Mortgage or loan?

Moving_from_Brussels

We've been offered an 18-year mortgage at standard variable rate for £95,000 and monthly payment of £593. This would allow us to do renovations using money that we are getting in December/January.

Or, we can get a bridging loan of £87,000 for four months, then reduce that to £40,000 with the money we get in December and pay that off in 5 years, leaving us with no mortgage, but also no immediate money for renovations.

We are currently expats, we've been living in Europe for 9 years, 6 years at the same address, but that has caused standard banks to reject us for mortgage lending because we are on the electoral roll in Brighton, as we are not entitled to vote while living in Belgium. Also, we are basing the application on my earnings from my new job, but I have a standard probationary period and the banks are saying they won't lend when someone has a probationary period. Even though I am a teacher and the probationary year is generally seen as a formality in most schools to make sure we really aren't barmy.

One broker has found us the 18 year mortgage, another has found us the loan option. Which one is a better idea? Any advice gratefully accepted. Our personal deposit is around 70% with the loan, around 60% with the mortgage.

dimbo61

What is interest rate for the bridging loan?
What is the interest rate on the mortgage ?
Fees for both Loans ?
Are you 100% sure that you will have the money by December !!!!
If you take out a mortgage unless you fix for 18 years I think you can pay it off early.
Consider Offset mortgage that way once you get the money in December you can put it in the offset account
only my views :-)

ValHaller

What is the interest rate on the loan? The mortgage is 3.4%.

This information is important for the decision.

Moving_from_Brussels

The loan is 5% fixed for the life of the loan, no penalties for paying off a chunk or for early settlement. There is £453 arrangement fee.
The cost of the mortgage is £195 application fee to the broker, then £995 arrangement fee.
We have to pay the survey/valuation fee for both.

I am 100% sure we'll have the money December 31st/Jan 3rd, it's a severance grant from my current place of work.

ValHaller

I think I would be looking to take an immediate mortgage for £87,000 less the £40,000 plus the money you need for renovations - say £55,000. And take the loan for £40,000 until your severance comes through.

Yes, you pay fees on both, but you don't end up taking a bigger mortgage than you need and borrowing money which does not earn its keep nor do you pay early redemption penalties

Probably you need to get a spreadsheet going to cost the options.