Do I need a mortgage or loan?

Chloris

I have inherited some money and will be using it to buy a house. There will be a shortfall of something like 20-40K between what I have and what I will spend. As I need a loan for this money could I get an unsecured loan to cover it even though it is to buy property, or do I have to seek a mortgage? I'm not entirely sure about any possible consequences of using an unsecured loan to by a house. TIA

bubblegum1985

you dont have to get a mortgage BUT the rates for mortgages are a lot lower than for loans.

Might it be worth doing some calculations of how much it would cost you for both over say a 2 year period to work out which one is going to be the most effective bearing in mind that the mortgage will ahve arrangement fees etc.

Chloris

Thanks bubblegum1985. I think we will need more than two years to pay it back, more like five, but yes we will work out the cheapest option. I only wondered if there might be problems using an unsecured loan to buy property. I'm not aware of any but I'm not at all savvy with house buying. Just wondering if something could go wrong.

G_M

Subject to your eligibility, you could get either.

The interest on a mortgage will be much cheaper than a loa, but the payback period will be longer (usually 15 years minimum I think).

However if you get a mortgage that allows over-payments, or once any 'tie-in' period to a special deal is over (eg a fixed/discounted rate for 2 years), you can pay off the mortgage early. Check there are no extra penaly charges for doing this.