Personal Loan v Re-mortgage

cindylm

I want to pay off my mortgage (approximately 18k) over the next three years - what's my best option?
My discounted period ends in February and I don't know whether to stay with the same lender, re-mortgage again and take advantage of a further discounted period or take out a personal loan.
Maybe there are other options too, I'd welcome advice :think:

Xbigman

You need to get some figues.

What APR could you get an 18k unsecured loan for? If might work out cheaper than refixing or remortgaging after fees are taken into account.

How much would a 2 year fix cost you to set up and at what APR. (theory is to refix and save for 2 years then lump sum after 2 years, paying off as much as possible each month in the third year.
Regards



X

snowstorm

Personally I'd say the best way to see which way you would be better off is to look at the total you must pay over the three years.

Looking at Northern Rocks website (one of the cheapest for personal loans?) you would pay £544.18 per month for £18k over three years. Total repaid = 36 * £544.18 = £19,590.48.

You could then look at various mortgage websites and see if you could improve upon this. The complicating factors are numerous such as whether you believe interest rates will go up or down (could remove this risk if you fix the rate), whether you want to repay early etc. Don't forget to add on any loan arrangement fee to the total mortgage costs.

A potential further consideration is that you may (and I'm no expert but from what I have read on here) look like you are quite stetched financially with £18k of unsecured debt and so other lenders may be more likely to refuse you if you wanted to (say) buy a tv on 0% APR? An £18k mortgage on the other hand is obviously quite small in todays world.

These are just my opinions and how I might approach it, please do you own research and do not take as advice.

Kind Regards

Xbigman

I wouldn't worry too much about having 18k unsecured debt as in any application your rent/mortgage figure would be zero.
Regards



X

DavidHM

On an expenditure:income ratio, yes, but some lenders will also look at the ratio of unsecured lending:income, which will look worse.

Even so, if you're paying back £18k over three years then hopefully you wouldn't have too much need for credit. Alternatively, if your income is over £36k or so it shouldn't cause any problems unless you have further unsecured lending.

Arnold's_mrs

I dont know what every one else has said but i was told by a finantual advisor that a mortgage is always cheaper than a loan how true it is i dont know he was trying to sell me something at the time

Jo

neilhigh

Interest rate is almost always going to be lower on a mortgage. However, for such a small amount and timeframe, the costs have a larger impact, proportionally. You just need to get the figures and do the sums.