How to borrow flexibly?

darthling

Hi everyone

Please accept my apologies if this is the incorrect place for such a post. I need some general advice. I have requested a call back from a mortgage broker but just need some advice as I'm confusing myself. Here's the situation:

House value 140k
Current mortgage 95k
Monthly payment £700
Savings 2k

We have recently received a critical illness payout but we are about 3k short of our mortgage total for some reason. Our fixed rate ends in April so we want to make changes then. Obviously we've recently been in a position where you realise how precious life is and thus we have decided to go ahead and do two thing immediately that we were saving/planning for within the next 5 years.

So thing 1 is around 13k and thing 2 is 6k. We have immediately taken a 0% credit card for 23 mths which has a limit of 6k.

So years ago we had a one account where we had a current account with a 100k overdraft if you like. I was thinking that we could do with one of these now as it feels like we are having cash FLOW problems.
So we borrow say 20k over 5 or 10 years.

This is where I get confused, is that the right decision, what's the cheapest way to borrow if we want flexible cash?

So from April we have £700 (if we had no mortgage) per month to start paying for the things that we have just bought.

We could apply for a fixed rate loan
We could try and get another credit card
We could remortgage fixed or offset

Also from next April (2016) we want to invest in something else to the tune of £400 per month.

I sure hope you're not as confused as I am. Any advice greatly received.

Ps I have read a few posts on here where people are commenting on choices others have made. I'm just asking for advice on how to borrow this amount of money, and that's why I haven't mentioned what it's for

Thanks for any help.

CKhalvashi

My personal advice would be to pay the highest interest debt, leaving a small mortgage balance, which could be paid faster on SVR with overpayments, if I read your intention right.

darthling

thanks, we have never had SVR, always fixed. I will mention to the mortgage adviser.

amnblog

I would be really interested in your advice for mortgage holders who consider critical illness insurance 'too expensive'.

Jhoney_2

It's noone's business what it's for. Go enjoy your plans! It's great that you have been and are being so financially responsible - the last thing you need is stress about money so do take good advice.

Best of luck with it all.

dimbo61

" We have recently received a critical illness payout "
Will you be able to get another mortgage with another lender?
If you use the money from the Payout to clear the mortgage ( well most of it) you will only have a small mortgage payment each month!
£700 extra each month.
You could pay most of the mortgage off but keep say £14,000 from the payout and have a £17,000 mortgage.
By doing this you would have £16,000 in savings to pay for the things you want to do NOW while still having a small mortgage which you can overpay every month while on the SVR or ask your lender what deals they have for existing customers after the fix finishes.
Perhaps a tracker deal as Interest rate rises will make little difference when you only owe £17K

getmore4less

cash flow?

Does the critical illness payment have to pay off the mortgage?

if not problem solved you allready have borrowings/cash of around £95k use that.

Depending on the ability to (re)mortgage an offset low cost tracker is probably the cheapest option for flexibility.

0% CC a bit cheaper but less flexible having to renew regularly.


what is the rate on the current deal and follow on?

Simply put

You have £95k debt, £95k cash, £700pm for 1 year £300pm + £400pm going elsewhere from then.

say 10 years
£700pm 1y + £300pm for 9 years say 4% that will support a mortgage of £34350 pay the rest off.

take out your £19k now stuff leaves you with £15k in cash and a 10year loan.