Extension/Kitchen or overpay mortgage?

[AutumnLeaves5]

I’ve been thinking about replacing my kitchen and having a small single story extension to allow for a downstairs loo. However, given the change in the economy I’m wondering whether I should be using the cash to overpay my mortgage instead.

Following valuations, the work would potentially add £30k to my house so that’s the budget I’m working to. Happy to do tiling, painting, kitchen fitting ourselves to help the budget.

I’ve got another 2 years until I need to remortgage and currently got a fix of 1.45%. I’ve got a good amount of equity in the property with about 40% LTV. No other debt apart from the mortgage and would still have sufficient easy access savings after using the £30k.

Alternative would be to use the £30k to overpay by 10% for the next 2 years before I remortgage.

What would you do?

To me it would depend on lots of factors -how quickly I could save for the extension if I overpaid on the mortgage, and how stable my job was, how long I intended to stay in the house, how awful the kitchen was, age of dc etc.

I absolutely get that it's a financial decision at the end of the day and there's a 'sensible' answer (although I don't know what that it is!) but it's also your home. How much would a new kitchen and downstairs loo add to your life?

Assuming that you intend to keep living in this house, at least for another few years... Do the kitchen and extension.

1. You live there and will benefit from the changes immediately.

1. It adds value to your home.

Generally I'd say do the work so you enjoy it. But I don't think you'll get that done for 30k with recent labour and material cost increases.

I'd overpay the mortgage whilst it's at 1.45%. Plan for the extension in the future

I am holding off. I had intended to knock down a brick workshop and car port and move them to the bottom of the garden and then put windows in the kitchen so we could see the garden. However, I am now saving what I was going to spend on that to pay down the mortgage at the end of my fix which will be in December 2024. I am also saving as hard as I can to clear the mortgage entirely then, but realistically I won't quite do it.

In that case, I will either do the work then and remortgage as before or will move to the standard variable for the six months or less it will then take to clear it and then decide.

Have you had the work quoted recently OP? I'd be very surprised if you could get the single story extension for £30k, let alone a kitchen on top

But, if you can, I think I'd calculate what the changes might be in both scenarios. Imagine the interest rate is still 6% in two years time. What difference will that 30k make if you pay it off - both in terms of monthly mortgage payment and overall interest paid

Eg for us, paying the extra £30k would mean a reduction in monthly payments of £215, and an overall reduction in interest of £22k over 20 years

As somebody who spent over £100,000 on their house, I would never recommend you do anything to add value to your property it might do and that’s amazing but it might not and so if you look at it is you’re spending the money to increase your enjoyment of your property and that is your only motivation you can’t go wrong.

Personally I think Mani comes and goes there’s times I’ve had lots the times I’ve had none, you live in your house every day and the nice kitchen would make me smile every time I used it.

Overpay, see if the economy sorts itself out before your fix runs out. If in 2 years time you can get a good low rate fix, you can always up the mortgage again to pay for the work. Even better, see how much you can save towards it over two years,

Without considering the works, you can get a better return in savings than your mortgage so you wouldn't need to make any overpayments until the end of the fixed term.

It does seem like a very cheap quote for building the extension and a kitchen in todays prices.

Home improvements however do make a significant change to your living situation. I would do the works and save up to make a lump sum to reduce the next remortgage in 2yrs time.

Either do the work or put the money in a savings account. You can get 4.5% on savings now - if you want to add it to the mortgage when your two years are up, that's much better for you than overpaying now.

I doubt you would be able to do that work with that budget
We had quotes for a small simple one storey extension on back on kitchen roughly 4m x 3m in 2019 and the cheapest one was £28k plus VAT and was very basic. Other one was £35k plus VAT and the other £40k plus VAT
Much more than we'd planned for and read about price per square metre. Didn't need planning permission
We held off as would need a new kitchen on top so at least £50k for a not very big space

Thanks everyone - a real mix of responses! To answer a couple of questions:

Job is secure - never say never but I’d say on the more secure side than average. Also been there 15 years so redundancy payment would be ok and confident in finding another job.

Extension would only be about 6m2. I’d been working on £3k a square meter rather than the previous average of £1.5k-2k. I’ve got some plans being drawn up by a structural engineer which will help have some proper conversations and quotes from builders. Fortunately I don’t require an architect or planning permission. It may be that I just wait a bit longer until prices aren’t quite so crazy!

If rates are 6% when I remortgage, monthly payments would be about £200 lower if I paid off £30k but I could still afford the higher rate.

I’m definitely having a play around with my savings now that there’s some better accounts around to get as much return as possible before I need to remortgage.