Get a loan to clear mortgage?

Ivrytwr3

Hi all,

I am looking for advice on a possible option i am looking at.

We currently have a 2 part mortgage on our property. 1 part is at £52990 @ 1% and the other is at £21478 @ 3.99%.

On part 2 the remaining term is 7.5yrs and we currently pay £290 per month and overpay by £200 per month.

I have seen a loan for £20k at 2.81% and there are no fees for overpayments and is £357 per month.

Are there any pitfalls in using the loan to clear the mortgage and then overpaying the loan? ie where we overpaid the mortgage by £200 per month, we would overpay the loan by £145 to match what we were doing with the mortgage.

Make sense or clear as mud?!

My thinking is, interest rates are not going to drop 1%, but they may start to rise, therefore this is like a 5 year fixed with no fees!

With the no charges for overpayments, just by doing what we are doing with the mortgage saves us interest and reduces the term.

That easy or not?! Anyone able to cast some figures?!

freshcotton

Hi this is exactly what I am planning on doing when I come out of my fix. My balance will be about £45k and so it will be cheaper for me to get a loan for £20k rather than paying remortgage fees.

Makes sense to me

User1489

I have already done this, I OP'd 15k to my mortgage and got it on a loan 2% cheaper than my mortgage rate.


No regrets so far (three months after taking out loan).


Man v Mortgage

mfmaybe

The only things I can think of are 1 - you'd need to check on the flexibility of the loan. Historically they haven't been that easy to overpay so do check. And 2 - when does your part 1 need to be remortgaged? Having an unsecured loan could impact your credit rating.

Also I doubt you'd get a 7 year loan (might be wrong) so your minimum payment would probably go up. Are you sure you could afford the new minimum?

If all that sounds ok, I don't see why you shouldn't do it.

edinburgher

mfmaybe wrote: »

The only things I can think of are 1 - you'd need to check on the flexibility of the loan. Historically they haven't been that easy to overpay so do check. And 2 - when does your part 1 need to be remortgaged? Having an unsecured loan could impact your credit rating.

Also I doubt you'd get a 7 year loan (might be wrong) so your minimum payment would probably go up. Are you sure you could afford the new minimum?

If all that sounds ok, I don't see why you shouldn't do it.

I believe OP is talking about the T5B loan that is topping the best buy tables. It looks to be fully flexible, a great idea if you can get it (I can't)!

5 years is the maximum term.