borrow on mortgage or loan?

james3333

hi ,im going to build an extension on my house.
i need 15k
would i be best borrowing more on my mortgage or getting a personal loan?
would be happy to pay it off in 5 years and imagine putting it on mortgage would work out more expensive in long run? OR would i be able to pay off just the extra borrowed seperate to mortgage?
any advice?

PS i have asked this before but cant find the post anyone know how i can view all posts/threads i have created/posted please?

kingstreet

Click on your name at the start of the thread.

Choose the find more posts by james333 option.

Look through the list until you find the one you want.

Borrowing via a mortgage will be at a lower rate, but over a potentially longer term.

Find out what the repayments would be on a personal loan. Take out the mortgage but pay the monthly payments you would have paid on the personal loan. Ergo, you repay the mortgage bit faster than you would have repaid the loan because you will pay less interest.

Watch out for early repayment penalties on the additional mortgage borrowing though.

Jimbo1976

If you borrow it on your mortgage then it is typically called a "further advance". You contact your existing mortgage lender and arrange it through them. They will give you the rates available (which are normally higher than some of the cheapest mortgage rates but cheaper than most personal loans). You can either do it over a shorter term (eg your 5 years) or over the length of your current mortgage. It will be underwritten to see if you can afford it, so you will be expected to supply proof of earnings etc. You will also need to have enough equity in your property to release £15k.

depending on the terms and conditions of your further advance rate you may be able to pay it off earlier than the 5 years. Watch out for early repayment charges when you talk to your lender.

As to whether its more expensive on a mortgage, compare the further advance rate with personal loan rates. Some personal loans won't allow you to pay them off early without paying early repayment charges.

james3333

Jimbo1976 wrote: »

If you borrow it on your mortgage then it is typically called a "further advance". You contact your existing mortgage lender and arrange it through them. They will give you the rates available (which are normally higher than some of the cheapest mortgage rates but cheaper than most personal loans). You can either do it over a shorter term (eg your 5 years) or over the length of your current mortgage. It will be underwritten to see if you can afford it, so you will be expected to supply proof of earnings etc. You will also need to have enough equity in your property to release £15k.

depending on the terms and conditions of your further advance rate you may be able to pay it off earlier than the 5 years. Watch out for early repayment charges when you talk to your lender.

As to whether its more expensive on a mortgage, compare the further advance rate with personal loan rates. Some personal loans won't allow you to pay them off early without paying early repayment charges.

thanks for the advice all!:money:

james3333

thanks.... i have enquired to tesco for a loan, been accepted at 5.1%APR
What is the likleyhood my mortgage lender (halifax) will offer me a better APR....
find it really hard to find time at work to ring them, so thought i would check if its a possibility to get a better APR

kingstreet

APR only works for short-term borrowing.

You will get better mortgage rates, but as mentioned earlier, you would need to make the same level of payment to the mortgage to repay that portion faster and avoid paying interest for a longer period.

Ask your lender what it can offer.

You may wish to combine the two sums together and remortgage to a new lender and get a better rate for your whole mortgage. Halifax rates don't set the world on fire and you can do better.