When doing major houseworks, do you borrow money or have all cash?

[Mamabear12]

We are planning to do a basement. However, it would cost around 300k. Do people borrow some money when doing this kind of work? Or is that crazy and you should have all the money cash? We own a good portion of our house, but still have a mortgage to pay. We have 50% cash to pay for basement, would have to borrow the other half if we wanted to do it now. However, we could wait a year to save more....but was just curious on what people normally do?

If not for basements, if you are doing a new kitchen, house extension etc.

We remortgaged to pay for our renovations. But it wasn’t in the same league as yours!

We also remortgaged. But it was "only" £50k

As the above poster- we remortgaged but ours cost £20k. I guess it depends on your budget and income, doesn’t it?! Our house is worth about £220k and we are very low income so we borrowed but we already own most of the house. I wouldn’t want to borrow more than would allow us to buy somewhere smaller outright if circumstances changed- but that’s just our own approach. Lots of people are happy to have huge mortgages and huge houses!

How essential is the space?
If it is really needed e.g. as a bedroom (can you put bedrooms in basements?) then borrow and do now.
If it is a 'nice to have' then I'd save the money up front.

Wow that's a lot! We borrowed then remortgaged once the work was done so we could release equity when the house increased in value.

Personally I work with cash, but that's just a old habit of mine. I'm not a credit kind of person. Just the way I was raised.

Pay for everything, sign nothing...

Anyway, aside from that my advice would be to get your bill of quantities and contract with your builder as iron clad as possible, preferably have someone (a frind/relative) who's in the industry look it over for you. There needs to be financial implications written in for the builder should they go over budget, or over time. It's the only thing tgat keeps you protected.

Also, decide everything you want before you start, even down to the door handles. This was the BoQ will be as accurate as possible. I'd look for a tolerance of about 2-4% max.

It's all about the preparation, and the protection from your end. The builder needs to be given a very strict plan, budget and time frame, or regardless of your original financial plan you may end up at the bank regardless.

Just my 2p. Good luck :)

Thanks for the responses. I guess it is not really needed. It would a luxury to have. So it makes sense to wait and save for the money. We would put a bedroom in the basement, utility, media room and small office space. The bedroom would be for guests. I know this sounds like a lot, but if we stayed in our area and moved to a bigger house, we would be looking at paying a lot more including stamp duty.

For the sake of a couple of years definitely save. Why pay for something with money that you might not have?

I would get an estate agent to look over your plans and ask, would I see the money back for this type of project. Fine if you plan to live in the house for a couple of decades but if you are thinking of moving on then perhaps not.

You have had a firm quote of 300k I presume from various builders???

Yes, spoke with 3 different companies that build basements. And yes, I agree, it makes more sense to save for it. I was just curious if people always pay for these big projects in cash or if some borrow. The more I think about it, the more it makes sense to just wait and save. Especially, as its not urgent and we have enough rooms.

I’d save and have cash. And it won’t be £300k, not once you include fit out...

Is your house detached??

I second Abby about specing it out really well. It is the changes and the extras where you tend to get stung. We have done 3 extensions to our house and we produced a spec each time on bricks, doors, windows, skirting board, electrics, quality of finish etc so everyone could be really clear up front.

Wow £300k is a huge budget. I’m guessing you live in a multi storey Georgian or similar townhouse- something worth over 1.5 million. I’m sure you’ve already thought about it, but make sure you’ll get your investment back if you sell and you aren’t breaching the ceiling price in your area.

I would definitely borrow if you can afford it and you’re confident you’ll get your money back

Good luck.