Bigger mortgage or bank loan?

Silvershark

Hi all,

Maybe a bit of a 'how long is a piece of string' question but maybe someone has a feel for this sort of thing.

I'm interested in buying a house (1st time buyer) but it would need a bit of work done to it so require funds. Would I be better off reducing my deposit and borrowing more on a mortgage over 30 years thus leaving more in my pocket, or, putting down a bigger deposit for a 25 year mortgage and then getting a bank loan to provide immediate cash that could be payed off in 3 or 4 years? Not sure how to calculate which way I would pay less interest!

Be interested in any tips you might have - thanks.

Thrugelmir

Mortgage is cheapest form of finance available. So extending term does reduce cash outgoing and borrowing maximum. Maybe your best option.

As your income improves most mortgages allow overpayments in some form. So you could do this to reduce amount of interest you ultimately pay.

To pay less interest borrow less.

Silvershark

Thanks. I understand a mortgage can be changed after 2 years so I guess if circumstances change a bit I could contribute more to the mortgage.

Yorkie1

Silvershark wrote: »

Thanks. I understand a mortgage can be changed after 2 years so I guess if circumstances change a bit I could contribute more to the mortgage.

Not necessarily, depending on what you mean by "changed".

If you mean change to a different mortgage product, it will depend on the terms of the particular product which you get. Some will have a tie-in beyond 2 years (e.g. fixed rates for longer than 2 years) so you will probably pay hefty fees to change the mortgage within the tie-in period.

If you mean making overpayments, many mortgages permit this from the word go, but might have annual or monthly limits on how much you can overpay within the tie-in period. You can usually choose whether to reduce the overall term of the mortgage, or to retain the length but reduce the monthly payments.

Silvershark

Hmmm ok. Looks like its worth double checking what flexibility I'd have 2 years down the line. Decisions! :think: