Home improvements - borrow more or get personal loan

IvyFlood

We are remortgaging soon and need about 5K for some home improvements (that actually cost more but we already have the funds)

Is it better to put this additional 5k on our mortgage or get a personal loan? 

My only issue with getting a loan is its another hard check what with already remortgaging or does it not matter?

moneysaver1978

If it is only 5K, is a 0% credit card an option?

IvyFlood

moneysaver1978 said:

If it is only 5K, is a 0% credit card an option?

To be honest I didn't even think of a credit card! How does 0% work then? Surely there's a time limit to pay it off?

MorningcoffeeIV

One search isn't an issue.

What needs to be considered is your LTV, your total indetbedness, the risk of securing further debt against your home, the total cost based on repayment term and the relative rates.

MSE_ForumTeam5

We've merged two threads (in line with our rule on avoiding duplicate threads)

moneysaver1978

IvyFlood said:

moneysaver1978 said:

If it is only 5K, is a 0% credit card an option?

To be honest I didn't even think of a credit card! How does 0% work then? Surely there's a time limit to pay it off?

https://www.moneysavingexpert.com/credit-cards/best-0-credit-cards/

CliveOfIndia

IvyFlood said:

moneysaver1978 said:

If it is only 5K, is a 0% credit card an option?

To be honest I didn't even think of a credit card! How does 0% work then? Surely there's a time limit to pay it off?

It works just like an ordinary credit card, but for a set period of time (for example, 12, 18 or 24 months) interest is charged at 0%.  So if your offer is for 18 months, you have 18 months to pay it off, after which any remaining balance begins to attract interest at the card's standard APR.  You need to make the minimum payment each month, and at the same time be putting money aside to allow you to clear it when the time comes.  Or else just work out and make a monthly payment of more than the minimum which will mean the balance is cleared by the end of the promotional offer.

This does assume that you'll be able to use a credit card for the improvements.  If you're buying stuff from a DIY store and doing decorating etc. then no problem.  But if you're getting a plumber, electrician, whatever to do work for you, you may find they don't accept credit cards.

And, of course, you'd need to be accepted for a card with a high enough limit.

To your original question, it's likely that for such a relatively low amount a personal loan would be better (assuming you aren't able to go down the credit card route).  Yes, you'll probably get a lower APR on a mortgage, but the fact that you're paying it over 20, 25 years rather than just 2 or 3 means you'll end up paying more interest overall.

But whichever way you choose to do it, it'll come down to the total debt you have.  Depending on your income and total debt, it may be prudent to get the mortgage sorted first (as that's presumably the most important thing), then look at your options for the additional £5K.  If you're not able to get any additional credit then at least you've got your mortgage secured and you can save up to do the improvements.

FashionHeart

IvyFlood said:

We are remortgaging soon and need about 5K for some home improvements (that actually cost more but we already have the funds)

Is it better to put this additional 5k on our mortgage or get a personal loan? 

My only issue with getting a loan is its another hard check what with already remortgaging or does it not matter?

A personal loan makes more financial sense as making it into a secured loan is not a good idea to borrow against your home.
Anyway, 5K isn't a lot, so either personal loan or credit card would be a better option.