Use loan to lump sum overpay mortgage?

Shheather85

Hello.
I have a mortgage with a high interest rate of 4% (the house was an opportunity too good to miss so had to get a 95% mortgage last year)

I have the option to over pay (which I intend to use) each month or as a lump sum.
What I was wondering is that given the very low interest rates whether it is beneficial/advisable to get a loan out and pay a lump sum off the mortgage and pay that back on a monthly basis or just to stick with a fixed overpayment amount each month?

I can't see any problems with the first option but not sure if this will cause me problems further down the road when I come to remortgage?

Thanks
Simon

AnotherJoe

Its unlikely you'll get a loan, and it's doubly unlikely that if you did, it would be at a rate lower than your mortage rate.

Shheather85

Why wouldn't I be able to get a loan? I have no other debt other than my mortgage, excellent credit rating and earn £65k+?

Also from this own website there are loans out there with interest rates lower than my mortgage's interest rate "/loans/cheap-personal-loan" so wouldn't they be better to get than my mortgage!?

Cardinal-Red

Have you run the numbers in a calculator?

It just doesn't seem worth it to me personally, at best you might get 0.8% difference (if you're looking at the 3.2% loans) but you lose flexibility on overpaying (i.e. if you need to not overpay one month, how could you with a loan payment) and need to factor in the impact of a loan on your ability to remortgage.

It's not a bad thought but not one I'd be looking at.

SavingSteve

Shheather85 wrote: »

I can't see any problems with the first option but not sure if this will cause me problems further down the road when I come to remortgage?

When do you plan to pay the loan off, before or after its remortgage time? When you come to remortgage, if the loan is still!out there, the monthly payments will be considered in any affordability checks.

If after the remortgage, and it doesn't impact affordability, you may also want to consider whether there will be any penalties to settle the loan at that point, as it would make sense to consolidate the debt, if the mortgage lenders at that time allow this.

getmore4less

If you can borrow money cheaper than the mortgage then it makes sense to do that. It's called Stoozing.

The cheapest money you can get is 0% purchase credit cards.
Next is usually long term low fee balance transfers <2%.

As long as the numbers work and you have the cash flow you could save a bundle.