Loans into Mortgage?

HarryC_2

I have a £20k home improvement loan which is two and half years through a five year term, this has a current settlement figure of £10200 and costs £388 per month at 6.8%. I retire in 4 years time and I will get a lump sum, enough to pay off my mortgage. I am due to re-mortgage now so my query is, should I put the outstanding loan amount into my mortgage which will be paid off in four years time. I think this will reduce my monthly outgoings considerably.

CLAPTON

and the interest rate on the new mortgage will be........

Rafter

As Clapton says it all depends on the interest you will save on your mortgage in the next 4 years. You should also avoid the temptation to spend the £388 per month since the balance of your mortgage to be repaid in 4 years will be higher if you consolidate this loan.

An independed advisor should be able to tell you whether ploughing the extra cash into your pension is more tax efficient than repaying this loan out of taxed income when you could get a tax free lump sum in a few years instead and boost your retirement income rather than carrying on paying this loan out of your taxed salary.

Good luck

R.

HarryC_2

HarryC wrote: »

I have a £20k home improvement loan which is two and half years through a five year term, this has a current settlement figure of £10200 and costs £388 per month at 6.8%. I retire in 4 years time and I will get a lump sum, enough to pay off my mortgage. I am due to re-mortgage now so my query is, should I put the outstanding loan amount into my mortgage which will be paid off in four years time. I think this will reduce my monthly outgoings considerably.

The interest rate on the mortgage would be 3.48% but I would only be paying that for the next 4 years.

CLAPTON

basically you pay less interest at 3.48% over 4 years than you do at 6.8% over 2 and half years.; so all other things being equal go for it.