should we borrow £10k more on our mortgage?

[RillaBlythe]

We have a mortgage of £70k on a house we paid £150k for. I think we would get at least £150 for it, if not more - we aren't looking to sell any time soon anyway.

We have £10k in savings.

We want/need to do about £10k of work on the house - boring things like re-roofing. I feel really uncomfortable with the idea of spending our savings doing that because then we wouldn't have any savings for emergencies etc.

We currently pay £250 a month on our mortgage & could afford to go up a little in our payments. We have to re-negotiate our mortgage in a couple of months anyway as it was a 2 year mortgage originally.

Don't know if that is all too much detail, but wanted to put in any necessary information. I am really risk averse when it comes to money so I wanted to get some thoughts on the matter. Thank you!

Have you looked at Sold prices over the past few years on similar properties in your street/neighbourhood? Doing that may help you get a better feel for what the current resell value of the property might be, if the housing market remains the same.

Re-roofing I feel is an important thing, it helps ensure the building remains standing and is water tight.

10K in savings I personally feel is low... but I like having a big safety net, so like you I guess in that I am risk adverse. What is 10K in terms of number of months salary - More/Less than 6 months salary?

£250 a month seems low to me for a mortgage payment. Mine is just over £400 on a 60K mortgage, so I'm wondering why your's is so much lower. My current interest rate is .5% above base rate, so it's 2.5% I think. Length of mortgage could well be a lot different, though I do wonder why your payment amount is lower... interest only mortgage?

As your current mortgage deal is coming to an end soon and due to it being winter now, are you able to hold off doing the roof until you have a new mortgage deal in place? Adding to the mortgage will mean a re-mortgage I think, so attracting fees, whereas changing your existing mortgage deal may not involve fees (depending on the lender and assuming you stay with the same lender).

I feel you need to consider the upfront fees you are likely to pay, the interest you are likely to pay (over the period of the entire loan, so you could be talking 25 years).

Is your credit rating good? Could you get a loan for the re-roofing cost, rather than adding it to the mortgage (thus possibly increasing the number of years it takes to pay off)?

Thanks for your answer - lots to think about. It's my first house/first mortgage so it is all new territory to me!

I have looked at recent property prices. Our road is a funny one in that there are lots of different styles of houses - there are only 8 (I think) that are the same style as ours, last time one of them sold was 4 years ago for £220k! We bought the house next door two years later for £150k. So it is a bit hard to predict - one similar-ish has just sold for £225k. I don't really know. I have wondered about getting a valuation from an estate agent actually.

10k is about 5 months salary. We are pretty much redundancy-proof & DP's salary increases yearly at the moment, but he is not paid particularly highly currently.

The works aren't urgent but could do with being done in the next year or two.

Interesting what you say about re-mortgaging & fees. I assumed that we were re-mortgaging when this deal comes to an end anyway, is that not the case? We paid fees of about £1k I think when we got this mortgage, which seems sort of negligible when you consider the whole!

Loan repayments have looked higher than our mortgage repayments are, but I have only glanced at them. I will look again.

Have a play with MoneySavingExpert Mortgage Rate Calculator. Look at what your existing lender is likely to offer you in terms of interest rate, see what the monthly payments are likely to be if you did add 10k to the mortgage.

When I changed lender, I paid a fee. When I changed type of mortgage with existing lender I didn't pay a fee, not sure why, maybe it was a special deal they were doing, or maybe they didn't need to do much/any paperwork. So it's something to look into, when your current deal ends what costs will there be getting a new deal, as that cost will need to be paid somehow.

Loan repayments will be higher as it's over a shorter period of time and at a different interest rate. What I think you need to look at is the overall interest paid over the loan term... so if adding to the mortgage, how much extra interest do you end up paying over the entire loan period.

You say your existing mortgage deal is for 2 years... but I presume that the loan term is not 2 years... but something like 23 years, 25 years? It's the guarenteed rate of interest that is over 2 years I expect. Is that how it is?

I found that when my fixed rate ended, I was better off going onto variable rate as over the past few years the interest rates have dropped so much. Rates may well stay low for many years to come, or they may not. I can't see them going down any more, only movement I can see there being is in the upward direction though when that will happen is anyone's guess.

No, the loan term of the mortgage is a two year mortgage. We bought when DP was still a student (& I was a SAHM), & while we initially looked at guarantor mortgages with my dad as the guarantor we got a better rate if we just got a straightforward mortgage with dad on board. But because he was 2 years off retirement it was a 2 year only mortgage.

I will have a look at that calculator, thank you, & will have a look at some loan terms. I see what you mean about adding up the overall interest paid.

Ah, sorry your mortgage setup seems more complex than mine. So your Dad being on board means you have a low rate I guess... but if he's now at retirement age, will that mean he can no longer assist with the mortgage? That could mean you won't get such a good deal, thus have higher monthly payments on the same loan amount.

MoneySavingExpert: Loans Calculator will give you details about interest rates on un-secured personal loans.

£10,000 over 3 years I expect could be done at 5.2% APR or there about. So costing you around £11,000. Could you afford the payments, possibly around £300 a month?

Adding it to the mortgage would cost you less per month but you don't know what the mortgage rates will do over time... it could be over a long period of time, such as 25 years. Rates are low now but even 20 years ago the rates were a lot different... 10% and higher.

So it's a gamble... and if you are risk adverse then having a fixed length loan at a fixed interest rate could well appeal to you, rather than adding it to the mortgage whose rate will change over time (as you can't fix if for the next 25 years to my knowledge).

You have good equity in your home, so worse case you sell the house. Local house values are higher than your purchase price and a lot higher than your mortgage, so your mortgage would be paid off if you sold your house.

If it were me, I would take a fixed term loan, rather than add it to the mortgage. I don't know why exactly but I think it's due to knowing what I will repay and when it will be repaid.

Found a guide on MSE which is about the sort of thing you want to do... move debts to mortgage.

I've done various things to my house over the last 20 years ranging from extensions to new bathrooms and, each time, I've financed it by re-mortgaging for a slightly higher amount. The way I rationalise it is that the value of the house improvements (unlike a car or a holiday) will be realised when the place is sold and that, in the meantime, I still need some cash on deposit in case of emergencies.

Whenever I've re-mortgaged in the past (and this may have changed) I've always found lenders that are happy to do so for very little in the way of admin fees. As long as you have the equity in the house and you can afford the increased payments I'd say it makes perfect sense.

Have you looked at the lending multiples to see what the banks will lend you on your joint salary? Whilst you may think the monthly payments will be affordable, the banks might not agree. Depending on who you're with you may find the bank will only lend you 2 x joint income. Would that cover the £80k you want to borrow?