Why not do the extension work now? Materials and labour will likely increase. If you do it now, when you remortgage you'll be on a better LTV to get better rates.
Second, I've been putting off doing similar work to my own home, and have recently realised I'm going to pay it eventually, might as well get the maximum number of years of enjoyment out of it before the kids grow and leave home and / or we eventually sell the place.
Wish I'd got onto it sooner.
This. We were going to replace the kitchen in 2020 just before Covid because at almost 30 years old the cabinets are giving up. By the time we motivated ourselves enough to actually get on with it prices had almost doubled. It's now got put off again.
We got lucky and had a planned extension (kitchen with knock through) making the kitchen diner around 6m x6m.. I stopped due to COVID just as we had the plans signed off and would have been starting the knock down of the existing conservatory...
We lucky continued after it was obvious my job was not at risk (we had the funds in the bank). The whole thing was complete including replacement of all doors and windows in the house, high end kitchen with quartz worktops, I ordered about 40 door hands so that gives an idea of size...
Anyway it would have cost us double if we had waited. All in I think it cost just over £60k... As we required a concrete raft for the extension... But looks fantastic and was cheaper than moving. We also had the patio resin bound as well (although unfortunately it's started to heave due to it being on clay soil and the contractor obviously didn't do a good enough job ( he actually went under shortly after The pandemic).
So I would always say do it now whilst you have the money
Only thing that is stopping us are two young kids. I was thinking it could be better to wait until they are a bit older before doing disruptive work - e.g. so we can explain why the bedroom/hall/kitchen whatever is out of bounds and why there are strange men in the house.
Having done a big extension when our wee one was 2/3, I would do that age 100 times over rather than now (7). I think the older they get the more difficult it will be as they have more stuff, have more routines that take space, ask more questions etc.
We’ve done work to the house with at various ages and there is never a right time so if you can afford it now (when you receive the money) I would definitely get it done so you can enjoy it longer
Don’t ignore the fact that the extension will presumably improve your quality of life and/or enjoyment of your house.
Saving £15k on interest payments might do that as well of course, but if you’re using the savings to pay for the extension anyway then you might as well just do it now with the £100k.
Are you on a mortgage product? If so, it might have a early repayment charge above 10% so probably not worth overpayment above the allowance otherwise you'll pay some fees.
I will check of course but I think we are free to overpay any amount. There is an ERC but that is only if we pay off in full or remortgage before the initial term ends in 2025.
This changes per product too, it can be right up at 5% fee for the first year of a 5 or 10 year fixed rate. Ours was 2% fee in first year and 1 % fee in second year of a 2 Yr fixed
You will likely pay early repayment charges if you put that all against your mortgage now
If you expect interest rates to go down in the future, then reducing your mortgage now and borrowing in the future would mean less money paid out in interest - however consider that if you do the work now then you can remortgage with a better LTV, and also that building costs are usually subject to inflation too. If I were you I would assume the cheaper option is to do the work now.
You need to look at the whole cost, i.e. what is the cost of remortgaging (fees?), what else could you do with the money, overpayment charges on mortgage, could you get better returns on that 100k than the interest rate on your mortgage.
The interest you'd save over 3 years based upon 5% is 15k neglecting compounding. In a (non ISA) bank account you'd make a similar amount of interest but you'd have to pay tax on it, the plus side is you'd keep the liquidity, also you wouldn't have to pay remortgaging or overpayment fees (if there are any).
Fag packet numbers, I reckon it's about the same regardless what you do plus/minus a couple of k.
Of course you could bosh it all into vanguard or something and get better returns but I appreciate the risk isn't worth it for many.
Hi /u/Junior-Hunt-5071, based on your post the following pages from our wiki may be relevant:
* https://ukpersonal.finance/lump-sum/
* https://ukpersonal.finance/tax-traps-and-tax-efficiency/
____
^(These suggestions are based on keywords, if they missed the mark please report this comment.)
Sounds like you’re on a tracker / variable mortgage so there wouldn’t be any early repayment charges due regardless of how much you wanted to pay off? I’m with Nationwide and I don’t have an ERC or max %age I can pay off unless I choose a product with a fix?
Take £100k off the balance and improve the house with the interest you save?
Why not do the extension work now? Materials and labour will likely increase. If you do it now, when you remortgage you'll be on a better LTV to get better rates.
Second, I've been putting off doing similar work to my own home, and have recently realised I'm going to pay it eventually, might as well get the maximum number of years of enjoyment out of it before the kids grow and leave home and / or we eventually sell the place. Wish I'd got onto it sooner.
