home improvement remortgage vs cash to the builders

Dokimos

Hi

I read Martin's remortgage articles and the PDF book and a few of the threads here but I am still not sure what’s the best for my particular situation as it’s a bit complex (don’t everyone think that there situation is unique?).

I have a 3 bedroom detached which seems to be valued at around £140,000 and I need 1 more bedroom.
My mortgage hasn’t been moved for a few years now and is on variable rate (7.3 at the moment). The remaining amount is £39,000 over 14 years.
The cost of the extra bedroom is £35,000 as the most value efficient way of getting it is a double storey extension.

Now the bad things: I also have about £18,000 debts on credit cards and basically I can’t afford more that £150 increase on the mortgage payments.

The good things: I have about £5,000 in savings and another £5,000 in investment ISAs that are doing very badly for years and I am poised to cash in.

The (good) complication: I will be receiving £40,000 towards the extension.

The questions:
Should I use the 40K to pay the builders? Or should I add the £35K to the mortgage and remortgage using an offset account with the £40K.

Should I use the difference between £35K and 40K to pay more of the debts or use the savings and investments only and shift the rest from 0% to 0% until its paid off.

And finally should I add the 18K debt to the mortgage and use an offset account with the savings and investments?

Is there a maths calculation to clarify the best options?

Thank you

Lomion

Why do you have savings when you owe so much money on credit cards?

Use the £10k savings and the £40k to pay off your credit cards and pay the builders. Never add money on to your mortgage if you can help it.

Change your mortgage to a better rate. Go see a broker or give L&C a call. It's free


At the end of the day you will have about £3K - £5K left owing on your cards.

Use the money saved by switching your mortgage to pay these off as fast as possible.

Look at moving the credit card debt left over to a 0% rate if possible. Have a look which of your cards are offering the best balance transfer rates. Make sure you pay this one off in full...then BT the remaing £3k on the other cards to that one. If you can't do this, look at getting a loan to pay the rest off. Just compare the interest rates to see what suits you best.

Dokimos

Well good point :huh: - we actually cleared off all debts twice in the last 6 years BUT personal circumstances (6 months unemployed twice, and 6 months off work due to serious illness, partner’s stopped working ) meant it crept up again . The savings are what we call ‘the kids money’ and we try not to touch, and the investments were from just before the IT stock crash so we always said that we’ll keep them as long as possible in the faint hope that they may reach the INITIAL investment (never mind making anything above that).

A complication I forgot to mention is that the 40K I can only use to pay builders or clear mortgage not to clear debt. In that case I guess I should clear 5K off the mortgage before remortgaging?