Is this a bad idea?

bonnyrigger

So at the moment we have 33.6k left on our mortgage (most on 2.75% about 8k on 4%), it's due to finish in 2yrs 10 mths, we are paying about £1087/month. All well and good but by the time it's paid off I'll have turned 59 and I got to thinking it'd be nice to have extra money to spend earlier.
Our credit rating/record is 100% OK, and I can get a £25k personal loan from Sainsbury at 2.9% over 5 years next August by when the amount left on the mortgage will be less than this.
Net effects would be:
1. £600 a month better off.
2. Paying for longer (extra 2 yrs 9mths)
3. Loan not secured on property anymore.
4. My planned retirement date is 62 or 63 so will still be working anyway.

Why is this a bad idea?

edinburgher

Is your forum name related to where you live? I ask as my gran lived in Bonnyrigg for decades

Is there any reason why you couldn't take this idea to its logical extreme? I.e. borrow all the money on credit cards? I'm not sure what the current offers are, but if you have a decent credit score, many companies are willing to lend cash advances (with a fee). From memory, I was being offered in the region of 2% fee for cash advances a couple of years ago. If these are still around, it would be considerably cheaper than a loan (as a loan has a fixed rate every year IYSWIM (cash advance is x% as a one off, but loan is y% for the duration of the loan on any outstanding monies)).

Might be worth doing a bit more research, sure you can do this cheaper.

Also, the risk is the same for both, worst case scenario is unemployment for both of you with a large unsecured loan that you won't be able to afford. If your mortgage is nearly paid off, it's not like you're going to be forced into repossession to pay it off, your creditors would likely agree a payment plan.

Seems like quite a lot of upside, relatively minimal risk as you have all your financial ducks in a row and have got to your 50s in employment anyway.

Jonbvn

Only issue I can foresee is trying to explain what you want the loan for. The lender may not agree.

BakingC

Can you definitely get the 2.9% loan ? You might not be offered the headline rate simply because you might not be their ideal customer regardless of low other debt etc.

I agree with advice above about credit cards. Interest free money transfers / stoozing on purchase cards may be an option.

Also check the total interest left payable on your mortgage Vs with paying the loan for longer. You may end up with extra money each month but you would nearly be doubling how long till you are debt free.

bonnyrigger

Thanks all for the advice, I've a meeting with my FA in May about my pension so will ask him about it then and see what he thinks.