Should I take out a loan for home improvements before i remortgage?

I haven’t posted before but am looking for some advice re re-mortgaging home and getting a loan for some home improvements. I’m hoping you can offer some wise advice. Also hoping I've posted this in the right place..

So, we bought our 3-bed end of terrace in SE London for 425k in June 2014 with a mortgage of 320k. I was on mat leave at the time and we’ve since had another child so money has been quite tight but we’ve made overpayments for the past 18 months where possible. We now owe under just under 300k. Based on local sales, I would imagine our house is worth at least 550k currently, hopefully more.

We have been locked into a 5 year fix and have a high early repayment charge so it hasn’t made sense to re-mortgage until the fix runs out (I’ve consulted two brokers about this to do the maths after rates dropped to record lows, but both confirmed we’d lose money by re-mortgaging). Finally, next March we are able to re-mortgage and I’m doing some forward planning.

My question is around getting a (quite large) loan for home improvements. Every spare penny has gone into the house since we moved in – we don’t have any loans or a credit card and have been saving every month. Our location is great but we’ve had to do a lot more to the house than we originally envisaged. This has taken ages as it takes us so long to save. But we have rewired, decorated every room, put in a new bathroom, added a utility and downstairs toilet, transformed the garden, added bifolds and moved a wall to create 3 double bedrooms (it was 2 doubles and 1 box room).

We have pretty much finished the inside now but the porch is in a dreadful condition and, when we do it, we’d like to do a very small side extension at the same time. In total this will cost 20k. But, not only will it make the house look great from the front (it looks awful at the moment!), we are hoping that the side extension will add a bit of a ‘wow’ factor to the house, adding an additional study/playroom.

We can’t afford this. We currently have about 5k in savings and are keen to lock them away rather than endlessly saving for home improvements then spending it all and starting from scratch yet again. I try to save £500-1k a month but this isn’t always possible. Both my husband and I work FT and are lucky to have help with childcare from my mum so we only pay 2 days nursery for our youngest (which is still nearly £600/p month, eek). We don’t earn huge salaries but are careful spenders.

So, my question is; would you recommend we take out a loan to pay for the building work while loan rates are so low and use this to get new porch and side extension? This will then (presumably) boost the house’s value to improve LTV rating and hopefully enable us to access a lower interest rate. But obviously we’d still owe lots of loan money when the mortgage broker does the re-mortgage sums - so I'm not sure whether that would cancel it all out anyway once they take that into consideration. It makes me nervous to take out a loan but then it’d also give us an extra room to live in and I am hoping it would add more value to the house than it would cost, although I’m not sure.

We aren’t planning to move any time soon, just hoping to save enough money on our mortgage payments for me to go down to part-time hours while my kids are small. I feel guilty working FT but have felt this is the only way to afford living costs and get the house finished. We’ll still be saving for a new kitchen and loft extension, but I’m happy to wait for them!



Thank you, apologies for the essay.

Comments

  • [Deleted User]
    [Deleted User] Posts: 35,242
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    No.

    Save, get it done with cash and remortgage without debt.
  • BrassicWoman
    BrassicWoman Posts: 3,201
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    You have 3 kids and 3 bedrooms, so enough space


    Sounds like money is tight - tight enough that loss of job woud affect you quite severely. And the porch sounds cosmetic.


    To me, the anxiety of the debt would not be worth the extra room. If the porch was more than cosmetic I might DIY that.
    2021 GC £1365.71/ £2400
  • Pixie5740
    Pixie5740 Posts: 14,515
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    What's more important to you and your family, adding the wow factor to your home or being able to work PT hours to spend more time with your children?
  • Your 550k valuation may be a little optimistic as prices in the S.East aren't stable atm
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