Can I beat the banks?

pew0605

Hello to everyone,

This is my first post on MSE and so I hope that I am doing it correctly and apologies in advance if I make a mistake or two.

So, my key question is....can I beat the banks?

My mortgage situation:

£41,000 remaining on loan
My fixed term is set to end in Aug 2013

I have a friend willing to lend me £40,000 at a good rate of interest - 3.5%/year.

Questions:
Can I beat the banks without unforeseen charges for this loan?
Does this appear to be a good deal?
Does anyone know any pitfalls to this premise?

Please do get in touch as I'd love to know that this thread has been read but also, of course , if you have any queries and particularly if you have any answers.

Regards

Paul

R_P_W

Yeah dont do it! Borrowing any large sum of money from a friend is usually a bad idea.

Why is he so willing? And why are you so keen in 'beating' a bank?

At 3.5% he could probably get a better return through saving/investing (or at least acheive the same).

At 3.5% - I think depending on your circumstances you could either achieve a similar deal (or maybe a better one) through a normal lender.

What happens if you cant pay?

TrickyDicky101

I can't understand what it is you are proposing - how do you intend to "beat the banks"?
You already owe £41k but you need to borrow a further £40k from your friend - is that what you want to do? What has that got to do with the bank?

Voyager2002

What rate of interest are you currently paying on your mortgage?

How will you repay your mortgage when thee loan term ends?

What happens if your friend urgently needs his money back before the maturity date?

vacheron

My take on this is that the OP wishes to use the loan to pay off the mortgage when the fixed term ends, effectively becoming mortgage free and depriving the banks of their ongoing interest in favour of paying it to their friend.

My only issue is that the friend is locking up their money for a long time and could, as previously posted, receive a better return elsewhere with far less risk. Also what happens when the base rate rises?

Thrugelmir

pew0605 wrote: »

I have a friend willing to lend me £40,000 at a good rate of interest - 3.5%/year.

Given the interest is taxable income for your friend. Then he is the one that will be losing out. At basic rate tax that's only a net 2.8% return. Five year fixed term ISA's offer over a 4% net return.