Borrowing for home improvements

DavidJC_34

I'm looking to borrow a relatively small amount of money (about £5,000) to enable me to finish off my home improvements and (hopefully) sell my house within the next year - 18 months. 

My fixed mortgage period is ending in a couple of months, and my sticking with my current provider is the cheapest option. 

I've spoken to advisors from both the provider and a mortgage broker, and they have both advised against borrowing from the mortgage (even though my LTV is about 65% - which I thought was pretty healthy). But apparently re-mortgaging would mean that I have to go through the full assessment again which could mean higher fees, more time etc.

From some research, it looks like my other options are taking out a loan or using a 0% credit card (although this can get risky if it takes longer than planned, and I'd have to make all of my purchases within 60 days - which seems tight). With both of these options I could pay back the relatively small amount I want to borrow when I sell the house. 

Does anyone have any suggestions as to what the best option is? Other than my mortgage, I haven't really borrowed much before, so I'm not sure of the best options / potential pitfalls. 

Thanks in advance!

Ryan_Holden

Welcome to the forum.

If you can do you purchasing in 60 days then the 0% makes more sense. 

However make sure you consider if you can afford the interest should you not sell your house before the interest free period ends.

Also consider you may not get a £5000 limit on a card.

CliveOfIndia

DavidJC_34 said:

My fixed mortgage period is ending in a couple of months, and my sticking with my current provider is the cheapest option. 

Will you be reverting to your lender's SVR?  Might be worth shopping around to see what deals are out there - I know the mortgage market is in something of a turmoil at the moment and rates are rising rapidly, but it can't hurt to look.

That aside, borrowing on your mortgage needs to be thought about carefully.  Whilst the APR will be lower than a personal loan, the fact that you're paying it over 15/25/25 years or whatever means you'll pay a lot more interest overall, compared to a personal loan over a year or two.

On that note, bear in mind that if you do want to remortgage, then taking out more credit shortly before the mortgage application may affect the rate you're offered (as you have more debt, so that plays into affordability calculations).

DavidJC_34 said:

From some research, it looks like my other options are taking out a loan or using a 0% credit card (although this can get risky if it takes longer than planned, and I'd have to make all of my purchases within 60 days - which seems tight).

A 0% card would be ideal, though these are becoming harder to come by these days.  And you're right, you do need to make sure you repay in full by the time the promotional rate expires.  And you won't know what limit you'd be offered.

You don't always have to make purchases within the first 60 days.  Some cards do stipulate this, but some will apply 0% to any purchases made at any point during the promotional period - you need to check the T&Cs carefully.

But again, applying for a new credit card is a new line of credit, which could impact a mortgage application (if, indeed, you're planning to change mortgage provider).

Or, you could look at a Money Transfer credit card.  This could potentially give you a little more flexibility in terms of timing, but the same caveats apply as for a 0% purchase card.  Plus there's usually a transfer fee to pay.

The only other thing to bear in mind, can you even pay for the improvements by credit card?  If you're buying goods from B&Q then no issue.  But if you're paying an electrician to do some rewiring for example, you may find they won't accept credit cards (which is where the Money Transfer card can be helpful).

Hopefully some food for thought!