How do you pay for big projects?

[Leypt1]

Hi,

We are complete DIY noobs so apologies for the noob question. We bought our first house last year and it needs a full cosmetic makeover.

So far we've done most of the work ourselves and where we've brought people in (replastering, repairing windows) etc., we've paid out of our savings. Likewise furniture which is mostly second hand.

We'd like (need?) a new kitchen and bathroom as currently we don't have space for a freezer or dishwasher, and the bathroom has a 20 year old carpet and a crack in the paintwork which is growing black mould.

What is the normal route for paying for these large scale projects?? The combined cost of labour and materials for the kitchen is approaching £15k which it would take us maybe two or three years to save for (and that's without buying other essentials which we need should like bedroom curtains).

The kitchen supplier does 0% finance meaning reasonable repayments over three years. What about labour? Should we be looking at 0% credit cards?

We typically never buy anything on finance and our only debts are student loan, the mortgage, and a card which we pay off in full each month to help with our credit rating. Just curious as to whether it's considered reasonable and normal to pay using finance (and if so what route people use), or whether the default is actually to save?

Thanks!

Weve always taken loans out by re-mortgaging to do expensive works as its normally the cheapest way to get a loan.

You borrow or save the money up. You ask parents? Most people extend the mortgage if they don’t have an inheritance or money saved up. We had a combo of savings and mortgage. No other magic money tree options really. Play the lottery?

We saved up, so it took us 12 years to work our way round our 4 bed semi doing all the stuff that we wanted to do (boiler, roof, all new windows and doors, etc). We did a room, then saved up for the next one, then the next one etc. Only did the kitchen when we got an unexpected inheritance.

I’m not on a big wage and have a similar spending approach to you. I got some money when my divorce went through which covered my bathroom and I’m saving up for my kitchen. In a year I will have saved half and have had a pay rise so I’m planning 50% savings and 50% credit for that, assuming the repayments aren’t too much. But I keep costs on things like my car as low as I can and am a bit older than you, so no student loan these days.

Interest free finance deals

Loans, remortgage, credit or hard arse save

Extending the mortgage

I saved up and then got it done.

Remortgage :o feels so drastic!! Very interesting to see range of responses, thank you.

Our current thinking is to split across a couple of 0% credit cards and having read the thread this now feels more...normal? We could of course save, with the end result being that we have the kitchen at the end of 3 years instead of the beginning (bad), but with fewer long-term financial burdens (good).

Decisions, decisions!

We've always saved. We did have a mortgage to buy the houses but no other credit.

You buy knowing what must be done in the short term and what can wait 5 years and what can wait for 10 years/possibly never get done.

You live with stuff that can be lived with while you save up. If there is stuff that can’t wait and you do t have the money, borrowing is the only way.

People have different tolerances for what they would love. It can live without and what they feel they must have at once. Some will extend the mortgage for a new kitchen or to have an extension, whilst others will live with the older/old/ancient kitchen for 5-10 years. It’s the kind of decisions you take at the point if buying a property that in your view needs work.

Ive known people whizz round a whole house and gut it and do everything within about 6 months - amazing pace of change and huge spending. Most of it, I’d have been happy to live with long term, but they weren’t. I’ve known other people where someone was in the trades and they called in lots of favours so the work was done cheaper.

Ive also known people say 20 years after moving in that their mortgage still has 20 years to run….because they kept extending it to pay for work. They acknowledge they won’t retire until after 70, but they have a lovely lovely house.

Some of your choices depend on what credit is available to you and how much extra you can pay in monthly payments. Adding to the mortgage is often a cheaper rate, but of course you’ll pay it for many years. Credit cards and loans have varying interest rates and loan periods. You need to know what you can comfortably afford. In the end, your spend needs to fit your budget and not the other way round.

Personally we’ve saved up. That goes for cars, DIY, holidays etc. It’s a personal choice and over the years has saved us vast sums of interest payments. Moving to houses that were decent even if not with the latest decor always meant it wasn’t the case that anything HAD to be done at any specific point, plus we don’t mind not having the newest stuff and would rather buy great quality that will last, than cheap which won’t.

In my mind, a decent and usable kitchen can keep going easily for 5 years while you save up. Not having the additional debt can also make it easier to choose to take longer maternity leave or work part time etc, but it’s all personal choice.

Borrowing is very normal. Op, you can reassured that loads of people do it all the time for all kinds of purchases. One thing to be aware of perhaps, is a cycle of debt that lots of people struggle to get out of, and which impacts their life. They borrow £15k for a kitchen and after 4 years are close to paying it off, but by that time have taken out a car loan of a similar amount. By the time that goes, another debt of £25k has appeared for an extension. Lots of people live like this and there’s nothing wrong with it, but it’s worth being aware how many hundreds per month are going on that stuff. Might sound tedious, but is it at the expense of pension payments or simply meaning there is no flexibility at all re both working full time when kids are very small, or needing to work beyond retirement age. Think of it all as part if the bigger financial picture….and then do what works for you.

