Remortgage or a 10 year loan?

gillybean129

Having an extension built, will need to raise about 20K, any advice on whether to have a 10 year loan or to add to the existing mortgage....any advice appreciated.

Ian_W

No right answer - whatever suits you best really, I would have thought.

If you can afford the repayments on a personal loan and can get a reasonably competitive interest rate [they were very low a few months ago but I haven't checked since IR's started rising] then if your mortgage has more than 10yrs to run you'll probably end up paying a fair bit less interest on the loan over the full term. Also loans are usually fixed rate for the term whereas your mortgage further advance may not be - over 10yrs that could be either good or bad but with the loan you would know your repayments from the off.

I'd see what your mortgage lender will offer as a further advance then compare it with the best loan rates [see Loans & banking section of the site] and go with whichever is cheapest.

gillybean129

Thanks Ian

peterg1965

Hello gillybean. I agree with Ian W here, it all depends on what you can realistically afford. Ideally the 10 year unsecured loan would be better and easier to obtain. Equally you could ask your mortgage provider for an additional secured loan on your mortgage and run it alongside your current mortgage and have the additional borrowing over 10 years. The lender may charge you their SVR for that which would be more expensive than a high street loan at 5.8% APR. You could happily overpay with the secured loan whereas that is also sometimes more difficult with a personal loan. Another factor is how much equity you have in your house. If you have lots that may swing it towards the secured option.

gillybean129

Thanks Peter

We have loads of equity and on enquiry our current lender will let us add more for a fee of £149. I've never had a loan (other than a mortgage of course!) in my life and just wondered what the options may be.

I think we'll stick with our currrent lender even though it's offset and they'll hardly be any savings to offset left after our extention and as it's a small mortgage (but large to us!) of around 40K the fees we'll have to pay for another mortgage won't really mean we gain much in switching.

If anyone has any further options I hadn't considered please let me know!

Thanks