Mortgage V Loan

Hurls99

:doh:
Desperately seeking advice!!
We currently have 9 years left on our mortgage- current balance £40k BUT we want to pay £20k off and pay the remainder over the next 3 years.

Our current provider will not mortgage under £25k (& then at a higher rate!!!) So we started looking at taking a £20k loan over 3 years or 4 years with the option of overpaying.

Is there any reason not to have a loan or any benefit to keeping a mortgage (we can only find 3 lenders who will offer a £20k mortgage?!)

Any advice would be gratefully received - Thanks

Thrugelmir

Remortgaging to another lender may well outweigh any benefits, i.e. savings. Does your existing offer any products which allow unlimited overpayments?

Are you currently locked into a fixed term product?

Hurls99

Our fixed rate expires 1st Feb, overpayments are limited to 10% of overall mortgage so don't really have opportunity to overpay much/reduce term.

We aren't keen to keep money in savings but are desperately keen to be mortgage free

Our existing lender has been most disinterested & rate about to jump

Thrugelmir

Hurls99 wrote: »

Our fixed rate expires 1st Feb, overpayments are limited to 10% of overall mortgage so don't really have opportunity to overpay much/reduce term.

After the 1st February you have flexibility to overpay. There's nothing to stop you overpaying by £20k. Then asking your lender to reset your mortgage term to 3 years (36 months) or whatever you wish. This will require an affordability check.

With such a small balance you could then fix the interest rate with a fee free product option for a minimum of 2 years, possibly 3 if your lender offers a product of this term length.

Your lender isn't interested because it's not worth their bother. Too costly to waste time.

Hurls99

Thanks very much

Unfortunately our lender has said if we pay off the lump sum the rate will increase significantly so existing lender is a no go for us.

Affordability will definitely not be an issue.

CommitedToChange

I would remortgage now for the best deal possible for 3 years. Overpay the maximum each year and save the rest in a high interest saving account (linked ones currently do 5%) then at the end of the three years pay off in full.

You'll still be mortgage free in 3 year.

ViolaLass

What's the interest rate you can get on the amount you currently owe?

It might make more sense to save your money rather than overpay if you can earn more interest than it costs.

Hurls99

Thanks so much - can you confirm if you're suggesting to keep the mortgage at £40k please?

ViolaLass

Hurls99 wrote: »

Thanks so much - can you confirm if you're suggesting to keep the mortgage at £40k please?

I am, if the interest rate on the mortgage is lower than the rate you can get on savings.