Borrowing more money - what to say?

pimento

We have a repayment mortgage with C&G that has about 13 years left to run. I think it has about £62k left on it and we have a large amount of equity (house worth £350k). I work full-time and earn a good salary and I work for a government so my job is fairly safe (as safe as anyone's is these days).

My husband has been diagnosed with cancer. He has had some treatment and has responded well but the type of cancer he has (lung) has a very poor prognosis and we are being realistic. My health is OK.

I've had an idea that I want some opinions on. I thought I would like to add £25k to our mortgage and take six months leave without pay and we could do some travelling. My employer has agreed in principle with me taking some leave. I want advice on how to approach our mortgager with this.

We came off a fixed rate deal about two years ago and got a preferential SVR when it finished (base rate plus 2%) so it's a good rate. Would I be likely to be able to add any additional borrowing on and keep that rate?

Should I tell them what I intend to do with the money?

Should I tell them I'll be taking LWOP?

The house would not be left empty. We have a son in his 20s who lives at home.

Any advice/opinions gratefully received. It's still only an idea.

HappyMJ

If you told them you aren't getting any income then I doubt they'll approve the loan.

How about a personal loan? You could borrow about £25k over 5 years for about £500 per month. If you borrrow enough extra to put into the bank to make the next 12 months payments and then once back in employment you can use your own income to make the payments.

You can also ask our mortgage provider for a 6 month payment holiday. With the reasons you've given I see no reason why that should be declined.

pimento

Thanks HappyMJ

£500 a month extra sounds like a lot. Wouldn't it be cheaper to pay it back over the 13 remaining years (even if it isn't at the same rate as the mortgage)?

How does a payment holiday work? Do they just extend the term by the length of the holiday? That sounds too simple.

Would it be dishonest to ask for the re-mortgage/loan/whatever and not mention the long holiday from work?

dimbo61

Do you have life assurance to cover the mortgage ?
Does your husband work ? Pension from work, sickness benefit.
Even some bank accounts have life cover !
Can he draw his pension, lump sum early ?

Do you have any critical illness cover or insurance policies as they can pay out early.
You can sometimes ask for a mortgage holiday from your lender so speak to them
Good luck

pimento

dimbo61 wrote: »

Do you have life assurance to cover the mortgage ?
Does your husband work ? Pension from work, sickness benefit.
Even some bank accounts have life cover !
Can he draw his pension, lump sum early ?

Do you have any critical illness cover or insurance policies as they can pay out early.
You can sometimes ask for a mortgage holiday from your lender so speak to them
Good luck

We both have life assurance to cover the mortgage, yes.

He doesn't work and doesn't have a pension.

No critical illness insurance and anyway, he hasn't been given a 'terminal' diagnosis.


I wanted to put off speaking to the mortgage provider until I knew what I wanted to ask for.

_Andy_

1) they will ask what the money's for and you have to state the truth
2) With no income they won't approve it anyway
3) no the additional borrowing won't be on that rate.

pimento

Does that scupper my plans? Or is there something I haven't thought of?

HappyMJ

pimento wrote: »

Thanks HappyMJ

£500 a month extra sounds like a lot. Wouldn't it be cheaper to pay it back over the 13 remaining years (even if it isn't at the same rate as the mortgage)?

How does a payment holiday work? Do they just extend the term by the length of the holiday? That sounds too simple.

Would it be dishonest to ask for the re-mortgage/loan/whatever and not mention the long holiday from work?

No it'll be more expensive. Cheaper per month but overall it will be more expensive. Assuming you did get a SVR rate of 4.5% over 13 years £25,000 will cost about £7,300 in interest and the payments would be about £210 per month. It's also variable...the payments could go up and over 13 years I'll put the house on it that they will. £25,000 over 5 years at a fixed rate of 7.9% will cost about £5,000 in interest. It's quite a big difference.

Yes they just extend the term by 6 months...or they can make the payments slightly higher each month if you want to keep your retirement date the same.

Yes it would be dishonest. A personal loan application does not ask that question.

If after taking out a personal loan you find yourself short where you can't meet the repayments you can take out an interest free credit card and join the stoozing club transferring interest free credit from card to card for the next few years...as well as dramatically cutting back your expenses....and you could ask your son to help out a bit by paying all the household expenses for the time you are away.

pimento

I have six months mortgage payments in savings so I could do without the payment holiday. I looked on the C&G web site and they only give a maximum two months payment holiday. Their extra borrowing rate is quite high, too - about 6%.

I suppose I could move the whole mortgage to my bank (First Direct) and add some to it.

My employer is very helpful and quite flexible so there might be a deal to be done regarding leave. Maybe we could take several shorter holidays rather than one long one and then I wouldn't need to do the leave without pay.

Hm. Food for thought. Thank you everyone who replied.

HappyMJ

pimento wrote: »

I have six months mortgage payments in savings so I could do without the payment holiday. I looked on the C&G web site and they only give a maximum two months payment holiday. Their extra borrowing rate is quite high, too - about 6%.

I suppose I could move the whole mortgage to my bank (First Direct) and add some to it.

My employer is very helpful and quite flexible so there might be a deal to be done regarding leave. Maybe we could take several shorter holidays rather than one long one and then I wouldn't need to do the leave without pay.

Hm. Food for thought. Thank you everyone who replied.

I really wouldn't leave a BOE BBR + 2% mortgage for anything in the world. I'd stick it on a credit card before leaving that mortgage.

Just some quick maths...

£62,000 @ 2.5% 13 years repayment around £10,000 interest..
£62,000 @ 4.5% 13 years repayment around £18,000 interest.

Even if you took out a credit card and racked up £25,000 on that at 11.9% interest paying back 3% of the capital each month to repay it in 3.5 years you would not save the extra £8,000 in interest that the mortgage cost you. A credit card would cost you £5,100 in interest assuming you keep the repayments at £750 a month for 41 months.

A Sainsburys credit card only charges 7.8% long term interest which is much better....but I'd still go down the personal loan route over 5 years.

pimento

I hear what you're saying but the long term isn't as important as the short term in our situation.
I'd struggle to find another £500 a month. I know it's wrong to look at the monthly payment because ultimately it will cost me more but I can sort all this out after the fact.

The only other thing I could consider is selling the house and buying something smaller but that would take time we don't have.