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Best way to fund house renovations

pioneer22
pioneer22 Posts: 523 Forumite
First Post First Anniversary Combo Breaker
in House buying, renting & selling
Hey,

We have approx £55,000 in terms of equity in our house after fees and stamp duty and so on.

We are looking at buying our next house which will be in the region of £230,000 we were wanting this house to be fully decorated for when we move in. Floors, Kitchen, Furniture, Lighting, Bathrooms etc

In terms of funding this would we be better off

A. Putting down 30k as a deposit and use 20k to fund it, the mortgage payments if we get the rate quoted would be £770. The other 5 will be used to clear Credit Card/Overdraft etc.

B. Put down the full 50k as a deposit making the mortgage payments £693 and getting a loan to fund the renovations

We're planning on this being our forever home, not sure which way to go about it because we would only have a £77 difference in mortgage payments a month but I'm conscious we wouldn't have as much in equity and it would almost be like having a loan of £77 for 35 years.

What would you MSE'ers do?

Comments

  • Doozergirl
    Doozergirl Posts: 33,813 Forumite
    Name Dropper Photogenic First Anniversary First Post
    Better to borrow short term. Higher interest rate but paid back sooner and less overall.

    Even better of your mortgage allows you to borrow more and then overpay to bring the extra debt down quickly. Low interest paid back faster is the most MSE.
    Everything that is supposed to be in heaven is already here on earth.
  • phillw
    phillw Posts: 5,594 Forumite
    First Anniversary Name Dropper First Post
    edited 10 September 2017 at 7:32PM
    pioneer22 wrote: »
    What would you MSE'ers do?

    I wouldn't spend £20k on renovating it before moving in. However if you must do it, then keep the cash on hand.

    Reducing the mortgage payments and then getting an unsecured loan will cost more than £77 a month. You can overpay on your mortgage anyway, so you can pay back the extra 20k you borrowed on your mortgage at your own pace.
  • Red-Squirrel_2
    Red-Squirrel_2 Posts: 4,341 Forumite
    Cost everything up before you make any firm decisions. 20k doesn't go as far as you might think unless you have the skills/qualifications to do most things yourself.
  • pioneer22
    pioneer22 Posts: 523 Forumite
    First Post First Anniversary Combo Breaker
    edited 10 September 2017 at 9:13PM
    Red-Squirrel wrote: »
    Cost everything up before you make any firm decisions. 20k doesn't go as far as you might think unless you have the skills/qualifications to do most things yourself.

    Thanks will get a joiner for worktops and fitting the sink and plumber for the bath.

    My budget is £14000 for tiles, furniture, kitchen, hob, oven etc.

    Leaves me 6k for trades and any unexpected costs. I can tile/ fit skirting/put the kitchen up / shelves/build furniture.

    Terrible at painting though.
  • steampowered
    steampowered Posts: 6,176 Forumite
    First Anniversary Name Dropper First Post
    If you need to borrow, you should borrow at the cheapest rate possible.

    Your mortgage will almost certainly be a much cheaper way of borrowing than getting a short term loan. So, you should put it on the mortgage.

    Also, putting it on the mortgage gives you more flexibility to borrow short term if it costs more than you expect.

    You can always overpay your mortgage in future to remove that extra £77 a month over 35 years.
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