Swap mortgage for unsecured loan??

Rkelly_2

Is this a sensible idea?

Currently have about 18k outstanding on my mortgage, of which 5k is offset on a 0% CC. The discounted rate on the mortgage has just come to an end and I am now on a SVR of 5.25%. It is pointless switching to another mortgage lender as due to the small amount involved redemption/set up fees would negate any better rate.

Northern rock are currently offering loans at 5.6%. I have applied for a 13k loan over 5 years and intend to use it to pay off the remainder of my mortgage, whilst hopefully also moving around the CC balance on 0% offers and clearing that over time.

I know I will be paying slightly more interest (works out at about £200 altogether) over the life of the loan but I would have the satisfaction of owning my home "outright".

Are there any pitfalls or other things to be wary of? Any advice welcome, thanks.

gentlepurr

Rkelly wrote:

Is this a sensible idea?

Currently have about 18k outstanding on my mortgage, of which 5k is offset on a 0% CC. The discounted rate on the mortgage has just come to an end and I am now on a SVR of 5.25%. It is pointless switching to another mortgage lender as due to the small amount involved redemption/set up fees would negate any better rate.

Northern rock are currently offering loans at 5.6%. I have applied for a 13k loan over 5 years and intend to use it to pay off the remainder of my mortgage, whilst hopefully also moving around the CC balance on 0% offers and clearing that over time.

I know I will be paying slightly more interest (works out at about £200 altogether) over the life of the loan but I would have the satisfaction of owning my home "outright".

Are there any pitfalls or other things to be wary of? Any advice welcome, thanks.

hi

if your mortgage rate is now 5.25, why not aim to overpay on that to pay it off over 5 years, instead of taking a five year loan on a higher interest rate where you are more commited to the higher payments, rather than overpaying, if you see what i mean.

i dont mean to be pessimisstic, but if for some reason you couldn't afford to make the overpayments on your mort for a couple of months, at least you would have the option, wheras you wouldn't have the option with a loan.

alternatively, why not approach your lender for a new quote over a five yr period on the existing mortgage, you may be pleasantly surprised.

hth

xx

Joe_Bloggs

I see no logic in it,perhaps others will. It is a high risk strategy as you risk not finding another 0% card. There are not that many real ones left. Would a 13K loan influence your amount of available credit ?
Flexible overpayments are the key. 5.25% is not a rubbish SVR At best you could have got 4.75% for five years with approx £700+ total fees. Those paying around 6.3% have the garbage rates.
Have you got the flexible features in your proposed loan that you have got with your mortgage ?
J_B.

Rkelly_2

Thanks for the replies. Yes my current mortgage is flexible and allows overpayments (which I am doing at the moment).

Perhaps I am getting carried away with the idea of not having a mortgage, forgetting that it would allow me greater flexibility than the loan I was considering. I have put the idea on the back-burner for now (I do not even know if I would be accepted for the loan anyway).