Whether to put savings into a home extension or into paying a lump sum off mortgage.

A friend of mine has a very small cottage which she wants to extend. She has a fixed (until sept 09) mortgage on this cottage of €2,000 per month. She was finding she could just about manage this mortgage until the recent public service pension levy came in and her monthly income was cut by about €400 net per month. The extension would cost about 50,000, which is just about her entire savings. She's now in a dilemma as to whether it would make more financial sense to use her savings to pay something off the mortage and forget about the extension or whether to put the money into the extension to give herself the extra space she needs. She doesn't play on selling her cottage at any stage. Has anyone any thoughts on this. Thanks.

Re: Whether to put savings into a home extension or into paying a lump sum off mortga

50k is a whopper of an extension.
You need to find out if putting the 50k against the mortgage will reduce the payments or retain the same payment over the same term. If it does nothing to the monthly payments then you have no short term gain in paying off the mortgage.