Short term (2-3yrs) loan options ?

AdamBrunt

Hi all,

We are keen to make a few home improvements (update kitchen, boiler replacment, etc). Hopefully about £5-6k worth.

As far as I can tell we have the following options:

1) Release equity on the house/mortgage

2) Credit card

3) Overdraft.

I am guessing, with a current mortgage IR of 3.9%, (1) is the way to go. If so, would it just be case of asking the lender for the money (and getting a cheque) and then overpaying for the next 3yrs to get us back to the same place (as if we hadn't taken the money).

TIA for any help.

Regards,

Adam Brunt

Tixy

Whether you could do this would very much depend on your lender and the terms of your mortgage. You would need to consider if you could overpay sufficently amounts to clear the loan in that period of time (often overpayments are limited to 10% of the balance per annum).

You also need to think whether this extra money would increase your LTV that would mean you wouldn't get such a good rate.

Is there a reason you have discounted the idea of an unsecured personal loan? I would have thought that would be both cheaper and easier to control than an overdraft? Have you worked out how much you could afford on monthly repayments in addition to your existing commitments? Also an overdraft or credit card are repayable on demand which could leave you in a difficult position.

Not preaching here but could you not save up the money over the next couple of years and then have the improvements done?

timelson

hi,
if it was windows or fascias then i woulod say do not bother with the loan route (we do interest free) if it is specifically a kitchen & boiler then could you not work it so you pay for 1 & give yourself 12 months with the other? just a thought or 2!

ClaireB7

Tixy wrote: »

Whether you could do this would very much depend on your lender and the terms of your mortgage. You would need to consider if you could overpay sufficently amounts to clear the loan in that period of time (often overpayments are limited to 10% of the balance per annum).

IIRC we are allowed to overpay 10% of the outstanding balance per year. The outstanding balance is approx £130k

Tixy wrote: »

You also need to think whether this extra money would increase your LTV that would mean you wouldn't get such a good rate.

With a current LTV of about 55%, I can't believe that releasing £5-6k is going to affect this a great deal.

Tixy wrote: »

Is there a reason you have discounted the idea of an unsecured personal loan? I would have thought that would be both cheaper and easier to control than an overdraft?

To be honest, we hadn't looked into unsecured personal loans but, again, would they really be cheaper than the my mortgage lender's SVR of 3.9% ?

Tixy wrote: »

Not preaching here but could you not save up the money over the next couple of years and then have the improvements done?

If it was the just the kitchen then maybe but ... to be honest, we've been pushing our luck with the boiler for the past couple of years already.

EDIT: just spotted I posted this via the OH's account

somethingcorporate

ClaireB7 wrote: »

If it was the just the kitchen then maybe but ... to be honest, we've been pushing our luck with the boiler for the past couple of years already.

Did this not prompt you to save for it then? rather than get yourself into unnecessary debt?

ClaireB7

somethingcorporate wrote: »

Did this not prompt you to save for it then? rather than get yourself into unnecessary debt?

Don't see it as unnecessary debt to be honest - we could either save up for it or, in the same amount of time, pay back a loan for the same amount.. We have no problem paying it off if the APR was about 4.5% (which a further advance on the mortgage would be) and is far preferable to what seems like average APRs of 15+%