AllAboutNumbers
Registered User
- Messages
- 11
Background:
We are currently in our home 11 years. We love the area but we are aware that we are likely to outgrow the footprint of the current house in the future (I would think around 7 years from now when kids are slightly older).
Assuming additional space is necessary, our ideal situation would be to top up our mortgage to extend the existing house as we love where we are. We haven’t even considered having a conversation with a builder or anything like that, so what we want to do may not be possible but neighbours with a similar type house have extended successfully in the past. Ultimately though we may need to move. At this stage all we are trying to achieve is to put ourselves in the best financial position if / when we get to a decision around extending or indeed moving. We are trying to avoid making a decision now which may hamstring us in the future unintentionally.
Current Situation:
At the moment we are 3 years into a 10 year home improvement loan with €27k remaining at 4.25% (€370 PM). We can pay off this loan early without penalty. We also have a mortgage balance of €270k with 22 years left and an approximate LTV of 58%. This is fixed with UB @ 2.6% (€1,350 PM) with 18 months remaining.
My question is what are people’s views on topping up (that the right word?) our existing mortgage to clear the home improvement loan? We would then overpay monthly (in accordance with UB terms of 10% of balance) so that our net outgoings between the existing two loans remain unchanged when we roll them into a single mortgage repayment. From my calculations we would be in a better position at the end of 7 years (remaining term on home improvement loan) than if we left them separate.
Considerations:
Is topping up the mortgage an accepted practice to clear a loan that relates to the home?
Are we breaking out of our current fixed term by adding on this amount and do we need to refix as a result and pay the relevant breakage fee? If breaking, the high value UB rate of 2.2% for 5 years does look appealing although concerned with upcoming announcements about them potentially exiting the market. Our new LTV with the mortgage and home improvement combined would be c. 64%.
Can you only top up once for a mortgage e.g. an extension in 7 years may cost €150k for which we would require another mortgage top up. If we have already topped up to improve the home once before would this cause an issue for banks and prevent us from doing same again?
Finally I had thought as part of the process that if I am going to the trouble of combining the mortgage and home improvement loan than rather than overpay should I just reduce the term as part of the process but again with the same existing outgoings. Both our jobs are secure but from what I’ve read here most advocate retaining the flexibility an overpayment allows rather than tying yourself into a formal repayment schedule which becomes very difficult to amend should you encounter unforeseen financial issues in the future. I also think that if we did this we would need to once again extend the term to make the repayments manageable if we were to top up. Reducing the term only to extend it again might not be a smart approach.
Would be very grateful for any views and comments on things I may be missing. Thanks everyone!
We are currently in our home 11 years. We love the area but we are aware that we are likely to outgrow the footprint of the current house in the future (I would think around 7 years from now when kids are slightly older).
Assuming additional space is necessary, our ideal situation would be to top up our mortgage to extend the existing house as we love where we are. We haven’t even considered having a conversation with a builder or anything like that, so what we want to do may not be possible but neighbours with a similar type house have extended successfully in the past. Ultimately though we may need to move. At this stage all we are trying to achieve is to put ourselves in the best financial position if / when we get to a decision around extending or indeed moving. We are trying to avoid making a decision now which may hamstring us in the future unintentionally.
Current Situation:
At the moment we are 3 years into a 10 year home improvement loan with €27k remaining at 4.25% (€370 PM). We can pay off this loan early without penalty. We also have a mortgage balance of €270k with 22 years left and an approximate LTV of 58%. This is fixed with UB @ 2.6% (€1,350 PM) with 18 months remaining.
My question is what are people’s views on topping up (that the right word?) our existing mortgage to clear the home improvement loan? We would then overpay monthly (in accordance with UB terms of 10% of balance) so that our net outgoings between the existing two loans remain unchanged when we roll them into a single mortgage repayment. From my calculations we would be in a better position at the end of 7 years (remaining term on home improvement loan) than if we left them separate.
Considerations:
Is topping up the mortgage an accepted practice to clear a loan that relates to the home?
Are we breaking out of our current fixed term by adding on this amount and do we need to refix as a result and pay the relevant breakage fee? If breaking, the high value UB rate of 2.2% for 5 years does look appealing although concerned with upcoming announcements about them potentially exiting the market. Our new LTV with the mortgage and home improvement combined would be c. 64%.
Can you only top up once for a mortgage e.g. an extension in 7 years may cost €150k for which we would require another mortgage top up. If we have already topped up to improve the home once before would this cause an issue for banks and prevent us from doing same again?
Finally I had thought as part of the process that if I am going to the trouble of combining the mortgage and home improvement loan than rather than overpay should I just reduce the term as part of the process but again with the same existing outgoings. Both our jobs are secure but from what I’ve read here most advocate retaining the flexibility an overpayment allows rather than tying yourself into a formal repayment schedule which becomes very difficult to amend should you encounter unforeseen financial issues in the future. I also think that if we did this we would need to once again extend the term to make the repayments manageable if we were to top up. Reducing the term only to extend it again might not be a smart approach.
Would be very grateful for any views and comments on things I may be missing. Thanks everyone!