Re mortgage to clear other payments

chipbeck

Can anyone tell me if and where it is possible to remortgage my house and whilst doing so get cash to consolidate other loans. I have been told that rather than pay for a car loan it would be cheaper to take extra money on my mrtgage. Is this really the case?

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lisyloo

I have been told that rather than pay for a car loan it would be cheaper to take extra money on my mrtgage. Is this really the case?

Yes and no (just the answer you wanted).

Firstly you will need sufficient "equity" in your property to take out the loan.
"equity" is the value of the property minus the mortgage.
If this is a small number then the mortgage lender might be reluctant and the reason is that should you default then they might not get their money back i.e. if they had to reposses.
What is you current loan to value %. i.e. loan divided by house value (you don't need to provide the details if you don't want to - just the %).

Also you need sufficient income to support the mortgage. Often lenders use income multilple to judge this (but not always). If you tell us what you income multilple is then we can guess whether you have a problem or not. This is mortgage divided by annual income.

Thirdly is the question of whether it's cheaper or not.
IF you stick to the same term then probably yes.
So for example a 3 years loan at 5% (mortgage rates) is cheaper than a car loan at 10%.

However if you stick it on a mortgage for 25 years, then you will probably be more over the 25 years on the mortgage than a 3 year car loan because of the length of time.

A few questions:

Do you have a non taxpaying spouse?
Is you mortgage flexible? i.e. can you overpay it?

chipbeck

Yes spouse is tax payer.
Current flexible mortgage is eligible for movement at end of this month.
Conservative estimate of 100k in equity.

lisyloo

It doesn't sound like you'll have problems on the equity side then.

Ideally you want to get the best rate on your loan (which is offered by the mortgage) but pay it off in a short period.
So ideally get it on the mortgage but pay back over 3 years or so and not 25.

Two ways to do this are
1) get a flexible mortgage (these come with higher rates).
This might suit you if you have lots of savings and can make significant overpayments.
2) get the best rate you can which may limit you on overpayments. Put any overpayments that you can't make on the mortgage in an ISA (and spouses ISA) until you remortgage again and then repay at this point.
You should not be worse off doing this because most good rates are lower than ISAs and you won't be paying tax on the savings.
This will suit you if you don't have a lot of savings and can't make big overpayments.

If you are somewhere in the middle then I'm afraid you need to do more detailed calculations to work out which method is best for you.