Q: New loan vs mortgage borrow-back

minute2

Hi all!

A quick question for the finance experts here: what is the most cost-efficient way of borrowing money for a short term loan: taking up a new loan or borrowing back money overpayed on a mortgage? This is assuming identical rates, of course.

To be more specific: we're looking to borrow some cash to buy a new car (say, 10k). We have overpayed sufficiently in our mortgage and we can use a borrow-back facility without additional fees, etc. Or we can take up a separate short-term loan (which works out at a similar 6% rate) and pay that instead. What is best longer-term - in terms of total amount of interest paid?

I assume they would work out identically if, for the borrow-back, we were to overpay monthly on the mortgage the equivalent of the loan rate? Or am I wrong?

Any particular advice towards one or the other option, particularly in the current climate? Other options to consider?

Thanks for any insight

minute2

Hi all

Anybody has any oppinion on this? I'm surprised nobody answered so far - any insight would be appreciated!

Cheers

BYALPHAINDIA

I would go for the 'Borrowback' facility, As it should be easier.

A - Your lender knows all your details already.
B - Don't have to mess around getting a loan.
C- Saves filling in a load of application forms.
D - No need to be giving out your personal information again.

Do you def need 10k for a car?

You can pick some really good cars up for a quarter of that and less.

I don't know your personal circumstances, But I wouldn't dare spend that amount on a car.

Is the 10k the 'screen' price or does that include the interest/Tax etc?

Best Of Luck.

opinions4u

Borrow on the mortgage, but be disciplined enough to repay it as quickly as you would have done with a loan - or you'll end up paying more interest.