Secured loan or mortgage as savings

See_bee

Hello all

Now please, nobody blast me if this sounds stupid - I genuinely struggle understanding financial issues.

In short I'm selling my house and relocating from London to Wales in order to own a house mortgage-free and clear my debts - so this is a big opportunity!

However the house I'm buying needs the roof fixed, a new boiler and general updating.

I had wanted to have a savings buffer of around £10,000 for a rainy day, but I'm likely to only end up with half of that after I've fixed what's needed (on a shoestring tbh).

My question is, would it be a good idea to take out a secured loan or small mortgage of around £10,000 to keep as savings?

Thanks x

boo_star

Neither seems like a sensible option.

Paying interest unnecessarily, especially when there isn't an immediate need for the money and may never be seems ludicrous.

fatbelly

Sounds like you're going to have 5k left after the move and the jobs. That's enough for an emergency fund. If you have a bigger emergency (not sure what that would be) have a credit card ready

https://www.moneysavingexpert.com/credit-cards/best-0-credit-cards/

Make sure you have contents insurance (and building insurance) in place. For peace of mind add accidental damage.

DCFC79

Why take out a loan or small mortgage when the money would be sitting in account and your paying the monthly fees.


If you need to take out a loan then use that money to pay for the work you want doing.

Ebe_Scrooge

Having an emergency fund is eminently sensible, but taking out a loan to do so is most definitely not. Use your savings to pay for the work that needs doing, then re-stock your savings account every month. If, for instance, you take out a loan of £10,000 over 3 years, and the repayments are £300 a month - you'd end up paying back £10,800 (figures are for illustration only). Instead, don't take out the loan, but pay £300 a month into your savings account (you'd have to shell out £300 a month if you were to take out the loan). At the end of the 3 years, hey presto you've saved up £10,800 - it's a no-brainer.

See_bee

Thanks everyone! Now I understand. It's the whole panic of moving so far away, but you've all made perfect sense

Herzlos

If you're able to take out a loan to leave sitting for emergencies, then you should be able to wait and take out the loan if an emergency happens. In the mean time, you can pay the loan repayments into your savings and you'll be in a much better position.