Loan or additional mortgage??

jacksback

I really don't know which way to go.. I need to borrow £20,000 my current mortgage is £36,000 and my house is worth £240,000. I have never missed a payment but my husband and mine joint income is only £22,000.

What should I do?

AndrewSmith

It depends on a number of issues really such as:

What the money is for
How long you want the loan
How old you both are
Any existing other debts

Post some more details and I am sure some firther help will follow.

jacksback

Hi We are 44 and 42.. the money is to pay off existing credit cards of £9000 and for home improvements. We want it over 13 years as thats when our mortgage finishes. We don't owe anything else

geralddlp

You can usually borrow money more cheaply on a mortgage than on a personal loan.
The main downside of borrowing money on a mortgage is that then it's secured to your home. This brings the risk that if you don't repay they can take your home.

The other issue often overlooked, is that if you borrow on the mortgage you tend to borrow the amount over the remaining term of your mortgage, where as perhaps you could have repaid the loan in 4 or 5 years. (which might end up costing you more over the life of the mortgage - but you do repay more slowly). You don't mention how old you are and when your mortgage runs out.

You also need to check your mortgage deal, as you might find that you can remortgage to a lower rate, and take out the additional funds and cushion the blow of the interest.

I would start by finding out what rates you can get on each a loan and a mortgage.

You need to assess whether you want to take the risk of linking the new loan to your home. Indeed you may not have a choice as it might be hard to get an unsecured loan for 20,000 pounds on your income (I don't know about this I am no expert on loans)

being simple imagine that it costs you 200 per month on the loan but 100 per month on your mortgage (but over a much longer period )

It would be prudent to remortgage but arrange to overpay your new mortage by 100 pounds per month, so you will be paying the amount you would have paid with the loan, but at the lower rate you can get on your mortgage. And do this for the duration that the loan would have taken.

If after this time you continue to pay the 100 pounds extra a month, that will shorten the length of your mortgage and save you money in future interest payments.

One last thing, you don't mention if you need all the money at once, or to fund something gradual (like kids university over a few years), if you need it gradually, you might consider an offset mortgage, mortgage for the amount you need, and leave it offset until you need it. That way you only pay interest on the bit you are using, not on the whole 20,000

Good luck

Gerald

MarkyMarkD

A £56k mortgage isn't a big deal on a joint income of £22k. It will be easy enough to get a mortgage for that amount. If you aren't tied in on your existing mortgage, you have a choice of:

- getting a further advance from your existing lender and then (possibly, if they'll let you) switching product on the whole lot; or
- remortgaging to a new lender and taking the extra money at that point.

The first option will be quicker and MAY be cheaper, but it depends a lot on what rate they will let you have on the further advance and/or whether you can switch the whole lot.

jacksback

Hi
Thanks for your replies.. I have just spoken to my building society and have found out it will be £200 per month for the additional money and the rate is 7.9... they weren't very helpful to which was the best way for me to go

MarkyMarkD

If that's how much they are charging for a further advance, and they won't let you switch the whole mortgage to a better rate, it sounds like time to remortgage and get the extra money from a new lender.

You can easily pay way under 6% on your whole, new, mortgage.

jacksback

Thanks,, I have been on Moneysupermarket and someone is going to ring me so hopefully I will be able to sort something out

payless

Believe most enquiries from there get sold on to individual advisers, check what ( if any ) fees are payable.

Mr_helpful

payless wrote: »

Believe most enquiries from there get sold on to individual advisers, check what ( if any ) fees are payable.

I think also the advisers tend to be new to the business as most advisers have enough clients and dont need to buy them

jacksback

Thanks payless,, I will do.. nobody has rang me yet anyway.. my own building society didn't even ring after making an appointment to!!