Loan or mortgage

rose6789

Help please.

I'm lucky enough to own my house mortgage-free, but need some money to do some building work. Would it be best to get a mortgage or a loan for this? I want to avoid paying too much interest and will probably be able to pay it off in the next 5 years or so.

I'd really appreciate advice, thanks.

Gaz83

I personally wouldn't take out a secured loan if an unsecured loan was available. Have you looked around to see what kind of interest rates you'd be offered for each based on your circumstances?

rose6789

I figured the interest rates would be lower on a secured loan. I just get anxious that so called advisors are more interested in commission rates than advising the best thing so thought I'd see what people on here thought first! Thank you

Pixie5740

Which advisors do you mean, IFAs or the advisors at the bank?

Personally I would go for an unsecured loan as you get some low interest rates on them at the moment and if something should go wrong, such as a sudden and unexpected drop in income, then you're not risking the roof over your head.

Alternatively, depending on how much you want to borrow, could you use 0% credit cards to fund the work?

somethingcorporate

How much do you want to borrow and how much do you earn?

Unsecured loan rates are the lowest they've ever been but they still don't get close enough to mortgage rates at the low LTV you'd probably be looking at, although loans will likely have more flexibility on payback and they are not secured, if you ever did default.

rose6789

I've been to a bank advisor who didn't seem very knowledgable, and an IFA who recommended various investments that have always done poorly, but paid him well. Maybe I've just been unfortunate (or naive!)...

I hadn't thought of 0% credit cards, that's a good idea. I always pay off my card each month so have never used one. I'm going to need around £30K.

Thanks

rose6789

My current credit limit on my credit card is £10,600 and I've never asked for it to be raised, they just put it up periodically. Does this mean I would be able to get 3 0% cards for this level of limit, or would a new company be less trusting of me?

Thank you

Tixy

rose6789 wrote: »

My current credit limit on my credit card is £10,600 and I've never asked for it to be raised, they just put it up periodically. Does this mean I would be able to get 3 0% cards for this level of limit, or would a new company be less trusting of me?

Thank you

Not necessarily no. Each new card application will consider your existing financial commitments and also look at how much credit you have available relative to your income.

Of course even if you did get 3 cards it sounds like you wouldn't be paying back the debt within the promo period, so you'd then be reliant on getting further cards to transfer the debt to (or possibly be stuck with the at the standard APR) that could cost far more in the long run than a loan/mortgage.

I would personally say £30k for 5years is too much for too long to risk trying to get it all on 0% cards and risk being able to do future transfers.

Potentially you could consider looking for a mix of unsecured loan and 1 credit card (you are very unlikely to get an unsecured loan of £30k).

But to be honest in your situation and given that it is for home improvements then I'd probably go for a mortgage at a fixed rate for x years and with limited repayment penalties.

MallyGirl

no idea if there are any around these days but an offset mortgage would be my choice - you only pay interest on what you have borrowed so your interest will just rise as you pay out to each builder/installment. Then you 'offset' as much as you can with the flexibility to get it back if there are unexpected follow on costs.
Our OneAccount financed our extension in this way - sadly no new OneAccounts being offered but there might be others around.

meiligao

Maybea Gaz83 is right.:o

Thrugelmir

You may well struggle to obtain £30k of unsecured credit.

Now's the time to lock into a 5 year fixed mortgage product.