Seeking Advice on Mortgage Overpayment vs. Loft Conversion in SE London

[TheOliveSnail]

Hello everyone,

I have been a long time reader of this forum but a first time poster. I am seeking some advice regarding a situation with our property in SE London(Bromley Council)
We own a 3-bedroom, 1-bathroom semi-detached house, which we purchased in 2022 during the peak of the market. Our fixed-term mortgage is due to end in June 2025, and we are likely to transition to another fixed-term mortgage for an additional three years. After this period, we plan to sell and relocate closer to a school, as our daughter will be starting school at that time.

We have some savings and wish to invest them wisely. Here are the options we are considering:

1. Make an overpayment on our mortgage to achieve a lower loan-to-value (LTV) mortgage at a more favourable rate when we remortgage.
2. Convert the loft. We have received several quotes, and the cost is within our budget, meaning we will not need to borrow to fund this. The conversion could add either a large master bedroom with an ensuite or two rooms with an ensuite.

We are uncertain about which option would be a better use of our savings. Here are our specific questions:

• Is three years sufficient time to see a return on investment from the loft conversion?
• Would we be better off using our savings towards a mortgage overpayment?
• If we manage to complete the loft conversion, could the increased property value help us secure a lower LTV mortgage?

There are not many 4 or 5-bedroom houses in our area. The ones I have seen are either detached or located further away, so they may not be ideal comparisons for estimating our property's potential value. We did get the property evaluated by a couple of local estate agents. They all estimated a price that was more than what we paid for, so it seems like the property's value hasn't fallen over the last three years in this area.

I would greatly appreciate any opinions or insights you might have on this matter. Your advice will be invaluable to us.

Thank you very much!

Personally, I would just make a big overpayment if you are allowed to. You will need to check with your Lender as some only allow up to 10% of the original price you paid each year.

Having a smaller mortgage will make your repayments lower or reduce the term whichever you choose. Either way you will be paying a lot less interest. And it will be helpful when you come to remortgage in June as could immediately have a better LTV depending on the figures involved.

So first step I would be talking to my Lender about it to see what is possible. It's the risk free option and you wouldn't have to put up with all the stress of a loft conversion for a house you don't intend to stay in for many more years anyway.

We have done a loft conversion in SW London and I'd say don't do the work if you are planning on moving unless you desperately need to eg. because of another child etc. At the time we did ours, we were not planning a move. It has covered its own cost and to be fair, has been very useful, but it was so stressful at the time, we had to have the ceilings lowered so really disruptive and dealing with tradesmen was really hard work. It also dragged on well beyond the expected time - is it really worth living in a building site for 6months? We are actually thinking about moving to Hertfordshire in a few years and so kind of wish we'd not bothered with the loft and kept our money to put into the pot for the new house.

We're nearby and did a loft conversion a few years ago. It's great, given us loads of extra space etc. But we intend to stay here for a long time - probably until kids leave home. If I was planning on moving in a few years and could live happily in existing space, I'm not sure I'd bother doing it. I think it's made the house more saleable and probably added £100k value - but didn't cost much less than that.

We did a loft conversion (London also) 10 years ago. It was worth it as at the time the costs were quite low, we planned to stay for another decade and interest rates were low so overpaying wasn't a priority at that time. We've easily made the money back and have an amazing space. My advice is not to try and squeeze two bedrooms in there unless it's a really big space. Better to have one big master and a bathroom. Height is lost due to the sloping roof at one side, which limits what you can use that space for. So it looks huge on a plan but less so in reality.

If you are going to move within a few years, given that the market is very flat and interest rates higher, I'd just overpay. However, consider whether staying is an option as your family grows. Moving is super expensive too so doing a loft conversion and staying another 10 years might not be a bad option.

@Twiglets1 @Notsuchacleverclogs @You4coffee @Gekko21 Thank you all for your insightful comments and sharing your experiences regarding overpaying the mortgage versus undertaking a loft conversion. After considering your advice, we've decided that focusing on overpaying the mortgage is the best route for us at this time. It seems to be the risk-free option that aligns well with our plans to move in the near future, and it helps us avoid the stress and disruption of a loft conversion. Your perspectives have been invaluable in helping us make this decision, and we truly appreciate your thoughtful input and support!

Glad to be of help. Overpaying feels great. We've been doing so for a while now and my partner gets excited looking at the app every month to see how much we've paid off.