper in terms of APR, but you have to be aware that, should you fail to keep up the repayments, your house can be repossessed.  Also, most mortgage lenders will only lend for improvements that increase the value of the house (again, not set in stone, but that's usually the case).  Whether they would view garden renovations and garden rooms as adding significant value I don't know.

Finally, think of the term of the loan.  Whilst a mortgage will have a lower APR, you're usually paying it off over a longer period of time, so overall it may actually cost you more.

Hopefully this will give you food for thought, and may help you decide which is the best option for your particular circumstances.

[Deleted User]

You can get mortgages from 6 months though 2-5 is typically the minimum they will offer  

A 15 year mortgage will be more expensive monthly than a 25 but of course will be paid off quicker

Keep in mind that as it sounds like you're probably close to retirement if not retired that mortgages can be a bit harder to get for older people  some lenders have limits like only offering them to those under 65-80 on taking it out but others will say it must be paid off by the time you are 70-95 e.g. someone at 65 might only get a 15 year mortgage

K_S

deskmonkey16 said:

Hi everyone,

My wife and I have been in the fortunate position of living loan and mortgage free for over 15yrs now. We are wishing to overhaul our gardens and patios etc. and are also contemplating creating two garden rooms. One for my home hybrid office and the other as a craft room. As we've been out of the loop with regards to loans and mortgages for such a long time we are uncertain which is the best way to go to pay for the garden rooms and garden refurb. Is this something that is best with a loan or a new mortgage? For info we are both in our early 50's and have secure full-time jobs with no plans to take early retirement.

Thank you

m

@deskmonkey16 Depends on the size of the loan, what monthly payments you are comfortable with, whether you may need to borrow more later, etc.

Quite often, for loan sizes up to 30k, the simpler option is to take a unsecured personal loan as there isn't any of the hassle of a mortgage and it's not secured against the house you live in. Even from a cost perspective, with recent mortgage rates going up significantly, the price differential between a personal loan and a mortgage can be minimal for prime borrowers.

To take an example (using very very ballpark figures), if you take out a fixed-rate mortgage now, the rate even at the lowest LTV (loan to value) bands for fixed-rate products is likely to be around 3.25-3.5%+. To compare that with a personal loan, as per the MSE charts you can get a FirstDirect 25-30k personal loan at 3.3%+.

If you do decide to get a mortgage, being in your early 50s with no plans of retiring soon, you should have plenty of options to borrow using normal products.