I save half and borrow half.

Everything Wombat said.
Different people do different things.
Me, I'm a 'saver' but it depends how useable / unusable the kitchen and bathroom are.
0% finance usually means the price is higher in the first place - they are just incorporating the cost of the loan into the cost of the thing they are selling you. But many, many people would accept that is just the cost of getting the thing you want, when you want it.

We save like mad, spend it on something then start again. In the 10 years we've owned our current home we've done double glazing, new bathroom and shower room, front and back gardens and replastered the hall. We just did an extension into what used to be the garage and that was funded 30% by us, 20% loan from my Mum (we pay her back £500 a month), 50% bank - we remortgaged to cover the cost but reduced our interest rate and mortgage duration into the bargain.

We're now saving up again to do the kitchen, but given the increase in the cost of living and raw materials, that one probably won't happen for 1.5-2 years....

Roaring inflation might make saving a lengthier time than anticipated.

We added our huge project to the mortgage but our rate was under 1% and at the time, we couldn't see any sort of rise in the near future. Our project was also significantly larger and more expensive than yours

Smaller projects are saved up for and paid in advance. We keep our borrowing to the mortgage only

We have an interest only mortgage and save the extra money into a seperate account to pay for any renovations. If we finish all the renovations or don't have anything which is urgent we occasionally bung some extra into the mortgage to reduce the mortgage. Worse case scenario at the end of the mortgage period if we hadn't managed to repay they we would sell and downsize.

I save generally, but if I'd saved £10k and my project was £15k and I had an interest only credit card option I'd put £5k on that no problem.

A mix of the above. But in a high inflationary period it would make more sense to borrow at low (fixed) rate and pay it back over time rather than to spend time saving, because the value of the debt will decrease over time rather than the value of your money if you try and save.

As in the relative value of the debt sorry.

I would save up. If you go for the credit cards/loan then make sure you still have enough savings for the emergencies which might come up in the meantime. Things are going to get more expensive in fuel/food/travel etc with inflation as it is, so I'd be nervous about taking a loan I couldn't afford to pay back.

I get an annual bonus. When its paid (generally in September) I take it and pay some debt, give myself one personal spoil like a perfume or pair of boots or whatever, and the balance goes to the property. Its never enough for a massive project like a bathroom or kitchen gut and redo, but it has covered new carpet in a couple of rooms, a new shower box and tiling, painting of interior lounge and dining room etc - all of which have made a big difference in the overall look & feel of the house. And best of all, no debt.

Ask yourselves: does the kitchen function safely as it is, in that you're not pulling drawer fronts off etc? If it's safe and useable, then my advice right now is to save and buy later. If inflation runs away with itself, and fuel/energy costs rise even more (likely), you may find you struggle with normal bills, and need the money for something else (new boiler perhaps? new car to get to work?) - and then not be able to pay the 0% payments, resulting in paying interest on the whole of the remainder and at some really high rate. You only have to miss ONE Payment at 0%, for the WHOLE amount of interest to be charged with some 0% deals - check the small print, or if you've still got £6k left to pay on a credit card, you pay interest on the WHOLE of the remainder once that min payment has been missed.....then some other crisis occurs and you end up paying a higher % still should you make a second default. This is how folk get into serious debt. Don't do it! The time is not right with bills soaring!

I was very very lucky in the era of 15%+ mortgages, because I had my younger brother as my lodger so didn't suffer as others did, but many of my friends lost their houses because they had no spare cash to pay their mortgages. Even afterwards they were relentlessly chased by the mortgage companies for accrued debts.

The truth is we do not know how this energy thing is heading, so we do not know how energy costs will end up (sure as anything they will not go down), nor how inflation will pan out. High interest rates are a revelation to folk used to a rate below 3% on their mortgage! Even I'm concerned (no mortgage, no borrowed money, but our savings are not going to keep pace with rampant inflation)

My advice is simple: put up with what you have for now - you can always cheer it up with a coat of paint on the wall or new picture or curtains for now at minimal cost - and save save save. Yes, sure the cost of a new kitchen will go up, but I believe the cost currently is at max profit for the kitchen companies, given a leaner time for them with less people buying new kitchens (with higher energy costs, bills and inflation generally - don't forget food will rise due to a wheat shortage) then the prices will become more competitive, so you won't necessarily find the cost will go up as much as you'd expect when you come to get your kitchen installed.

For large projects we use 0 percent finance and pay it off before interest is applied, as rhe momey is better in our account than in the suppliers.