Extend or bin the mortgage

[pano amo]

ok got to make a decision here. I've got a mortgage of 120k but savings of 90k specifically saved up for quite some time to put into the house. I've had all the plans drawn up to extend and its going to come just shy of 90k but now that I need to put my money where my mouth is, I'm worried about pumping so much hard earned money into my extension. Its a big extension and includes a lot of work to the rest of the house. Obviously I can only summise my situation but what would you do - Make the house bigger and nicer (cause frankly its in a bad way) or pay of the guts of the mortgage and give it a lick of paint.

Im not sure which is the better decision in the long term.

[Simpo Two]

Generally it costs more to borrow money than you get from saving it. That's how they make their money.

[sparkythecat]

What about an offset mortgage ?

You effectively pay your savings off your mortgage, but can borrow them back anytime you want.

[condor]

I'd go with paying the mortgage off...and save towards the diy stuff.

[R60EST]

I am in a similar predicament , except I don't have £90k in savings, but my mortgage is almost paid off ( offset mortgage only 5 yrs in but 75% paid) I would like to do a whole host of improvements to my home but I can't bring myself to undo all the effort I've put into paying off the mortgage ASAP. If I were in your shoes I'd pay £90k off the mortgage , set myself a goal of paying off the remainder ASAP and then saving for improvements and paying cash for the work to be carried out. If you take this path and your priorities change at any point in the future having a massive amount of equity in your home will always be more favourable than having a large mortgage to meet every month and significantly less equity

[smifffymoto]

Yoo have managed in the house so far,do you really need to extend? Paying off the mortgage is the right choice

[Dave_ST220]

sparkythecat said:

What about an offset mortgage ?

You effectively pay your savings off your mortgage, but can borrow them back anytime you want.

Sounds like the way forward to me but only if not using the whole 90K.

[Bill Carr]

If you've managed to accrue 90k of savings (kudos!) then I'd pay off the mortgage asap. Then you can pay-off the remainder in relatively short order and save your pennies for the extension. Or could you do the extension in stages or scale it back somehow, such that it costs e.g. 45k, and you put the other 45k in the mortgage? Just a thought.

[_Deano]

personally i would dump the whole £90k on the mortgage so the monthly outgoings could be less in times of hardship.

[onemorelap]

I suppose the PH response should be keep the mortgage, do the garage up and buy a F430....

In a similar conundrum myself regarding developing my house so the questions i have been asking myself.

1. How much capital do i have in the house as it stands?
2. Is it worth selling the house as it stands or with minimal work and putting the resultant capital together with the savings and put it into a house where i can live with a smaller mortgage / mortgage free?
3. If i extend will it add more value to the house than it costs to do?
4. If answer to 3. is yes then:
a. Do i plough the savings into the extension and then turn the £90k into more than it would be worth sat in a bank by:
b. Selling the house once the development has been done.
c. Living with the current mortgage / no savings and benefit from the added value increasing once the market starts moving up again (guessing but could be a long haul at present)

THEN if i do decide to sell the extended property and benefit from the increased capital do i:
a. Buy another house to develop.
b. Buy another house and live mortgage free / have capital in the bank / lot smaller mortgage.
c. Buy another house and live mortgage free but buy another house to develop / BTL on.
d. Stick all the capital in the bank, live in rented and see what the market does.
e. Blow the lot on a Carrera GT and live in a caravan.

Personally i'm working towards option e. but SWMBO is not so keen.