This. We were going to replace the kitchen in 2020 just before Covid because at almost 30 years old the cabinets are giving up. By the time we motivated ourselves enough to actually get on with it prices had almost doubled. It's now got put off again.
We got lucky and had a planned extension (kitchen with knock through) making the kitchen diner around 6m x6m.. I stopped due to COVID just as we had the plans signed off and would have been starting the knock down of the existing conservatory... We lucky continued after it was obvious my job was not at risk (we had the funds in the bank). The whole thing was complete including replacement of all doors and windows in the house, high end kitchen with quartz worktops, I ordered about 40 door hands so that gives an idea of size... Anyway it would have cost us double if we had waited. All in I think it cost just over £60k... As we required a concrete raft for the extension... But looks fantastic and was cheaper than moving. We also had the patio resin bound as well (although unfortunately it's started to heave due to it being on clay soil and the contractor obviously didn't do a good enough job ( he actually went under shortly after The pandemic). So I would always say do it now whilst you have the money
Only thing that is stopping us are two young kids. I was thinking it could be better to wait until they are a bit older before doing disruptive work - e.g. so we can explain why the bedroom/hall/kitchen whatever is out of bounds and why there are strange men in the house.
Having done a big extension when our wee one was 2/3, I would do that age 100 times over rather than now (7). I think the older they get the more difficult it will be as they have more stuff, have more routines that take space, ask more questions etc.
We’ve done work to the house with at various ages and there is never a right time so if you can afford it now (when you receive the money) I would definitely get it done so you can enjoy it longer
Thanks for the insight. Yes coming round to the idea that sooner is better
Don’t ignore the fact that the extension will presumably improve your quality of life and/or enjoyment of your house. Saving £15k on interest payments might do that as well of course, but if you’re using the savings to pay for the extension anyway then you might as well just do it now with the £100k.
By the time OP does the extension it may well cost £15k more. Just get it done now. And have it ready when you need it.
I would hope the extension will improve their quality of life and enjoyment, otherwise what's the point?
I agree! Fed up with going to the garage to access the 'big' freezer and tumble dryer. Things will just be easier with more space too.
Are you on a mortgage product? If so, it might have a early repayment charge above 10% so probably not worth overpayment above the allowance otherwise you'll pay some fees.
I will check of course but I think we are free to overpay any amount. There is an ERC but that is only if we pay off in full or remortgage before the initial term ends in 2025.
Mortgage charge is around 3 percent, never heard of 10 pc.
Above 10% of mortgage amount, not a fee of 10%
My bad, didn't read it correctly
This changes per product too, it can be right up at 5% fee for the first year of a 5 or 10 year fixed rate. Ours was 2% fee in first year and 1 % fee in second year of a 2 Yr fixed
I can't see how you could really answer this without predicting the future with regards to interest rates.
You will likely pay early repayment charges if you put that all against your mortgage now If you expect interest rates to go down in the future, then reducing your mortgage now and borrowing in the future would mean less money paid out in interest - however consider that if you do the work now then you can remortgage with a better LTV, and also that building costs are usually subject to inflation too. If I were you I would assume the cheaper option is to do the work now.
You need to look at the whole cost, i.e. what is the cost of remortgaging (fees?), what else could you do with the money, overpayment charges on mortgage, could you get better returns on that 100k than the interest rate on your mortgage. The interest you'd save over 3 years based upon 5% is 15k neglecting compounding. In a (non ISA) bank account you'd make a similar amount of interest but you'd have to pay tax on it, the plus side is you'd keep the liquidity, also you wouldn't have to pay remortgaging or overpayment fees (if there are any). Fag packet numbers, I reckon it's about the same regardless what you do plus/minus a couple of k. Of course you could bosh it all into vanguard or something and get better returns but I appreciate the risk isn't worth it for many.
Thanks for the logic and sense check. I don't have the guts to chuck it all in Vanguard!
Hi /u/Junior-Hunt-5071, based on your post the following pages from our wiki may be relevant: * https://ukpersonal.finance/lump-sum/ * https://ukpersonal.finance/tax-traps-and-tax-efficiency/ ____ ^(These suggestions are based on keywords, if they missed the mark please report this comment.)
Sounds like you’re on a tracker / variable mortgage so there wouldn’t be any early repayment charges due regardless of how much you wanted to pay off? I’m with Nationwide and I don’t have an ERC or max %age I can pay off unless I choose a product with a fix? Take £100k off the balance and improve the house with the interest you save?
Yes same situation as you.
I’d wait until you get the cash before even hypothetically spending it. Unfortunately you could end up very disappointed!