Remortgage funds - where to put?

[MoneyFunny]

We have our house £150k mortgage worth £220k/230k now.

We want to stay put, and there is just enough space to do so, nice area, near school, small third bedroom for 2nd DC when they hopefully come along. Ideally we want to extend (shouldn’t be major issues, neighbour has extension, relative is a planning officer and another is an engineer so we have a good idea of options) but quotes are looking at £100k for single storey to add dining/utility/WC shower and extra lounge).

Not enough equity currently to borrow all of that and want a second DC so don’t want to get a loan as well as remortgage.

My question is - we remortgage and get say, £50k, where do we put the money until we are ready?
Normal account? ISA? S and S?

Or do we not remortgage at all!

Also going to post in house forum to see if I get advice there too

Why would you take a remortgage and start paying interest to just put it in a bank? You'd have to ensure where ever you put it the interest was far outweighing the interest you're paying on it. Which i think would be unlikely.

Ah so this seems like it may be a bit of a bad idea then? I know a couple of people who have done this and made good interest to boost their money overall.

It would be madness to remortgage and start making interest payments now, unless as PP says you are able to invest that cash and reliably make more interest/capital gain, than it's costing you.

If it were me I would work out what repayments on that amount of borrowing would cost me and put that aside religiously into a savings account/S&S ISA/investment account (depending on how long you have to invest it) each month. You may find that when you are ready to do the extension you already have a chunk of the cost saved and are able to borrow much less.

If it's going to be 5+ years before you are ready to extend then a S&S ISA on a platform like T212 would allow you to put up to 20K a year into a global tracking ETF e.g. VWRP which should give you a good return.

It only makes sense if you are guaranteed to earn more in interest than you pay in interest and fees on the additional borrowing. That’s not very likely at the moment. Borrowing long before you need the money would not be a wise idea. You would be better off trying to save a bit more so that you can put some towards your extension.

You could only do this if you could get a significantly better rate in cash savings after tax (unlikely, especially if you are a higher rate tax payer), you're lucky with premium bonds or investments go your way. Depending on the timescale you could win with investments, but it's risky. People who've gained by interest have probably been lucky with timing, eg took an old cheap fix then interest rates rose.

You also would have to consider that as you increase the percentage borrowed, the interest rate is usually higher, eg your current rate to value could dip below 60/70% which means a lower rate than if you took out £50k and ended up above 80%.

If the work is likely to be a couple of years or more in the future, you could save hard and see how far you get. So you will earn interest instead of paying it and you will have money to put towards the work, meaning you'll be able to borrow less in the future. Eg if you could save £1000 pm for 4 years, this would be over £50k with interest and you'd then be able to fund the extension by remortgaging the rest.

If it's likely to be more than 3-5 years in the future, you could put the money in S&S ISAs but be aware that this could mean postponing the work if the value drops to avoid losing money. Or you could save some and invest some.

If you have a second Dc they can always share with you or your other child for the next few years anyway.

Thank you all for this advice
Im a generally measured and reasonable except when it comes to money, where I tend to make rash decisions. I’ll weigh this all up.

This probably made sense when interest rates were lower. It wouldn’t be as good an option now. You’d really struggle to get a good enough rate to make it viable.