Releasing equity to fund renovation - yay or nay?

spendynowsavy

Lived in our home for 11 years and mortgage is down to £113k. Value is around £230k but house is far too small and needs some tlc. Had grand plans to renovate but this was put on hold as husband went back to uni. We’ve accrued £27k debt because of his studies (he’s now in ft perm work) and feeling stuck in a rut with repayments and lack of money to save. Is it wise or even possible to release equity to fund renovation and pay off some of the debt? Obviously we are chipping away at it every month but will take a while. The reno of dreams is likely to cost £100k but willing to consider anything at this stage. 

gwynlas

Before you start securing debt on house you need a realistic costing of your renovation plans and increased mortgage affordability. If renovated house would be worth in excess of £300K  with affordable mortgage payments I would say go for it

diystarter7

Hi
Before your "dreams" are realised, not just consider the cost of the renovation and add at least 15% to that. Also consider if you or hubby loses work or worse still become ill longer term, accident that has an impact on type of work he you can do etc.

Personally, I pay off or good as pay off my initial debts then consider my "dreams."

We have always been cautious but we are all different and I have seen people doing ok, managing well, they take out new loans, but new home and something goes wrong and they lose everything. Therefore, IMHO, best to reduce debts and then live your "dreams." Ideally make the most of what you have and trust me if all remains well, it will come to you with a lot less risk.

Thnaks

dimbo61

Is the £27,0000 student debt ? 
9% Tax each month 

spendynowsavy

gwynlas said:

Before you start securing debt on house you need a realistic costing of your renovation plans and increased mortgage affordability. If renovated house would be worth in excess of £300K  with affordable mortgage payments I would say go for it

Thanks. Would definitely look to get costings done before making any decisions. The value would probably increase to around £400k (same as neighbours) so there is good investment potential. 

spendynowsavy

diystarter7 said:

Hi
Before your "dreams" are realised, not just consider the cost of the renovation and add at least 15% to that. Also consider if you or hubby loses work or worse still become ill longer term, accident that has an impact on type of work he you can do etc.

Personally, I pay off or good as pay off my initial debts then consider my "dreams."

We have always been cautious but we are all different and I have seen people doing ok, managing well, they take out new loans, but new home and something goes wrong and they lose everything. Therefore, IMHO, best to reduce debts and then live your "dreams." Ideally make the most of what you have and trust me if all remains well, it will come to you with a lot less risk.

Thnaks

Thanks for your thoughts. I probably should have stated that my “dreams” are probably what others would consider to be basic - a proper entrance, maybe even a porch, a bedroom for each of my kids, a second loo, an intact roof… I’m not looking for anything grand. 

I do agree that paying off debts is the sensible thing to do and would never want to put ourselves in the position that we couldn’t pay the bills if faced with a crisis. However, I lost a parent recently and they didn’t even reach retirement age so there has to be a balance between living for the here and now and planning for the future. 

Thanks for sharing your thoughts. 

spendynowsavy

dimbo61 said:

Is the £27,0000 student debt ? 
9% Tax each month 

Not student loan, the £27k is spread over 0% credit cards. 

dimbo61

" equity release " is normally for older home owners with mortgage  paid off.
Maybe a lender will offer you extra money for debt consolidation ( pay off the 0% credit cards ) and renovation  of the property but lenders are being ultra careful  with rates climbing to 4/5% plus and tougher  lending criteria.
Paying down debt and doing the vital jobs on the house 

Annisele

spendynowsavy said:

Thanks for your thoughts. I probably should have stated that my “dreams” are probably what others would consider to be basic - a proper entrance, maybe even a porch, a bedroom for each of my kids, a second loo, an intact roof… I’m not looking for anything grand. 

I think that one of those things is not like the others. If you don't currently have an intact roof, then that's something you need to fix as soon as you can. The other stuff - I'd say that it depends on your income.

As a couple, it looks as though you have secured debt of £113k and unsecured of £27k. If your joint income is in the £30k region, I'd say you were in a precarious position - if you ever get to a point where you can't refinance the £27k onto a new 0% deal, you might be in serious trouble. If your joint income was in the £300k range, then just tighten your belts for a bit and pay for the refurbishments out of income. I suspect you're in the middle of that range - but where in the range matters.

In your shoes, unless I was properly rich I'd be very very nervous about carrying £27k of credit card debt though.