Pay off Mortgage with unsecured loan?

Rkelly_2

Hi all, my current flexible mortgage deal comes to the end of its discounted rate in May next year. The rate will jump from 4.75% to 5.5% with about 18k outstanding on the mortgage.

At the current rate of payment (overpay when I can) I will pay it off in about 6 years time. However, if I can get an unsecured loan at say 5.9% over five years to clear the outstanding mortgage come May would it be a good idea?

I know it will cost me a slightly more in interest (about £300 overall) but I would have the security of owning my own home outright....any downfalls to consider? I will not be adding PPI to the loan (job secure) so won't be ripped off in that way! Thanks in advance for any replies.

sparklymessygirl

Hi there,

all I can think of off the top of my head is redemption costs for paying off early - those should be added to the extra interest calculation of £300 - but I guess as you were always planning to pay off early you would have been charged anyway. I think if you give 6 months notice you don't get charged (?)

Sparkly

YorkshireBoy

Some thoughts...

Can't your current lender transfer you onto another product at minimal cost? Mine has an offset deal at 5.25% - and all I need to do is deposit £10 in their savings account to qualify.

I *think* you'll have trouble finding another mortgage lender willing to give you such a small mortgage, so that might rule that option out.

It sounds like you've been overpaying your mortgage already. In doing so, you may have built up the facility to take a payment holiday with your current lender should you need to.

Such a large unsecured loan could affect your chances of obtaining other forms of credit - depending on your salary and other commitments.

And finally...

Rkelly wrote:

(job secure)

...so was mine, and for 26 years as well - until I was made redundant!