Borrowing for house work/cellar conversion

Khaderbhai

Hi 

I have had some quotes to convert the celllar/basement in my mortgaged home but have been put off borrowing with the current interest rate rises. Is there any other options out there other then additional borrowing/further advance on current mortgage? Expecting to borrow between £40-£60k (North of England) with a mix of savings but looking at loan rates they are quite similar/on pare with current mortgages if borrowing £25-30k for example. Any other options here or is it best to bite the bullet and borrow as soon as possible rather than saving little by little? 

Cheers

DrEskimo

Why do you have to borrow? Is there a need to start the work now that you have to borrow from your future earnings and pay interest, rather than just save and wait and pay no interest?

Khaderbhai

DrEskimo said:

Why do you have to borrow? Is there a need to start the work now that you have to borrow from your future earnings and pay interest, rather than just save and wait and pay no interest?

Starting to run out of room following newborn arrival. Would much prefer to save but feel it all but not sure its realistic with 1 earner with mum on mat leave and possibly not returning/going back part time. 

DrEskimo

Khaderbhai said:

DrEskimo said:

Why do you have to borrow? Is there a need to start the work now that you have to borrow from your future earnings and pay interest, rather than just save and wait and pay no interest?

Starting to run out of room following newborn arrival. Would much prefer to save but feel it all but not sure its realistic with 1 earner with mum on mat leave and possibly not returning/going back part time. 

You will have to save/pay the money back either way. 

If there are concerns about being able to save over the coming months then those would equally apply if you took out a loan, if not more so as you have a contractual obligation to pay and it will be higher as you will also have to factor in the interest costs. 

Is it possible to delay work for 3-6months, put the monthly cost the loan would have been, and then see if you can divide the work up. That way you can continue to use savings and then if you have to borrow, you could look at 0% purchase credit cards on items as hopefully the total amount needed will be much less. 

Grumpy_chap

If the OP goes ahead with this house improvement and needs to borrow to do so, then the OP is most likely going to want / need a secured loan and that really means extending the mortgage (or re-mortgaging to the higher value).
In making this assessment, lenders will typically be looking at salary multiples and LTV (based upon the house as it currently is, not what it will be once the work is complete).  
Does the OP have affordability when considering in the light of these criteria?

Khaderbhai

Thanks. Yes re meeting affordability criteria. In an ideal world I would like to save it all first, but if we need that space now then not sure its worth waiting for a few years down the line when we may have enough in savings. 

Would like to pay it off quickly if its borrowed so wasn’t sure if a loan will be better than a mortgage if the interest rates are the same? 

macman

But if not a remortgage, what do you intend to secure the loan against?
Even if you could get an unsecured loan for that amount, it would be at a far higher rate than a mortgage.
If you are going to be down by one income for the next few years, can you afford to service this loan?

Khaderbhai

If you look at the loan rates for £25k on the MSE site, the rates are almost the same as mortgages now at 4.9% so was wondering if a loan would be better in anyway (not really sure).

[Deleted User]

The rates advertised on any site aren't tailored to reflect your own personal illustration though, they're only going to be a very generalised one.
Until you actually apply, directly, to a lender you'll only be guessing.
The rates applicable to your own circumstances could be far higher - this could throw a complete curve-ball into your decision.

macman

Khaderbhai said:

If you look at the loan rates for £25k on the MSE site, the rates are almost the same as mortgages now at 4.9% so was wondering if a loan would be better in anyway (not really sure).

But you are looking to borrow £40k minimum...
How can the estimated costs vary so much, from £40k to 50% higher?

Khaderbhai

Thanks, my OP is miss leading. It should be expected costs are 40-60k. Have savings to put towards so was hoping to borrow closer to 25-30k