Would you have smallest mortgage possible or keep some cash back for improvements?

[Braverfeaver2]

We are buying a house.
We have the option to put all the money from the sale of our current house into the new place to give us a smaller mortgage.

Or keep around £20k back to do an extension.

Due to the different lenders rates this extra £20k cash would end up costing about £300 extra on top of the smaller mortgage ammoubt.

The house we want really needs an ex tension.

Would you have the smaller mortgage and try to save up slowly or bigger mortgage and do it straight away?

Bump pls

Can you set up an Offset account where your savings are accessible, but tied to your mortgage? You don't get interest on your savings, but you don't pay interest on your mortgage for the amount you hold in that savings account. That way you can pay off the larger mortgage faster, but still have access to the cash when you finally need it.

We did that, and took the extra £20k in cash. Put it in premium bonds until we needed it for the extension - which was delayed for various reasons (we had another baby instead!)
In the end we did far more work - we needed another bedroom - and having the £20k to present as "savings" when we wanted to borrow more was definitely an advantage.
I did make very sure it wasn't going to be frittered once we realised we had to put our plans back. It may not be the best business sense (interest costs etc) but it worked well for us. And we got at a good fixed rate, taking that uncertainty away.

By doing it will mean we have to move away from our current lender with an amazing rate to a fixed of 3% from another lender which I didn't think was very good.
My hats what's worrying me.

Depends, what's the difference in the cost (interest + capital repayment):

1. Over the life of the mortgage
2. Over the life of any loan you might take out for the extension
3. Keeping it in savings until required

Basically, go with whichever turns out to be the cheapest.

If you can easily afford your mortgage repayments with the bigger mortgage I'd do that and press ahead with building work, as saving takes a long time. Otherwise wait it out

From experience pay off small mortgage and then get new mortgage for extension. Easier to hammer through payments as otherwise the struggle with interest can be huge.

But also it depends on the mortgage amount, your income, the cost if the extension. Can you give more info?

It makes more sense ATM to throw all money at the mortgage. Save the 300 a month. You will take ages to get round to an extension

I'd possibly throw the extra 300 at the mortgage. However it really depends on all the facts and figures. How much is the mortgage? How much is the extension? How much are your repayments with both?

Do the math. You can get a 15k personal loan for circa 5 percent. It probably cheaper to have the lower interest rate across all if your mortgage and a higher interest rate on the personal loan. Remember to look at the interest rather than the repayments.