Pay off mortgage or pay for extension?

[Run247]

Just looking for opinions on what you'd do in our situation. We keep flip flopping and can't decide.

Husband and I are in a good position with our mortgage. We have £150k savings and £175k left on the mortgage.

We have two options at this end of this term:

1. pay off mortgage and borrow £25k from family- repay in 6 months
2. extend kitchen side return at a cost of about £100k and remortgage for approx 3 years.

Other info:

• Our kitchen is a small galley. We would be extending to create a family kitchen /living room. The current living room is separate. I have concerns that when we have a family that I won't be able to watch the kids while cooking.
• although it's just two of us, with any luck we will be 3 in the next year or so. This will mean our income halving while I'm on mat leave. We could still live comfortably on my husband's salary with a mortgage, but being mortgage free by the time I'm on Mat leave would be nice

3) Moving house is not an option as it would cost £200k to upgrade to a similar house with an extended kitchen in our location. 3b) not interested in moving out of our part of London or out of London itself

Makes sense to extend:

-Moving would cost more money and it sounds like you are not happy with the kitchen how it is.
-You can afford the mortgage on one salary.
-Better to get building work out of the way before having a baby.
-It is a long term investment which will increase the value of your house.
-It will be lovely to have a new kitchen diner/ family room when you are maternity leave and you will be able to keep an eye on child/children when cooking.

Thanks Hopeful, everything you say makes sense and is what my gut tells me to do. Our current kitchen is not fit for purpose, although we could renovate and not extend.

Meant to also say- the hideous cost of the extension is what is making us pause. Even though we could afford it, it seems unreal to cost so much.

100k seems very high for a single storey kitchen extension, even in London. Is that with or without VAT?

We've just paid 60k with VAT for a 40m2 extension, we are out of London though.

Hi Rumpy,

£100k would be our rough all in cost with building work, kitchen fitted and VAT.. Was yours for building work only or the kitchen itself too?

In your position I would do a (cheaper) extension. I'm no expert but I can't believe you have to spend so much. If the house next door did the same but with a lesser spec and for 20k less would your house objectively be worth much more? Ask an agent. I dont see the point in paying off the mortgage when you're so young, you have time and I think its nice to have savings so you continue to have options. But if you do opt to pay off the mortgage DON'T borrow the money from family - keep the 25000 as outstanding. My understanding is that its actually good for your credit rating. I hear old people struggle to get certain credit because they have long paid off their mortgages (although maybe that doesn't apply to younger folk? ) i think it is also easier to extend a mortgage and borrow extra with an existing lender should you need to in future, rather than have an unmortgaged house and take out a new mortgage. Could be wrong on that though.

I would always pay off a mortgage before doing anything non-essential that's a big expense. The piece of mind from knowing the roof over your head is sorted is immeasurable. It depends on your attitude to life though, different strokes for different folks I guess.

Pay off mortgage. You will save a fortune in interest too (check how much it will cost you to pay though ours has an early re payment charge if over 10% in a year.
With no mortgage you will quickly be able to save for an extension.

No-one has to be in debt to maintain a good credit rating! If you have no mortgage get a credit card, spend a bit on it each month and set up a direct debit to pay it off in full every month so you don't pay any interest.

I would pay off the mortgage as well.

I would get a few quotes for your extension as that does seem high. If you could do it for £75k then is extend and put £60k on the mortgage and keep £15k in savings. If you remortgaged after your extension and lump sum you could get a lower interest rate as your LTV should be more favourable.

£150k

I'd spend half of that on the extension and the remainder to reduce the mortgage.

Everyone wins!

Sadly, that's not high for London. Everything is more expensive here. We've been told it will be £150k to extend our house to the side and rear, and that fits in with what the neighbours say.

Having said that, I would do the extension. That's not a huge mortgage to keep paying over a long period and the value of having a home you can stay in for longer is huge. Most people would need to extend their mortgage to pay for it so you're saving yourself a lot of interest and getting a home you love.

Pay the extension now keep the mortgage, presumably you're on a low mortgage rate???

We are in london also. We had done cheap renovation work done initiall 6 yrs ago, and then more expensive 3 yrs ago. Tbh, it was better spending more, esp given the capital appreciation of property in London.

Pay off the mortgage as if interest rates go up drastically you won't be shafted.

When I read the thread title I thought 'pay off mortgage', but after reading what you've written, I'd probably go for the extension as it will add value to the house and it sounds like you'd still be able to live on one salary.

I think you need other quotes, thats excessive even for London prices (unless you've budgeted for a very expensive kitchen). Get proper quotes and perhaps lower the spec.

As others have said, it comes down to how you want to live your life. For me, especially with having a family, trying to make friends with other new parents, inviting them over and having "family" space, and then later having the ability to watch / interact with toddlers / children whilst you cook and faff about in the kitchen - that is more valuable to me than having £150k sat in the bank. Of course I'd like a buffer, and I think you can still do that and have the extension.

You will not lose money, but you'll have less savings at your disposal, the rest will be tied up in the house.

Thank you all for your comments for your thoughts and comments.
We have also looked at renovating our kitchen without an extension and could easily do that for £15k, but I do worry that it would be just a shiny and new version of the existing kitchen.

I'd love to be able to spend £50k on the extension and the rest on the mortgage but realistically, the building work would be at least £60k. I will get some more quotes though because from your replies and other forum searches, the cost does vary widely.

I'd extend and use the extra £50k to pay down the mortgage. A £100k mortgage is nothing in London especially if you are both on good wages - with repayment it is likely to be less than £500 a month. You can start overpaying the capital when you are earning again. You sound as if you are relatively young and have many years to clear the debt.

Sorry, £125k mortgage - so about £550-600 per month. Still not a huge amount for London.

What was your decision in the end?