Top Up Mortgage V. Home Improvement Loan

[laura28]

Hi All,


Posting this here, hopefully the correct place. We have recently traded up and purchased a new home. We borrowed €368k for this, slightly under the maximum we could have borrowed, knowing that the house will need some work done. From the sale we have a surplus of €20k which is in our savings account. We have been quoted €80k from a builder to complete the work we need. I had initially thought we had 2 options –

1. Take a 6 month moratorium from our mortgage, save an additional €15k and then get a home improvement loan of €45k over 10 years.
   
   
2. Get a top of mortgage of €45k based on option 1 above – however, would we get a top up so soon into our mortgage term, considering the fact that we are taking a moratorium also?
   

I’d appreciate people’s views and experience of this.


Thanks

 

[Boyd]

I'd ask a slightly different question. Do you really need to spend 80K immediately on the house straight away? Personally I would avoid taking on even more debt after borrowing E368K to buy it, if at all possible - you haven't given any indication of how this would impact your ability to repay it, if its no issue or if you would be squeezed etc.

Is this extra money required to do *everything* that is needed upfront? Is it liveable currently? Could you live there as it as doing maybe E20K worth of work that is really needed. Taking a moratorium of 6 months at the start of the mortgage and/or borrowing another 45K will cost you quite a bit in interest over the term.

I'm not sure which of the two options you provide would be better, as you haven't said your mortgage rate, or if its fixed, LTV etc. A quick Google tells me that home improvement loans run at about 7%, so it would seem to me that a top up on mortgage would probably be cheaper than getting separate loan, assuming your current mortgage is around 3%.

However, for me doing neither of those would be my preference!

 

[laura28]

Thanks for your reply - the house we have purchased is old and one of the major expenses is to get it wrapped and further insulated as well as a small modest extension. The figure of €80k is ball park. We are in the fortunate position of having some of our mortgage on a tracker rate and the remainder on 3.15%.