Mortgage or traditional loan

stuarta99
stuarta99 Posts: 143 Forumite
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in Loans
Hi all,

Just after some advice if possible please. I currently have a car loan to pay off and we are looking at adding a conservatory to the house. At the moment I had planned to take out a TSB fix and flex for the car with the aim of paying it off in 12-24 months and then adding the conservatory to the mortgage.

I'm now wondering whether its best to add both to the mortgage with a lower although longer payment. Rough idea of figures would be £10k for each. £10k on TSB loan would be £430/month (which is about what I'm paying at the moment and saving). £10k on mortgage about £50/month. Thinking that if I were to put both on the mortgage at say £100/month, I could then overpay about £350/month. I think the current mortgage term is 20 years at 2.8% where as the TSB loan I can only get about 5%. Also the mortgage is up in a couple of years and could possibly renew lower and that mortgage rates would be lower than loans?

What's everyone's thoughts please

Comments

  • bengalknights
    bengalknights Posts: 5,021 Forumite
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    If you are planning to overpay then I would suggest the mortgage route to save on interest
  • stuarta99
    stuarta99 Posts: 143 Forumite
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    ok thanks. Theory is that I might be paying the equivalent of £450 at the moment and hopefully more, but should the worse happen, we wanna start a family and that, a commitment of £100/month compared to £450/month is better. Although I don't want to get in the slippery slope of thinking "oh well, get this money lets spend it". Thinking as well that maybe the extra in the mortgage might look better on the credit report than another loan?
  • Herzlos
    Herzlos Posts: 14,683 Forumite
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    Mortgage is the cheapest approach if you can guarantee that you'll overpay by that much, but will cost you a fortune if you drop down to the £50 as you're paying it off over 20 years rather than 2.

    Plus, it transfers it from a non-secure loan (fail to pay, get a wrecked credit history) to a secure loan (fail to pay, lose the house).

    If you're unsure about being able to keep up the overpayments, go for the loan (or take the loan later and pay off the mortgage amount).
  • stuarta99
    stuarta99 Posts: 143 Forumite
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    Herzlos wrote: »
    (or take the loan later and pay off the mortgage amount).

    Sorry what do you mean by this?
  • Herzlos
    Herzlos Posts: 14,683 Forumite
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    stuarta99 wrote: »
    Sorry what do you mean by this?

    Stick in on the mortgage and overpay as much as possible. If circumstances change, then take out a loan to pay off what's left of the new borrowing on the mortgage.

    Say you borrow £10k on the mortgage, pay £5k off, then something changes. So you take out a £5k loan and put that onto the mortgage. So you've taken advantage of the low mortgage rate, and then transferred the risk from a secured to unsecured loan.
  • Thrugelmir
    Thrugelmir Posts: 89,546 Forumite
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    stuarta99 wrote: »
    ok thanks. Theory is that I might be paying the equivalent of £450 at the moment and hopefully more, but should the worse happen, we wanna start a family and that, a commitment of £100/month compared to £450/month is better. Although I don't want to get in the slippery slope of thinking "oh well, get this money lets spend it". Thinking as well that maybe the extra in the mortgage might look better on the credit report than another loan?

    That's often how things start going wrong. An unexpected event occurs that impacts you financially. You still have the debt, but the car needs replacing. While having shiny metal on the drive is very nice to look at. Novelty soon wears off. Worth thinking long and hard before borrowing large sums of money. Only you know your personal circumstances.
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