Loan to pay off mortgage?

brassmonkey001

I currently owe £16000 on my mortgage and intend to move house this year. My introductory rate ended a couple of months ago and has switched to the SVR, currently 3.99%. Because I intend to move house soon, I didn't bother shopping for a cheaper rate because I would only have to arrange a new mortgage deal to buy the new house anyway so decided to take the hit with the SVR for a few months.
The latest email from Martin shows the best loan deal is currently 2.7% on a loan of £15000 from Sainsburys so I'm wondering if it might be better to take out the loan to pay off the mortgage (I can cover the shortfall from savings) and enjoy the better rate for the time being until I take out a new mortgage when I find the right house?
Also, I am already a Nationwide customer and it seems they will beat any loan by 0.5% so if I understand it correctly, I could potentially shift from 3.99% to 2.2%?
When I take out the new mortgage, I would factor in paying off the loan in the new amount borrowed.
What do you think?

[Deleted User]

I'd try an eligibility checker to see if you can get anywhere close to the headline rate.

Remember also that the rate will be influenced by the term, so consider how long you need to pay off.

foxy-stoat

If the numbers work for you then apply away and report back when you get an offer of the loan.

Although when you go for the next mortgage you will have £15K unsecured debt that may influence the lenders decision on affordability.

JimmyTheWig

Interesting question.
There are associated fees when paying off a mortgage in full, but I would guess these would be less than the interest you would save.

A couple of potential problems...
1. Can you afford to pay off the £15k in the timescale of a personal loan? If not, what would you do if you haven't yet moved when your savings run out?
2. When you come to apply for a mortgage they will see the large personal loan and that will count against you (I don't think their systems will care that it is really your mortgage that you will be paying off).

System

£16k personal loan will reduce the amount you will be able to borrow and may affect an affordability check for a mortgage with a new provider.

MEM62

Why not go for a new mortgage deal now and just make sure that it is portable? Many are.

JimmyTheWig

Or can you get a retention product with no fees or ERCs?

JimmyTheWig

MEM62 wrote: »

Why not go for a new mortgage deal now and just make sure that it is portable? Many are.

Porting a mortgage is always harder than being free to go anywhere.

redux

1.33% of £15,000 is £200. 1.8% £270

That's for a full year. If the move is later this year, is this temporary scheme worth the hassle and potential drawbacks to save £50 or £70?

brassmonkey001

MEM62 wrote: »

Why not go for a new mortgage deal now and just make sure that it is portable? Many are.

I'd have to change the amount borrowed when buying the new property so I think it would be easier just to apply once I know how much I need to fund the new house. I imagine the amount would affect the deal.

brassmonkey001

redux wrote: »

1.33% of £15,000 is £200. 1.8% £270

That's for a full year. If the move is later this year, is this temporary scheme worth the hassle and potential drawbacks to save £50 or £70?

Given the points made by other posters regarding lenders seeing a personal loan and the potential effect on my credit score, probably not. It was just a thought.