How to pay for kitchen extension

[Ellasshitholekitchen]

Hi there,

We brought our house in March 16 - saved up 30k for our 10% deposit.

It's a 70's build house, big 4 bed detached but not had a thing done in it since new, basically 40 year old kitchen.
We want to extend out to the garage to do a kitchen diner. We think this will cost about 30k. We then have about 15k in savings to buy the kitchen.

We thought we could add this onto our mortgage, but they don't consider the value of what it's worth after work has been done only now so we would be borrowing more than 85%

The kitchen needs doing so bad, tap drips, cupboards are a safety hazard. So I was just wondering if you would suggest a personal loan, credit cards or wait to save up more? I would really appreciate any advise. Thank you

A dripping tap is likely just a washer replacement and could happen with any age of kitchen. How are the cupboards a safety hazard?

We have a low interest rate & our mortgage works out at £1.40 per £1 borrowed.

A personal loan would be cheaper, but extensions have a nasty habit of going way over budget. Add another 25% to the extension quote. You never know what the builders will find when they start work.

I would save up. It's the lowest risk way of doing it, by the time you've saved & done it you'll be out of your introductory mortgage rate. You can remortgage penalty free at a better loan to value.

You don't need 15k for a new kitchen

I would save. At least, save part of it (depending on if it really is a health hazard, or if you just don't really like the style - being 40 yrs old doesn't necessarily equate to being dangerous)

Save.
You saved £30K for the deposit and have £15K for the kitchen. So you have an income that allows you to save.
Why would you want to pay huge amounts of interest?!!
Your kitchen is not such a safety hazard that you need to spend £45K plus interest
You just want to remodel and update.
Sounds like a leaking tap and loose cupboards doors, easy to fix cheaply.
Do you have a fixed period on your mortgage? The only way I would borrow money for this is:
Save. Wait til end of mortgage period. Remortgage with possibly higher LTV if prices rise (or with a 95% LTV if the mortgage rates were still low) - borrow at mortgage rates, but borrowing less because you've saved in the meantime.
I'm 3 years into renovating my house bit by bit and I'm so pleased I haven't wasted a penny in interest

We financed ours with a combination of savings, personal loan, interest free credit card balance transfers and interest free credit from Ikea for the kitchen units. We had saved about £35k over a few years and needed to borrow about another £12k

Personal loans are really cheap right now. If you can save £15k in a short period of time, you can afford to repay a loan.

Obviously waiting and saving is the best way, but if your income is secure and you want to get on with it now, it shouldn't cost loads extra in interest, providing that you can get the good rates.

Adding the cost to the mortgage might not be cheaper, because it will be over a much longer period of time. The interest rate on our mortgage is tiny (about 0.5% pa) and I wanted to keep it separate from any other loans - secured loans had fees anyway, that made them more expensive.

Our personal loan is over 3 years and there's only about £500 in interest payable. Even if the interest rate on a mortgage is less, more interest will be charged if it is payable over 10-20 years.

Personal loan seems like the best bet to me but I do think your price for a new kitchen is excessive.

Could you not whack a cheap kitchen in til you've saved up for the extension?

We are currently saving for a kitchen extension and garage. Our neighbour has had a quote for a similar amount of work so we know a rough cost. We have said that 2020 is our target but actually it is more likely to be 2018.
It really does depend if it really needs doing. Ours is purely a lifestyle choice. It can wait. Therefore we won't borrow. If it can't wait and you have a choice for how to borrow, can you look at a combination of interest free credit cards and personal loan? Mortgage borrowing is an option, but over a long term it can be more expensive.

When can you remortgage? We remortgaged to do ours. We'd been in the house 4 years during which time we'd paid off a chunk of the mortgage and the value had gone up about 40% so we took some of the equity out.

Yes, I think it probably is more expensive over the long term because you're repaying it over say 15 years in our case but due to the lower LTV we needed, we got a lower mortgage rate & our monthly payments stayed the same even with the chunk of equity we took out. We wouldn't have been able to use loans / credit cards anyway as it was too expensive (big extension) but would have meant an increase in monthly outgoings.