How would you structure financing this?

[Isohungy]

We need a new kitchen (it needs so much remedial work that it'll be a costly refit) move some walls and do general updates like new front door etc.

This is estimated to cost about 19/20k.

We are borrowing 6k from the mortgage (just remortgaged) and will take a personal loan for the rest.

I'm torn, we have had an expensive few years starting up a new business and renovating our house- we've been doing everything cash but now it's time for the final push to finish off and can't wait facing another 3 years to save the rest as it's impacting our quality of life (house was in a terrible state when we bought)

Would you: take a personal loan for 14k and use the 6k from mortgage, knowing the repayments will mean no decent saving can be done for a few years.

Or:

Take a 20k loan, put the 6k aside and continue adding to it so we can have a decent contingency fund incase difficulties hit with self employment/general safety net?

Either way we plan to make bigger repayments when we can to clear the debt quickly.

Additional info that may help you advise: the house value will even out (possibly outweigh) the loan so we will recoup the money.

We aren't planning to move for the forseeable as we are in good location for kids schooling etc.

We could put a much cheaper kitchen in with less units etc (we aren't spending loads, about 7k with appliances) but in order to make the house really work for us as a family it seems a shame to skimp now and end up with a clean nice kitchen but not functional for our lives. The labour costs are the biggest thing as we need lots of electrical work etc. Could probably save 5k over all if we did bare minimum.

Obviously no debt is the ideal but the alternative is selling up and spending more to move...

Is £6k the most you can remortgage for? It tends to be much cheaper borrowing.

How much will the house be worth once the work is done? If the value won't be much increased you might just as well move.

Or could you stage the work and pay for it as you go along?

A mortgage will be cheaper than a loan so that's preferable.
Why are you in a tearing hurry to pay back? Instead of using money as overpayments, keep it for building up reserves.
Arrange the loan and the mortgage, right at the beginning, so that you can pay back some of the loan when you have completed the building works, by remortgaging the now more-valuable house.

Is £6k the most you can remortgage for? It tends to be much cheaper borrowing.

No, this isn't true! People misunderstand because they don't ocmpare the loan length.

The total cost over the life of the mortgage for the additional borrowing amount is generally much more than if you can get a decent personal loan.

For example. Borrow £20k at 5% on a 5 year loan term = £2,645.48 in interest with a monthly payment of £377.42

Borrow £20k at 2% on a 25 year mortgage... and whilst your additional monthly payment is only £84.77 you end up paying £5,431.26 in interest costs over the life of the loan.

Now, what you could do is to borrow on the mortgage but make over payments so that you pay off the additional borrowing over a much shorter time period or 3-5 years. Then you benefit from the lower cost of borrowing and the shorter timescale.

Tbh, I can't imagine doing expensive work on the house and taking out a loan to do it. I'd end up with a lot of sleepless night worrying about money.

Is there no way of doing the work in stages so at least it's a smaller loan that you can pay off before continuing?

For various reasons I can't go into without outing myself, 6k is we can release on the mortgage.

For arguments sake. We bought the house for 100k (just a figure) and the house is really worth up to 140k. We do not expect to make money on it- especially in the case of brexit and general market, but we plan to stay long term and the house generally ticks all boxes.

We have considered moving and spent 8 months seriously looking. There is nothing on the market worth moving for and ultimately after every viewing we'd come back and say "ours is better.. we just need to get our heads down and finish it"

We had to remortgage before we did the rest of the work.

Jojo what you say rings true in that this is why we have done stages (room by room) over the past three years, personally I think we've done well to get this far now- hence not having the money saved for this bit of work.

To the poster who asked about the rush to pay back- I am generally debt adverse, and would feel better paying it off as quickly as possible for my own mindset.

RE moving, basically house prices have increased along with our income, so it's all relative. When we looked to move we wouldn't be in any better situation and in most cases back to square one as everything needed redecorating/bathrooms and kitchens etc... and really we just love our house.

Hm... Maybe in your shoes I’d borrow the money, do the work and then remortgage again to pay of the loan. Interest is lower on mortgages and your monthly outgoings will be lower. If you’re doing well financially, you can always overpay the mortgage.

We got our kitchen from wickes on finance 0% interest for two years.

Paid 10% deposit. We're extending and do have the cash but wanted to keep money back until we're completely finished with the build. Really pleased with the kitchen btw.

So we will be on a 2 year fix so it'll be 2 years before we can do anything mortgage wise- We've currently got a shit deal because I didn't have enough books Self employed.

So do I take the loan now, sort the works. Over pay either the personal loan or mortgage then remortgage again at the 2year mark to swallow the loan?

If it's a fix, then I'd overpay the loan as much as possible (due to higher interest). Then you could take stock to see if you'd like to add remainder to the mortgage depending on what you've got left. And as PP said, consider 0% finance. Either offered by a shop or put what you can on a 0% credit card.