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!

You don't have to remortgage, you can just extend it a bit and if you have plenty of equity in it then this probably makes the most financial sense. Interest rates are still pretty low and it is probably one of the 'safest' ways of borrowing. With inflation savings will probably be worth less than what you pay back on what you borrow, if you see what I mean.

Bank of mum and dad :/

General renovation = Saved and completed a room every 6-12 months.
Plastering has been done professionally but we have done the rest.

Bathrooms = saving up. They are serviceable and white thankfully so we have lived with them for 5 years with some new paint and cheap lino. Hoping to replace at the end of next year.

Kitchen = savings and re morgage. Again, we painted it when we moved in but it it will need replacing in a few years. Will be when we our current mortgage deal ends in 2023, so spring 2024. Probably looking at about 15-20k to do.

We save up. Just got enough to do the bathroom now after five years, kitchen is a distant thought and we'll probably move before it's done. Not everything needs to be brand new - functional and not hideous (which was our criteria for buying) will do. We don't like having debt and have never taken out loans for anything except the mortgage.

Our friends take out a huge loan every few years, do a big project and then live like church mice to pay it off. They have a beautiful home but I'd rather be able to get a takeaway or a haircut when I fancy it.

Mixture of savings and very low cost (<2%) finance

We save always, even if it has meant waiting a bit, but apart from the bathroom which was horrendous everything in ours was liveable with for a few years.

Anyone who saved up over the last few years has paid more- interest rates are so low that the cost of borrowing far outstrips the rising costs of materials and labour.

Last year we got a new kitchen (and other building works) - £25k loan which will cost us approx £27k to pay back over 4 years. If we'd saved up we'd have about half the money saved by now but the cost of the project would have risen by at least 8%.

Therefore, my answer is always borrowing but within your means. The repayments should never be more than you could regularly save.

Our bathroom was in dire need of replacing so we paid for it on a 0% credit card. We won't be doing much of anything else until it's paid off which should be in about 18 months.

We'd like to change the layout of downstairs and improve the kitchen which will be expensive. I think we'll probably up the mortgage a bit to do that. The kitchen is useable but tatty, and I don't want to change it unless we're doing it 'properly'.

@over2021 Yes but you always have the risk of being unable to pay that loan off due to job loss. To me 25k is a huge and quite terrifying amount for something that isn't essential (like a mortgage or education).

Some people are risk-averse, some aren't. Low interest rates make loans very tempting, but there are risks involved.

Thanks everyone, lots of food for thought, especially re. the high opportunity cost of saving vs. the potential for our mortgage rate to increase.

I take the point about needing to assess our own individual circumstances, but here's our own background in case anyone feels nosy!

The kitchen
Functional but depressing. Maybe 3m total of counter space, 1m of which is constantly occupied by dirty dishes as we are tired and lazy. No freezer and a tiny undercounter fridge, which hinders us from batch cooking, keeping ice or switching the dog to a (cheaper and healthier) raw diet. Hob works but sometimes switches off without warning and continues to release gas. Oven works but timer goes off randomly. Drawer fronts are on but the backs of the drawers and cupboards are all off which disastrously, has allowed mice into our cupboards and drawers, bleurgh. All this means we're eating a lot more takeaways than we used to!

Income
Net joint income of about £4800 per month. This is three jobs between the two of us so in the longer term is probably more like £4400. However we're looking to supplement our fun funds via a bit of tutoring and matched betting, maybe an extra £200 per month but not reliable.

Joint outgoings approx per month
Mortgage £1300 per month - we're 8 months into a 2 year fix at 1% or something ridiculous like that.
Bills £410
Insurance and unions £90
Public transport (we don't have a car) £285
Food £100
Subscriptions and charities £60
Dog stuff £150
Gym/climbing £100
Haircuts £20
Fun £550

Joint savings per month:
courses/self-improvement £100
Holidays £100
Sinking fund £300
Retirement fund £150
Wedding £200
Gifts £60
House purchases - whatever is left of the fun and transport money at the end of the month. Roughly £450 per month at the moment.

Extra expenses
We're also thinking of paying for driving lessons (pass plus, £350 total) and a cleaner once per fortnight - £90 per month?

Kitchen repayments (or savings)
Would be roughly £500 per month all in over 3 years. The money would come out of reduced general house purchases (£350) and reduced sinking fund contributions (£150). The interest rate on repayments would be 3.4% if we got a personal loan for the whole thing.

OP, these are quite high outgoings as a percentage of your income. Do you really only spend £100 a month on food? Compared to £150 on dog stuff?

It doesn't sound as though you can afford home improvements at the moment if the repayments would be £500 and you definitely can't afford a cleaner @£90 a month!

@over2021 oh! do you think? We are saving nearly a third of our income at the moment into the various pots, and while we'd be reluctant to reduce any of the saving streams, it felt logical that the money would come out of our two current "house" saving streams.

We currently have around £1000 in the sinking fund and £500 in the house purchases fund, and these would hopefully still be growing but more slowly.

As for the food and dog - we are spending more on food tbh at the moment as we're eating at least one takeaway per week. A couple of years ago we were spending something mad like £15 per week on groceries as we ate mostly vegan and had a great pantry, so we know that reducing our bills is possible - we're not so tight now and I'd want to spend a bit more on luxury items, but £25 per week is realistic for us.

The dog has been way more expensive than we'd anticipated. The £150 was meant to cover everything including average vet bills but he needed to get his stomach pumped three (!!) times in the first 3 months we had him, so we burned through his fund and dipped into our sinking fund to pay off the insurance excess. More recently we've paid for a session with a behaviourist and now dog school.

HOPEFULLY as he becomes a more normal dog these expenses will level out over time. His routine expenses would be £30pm for insurance, £20pm for routine meds and check-up subscription, £60pm for food (£40 once we move to raw) and then some for treats and the odd toy. This would double if my office days increased as we'd then need to put him into daycare for one day per week.

Our kitchen is on finance, and we save up for everything else

We save up as much as we can, but also cut our cloth. A basic IKEA or DIY kitchens kitchen, laminate worktop, stand alone appliances.

If the cooker or fridge is failing now, consider replacing it but keeping the new one for the next kitchen.

Maybe split the difference - hard saving for 18m and then borrow the rest.

We moved in 5 years ago. Last year we got the en-suite done, last month the carpets and hard flooring done and kitchen is next. We’ve been saving but do plan to put some on the new Tesco interest free credit card so we get tesco points but the £20k we need is in the account. We did also consider remortgaging but managed to save enough in the 5 years.