£5000 cash needed - best option?

blue_bear

Doing some major house improvements just now and as always the folding stuff has run out. I reckon I need £5000 more - cash - to finish the job.

Spoke to my bank today and they are happy to give me further advance on my mortgage.

I am on a 2 year fixed mortgage at 3.9% until june 2005 - so well pleased with that. They are offering the £5000 as a tracker - no tie ins at 1.25% over BOE rate - so current 6%

I have 22 years left on mortgage and want to renegotiate it in June as a lump some - hence the no tie ins option.

But quickly working it out it looks like the extra £33.72 (current rate) for 22 years = just short of £9000 repayed. Seems excessive to me.

So before I do it I was hoping for some advice on other options to look at. I have enough credit limit on various credit cards but it has to be cash - so option of lifetime transfer seems unworkable? Also bank reckons a personal loan would be a far worse rate?

Any help / ideas?

Rafter

Blue,

The total amount payable on any long term loan is always scary because you are spreading the loan over such a long period of time.

The advantage of mortgage borrowing though is that it is cheaper because it is secured on your house. If you can't pay your loan back, the bank can force you to sell your house.

With unsecured loans (personal loans and credit cards) the rates are higher to reflect the fact that if you can't repay the bank can't force you to sell your house.

The key is how quickly you can repay the £5000 and whether you can be bothered to play the transfer game moving money between credit card offers every 6-12 months.

It is possible to get money from a credit card to your current account using an EGG card (MBNA do this too but charge a fee). You simply ask to do a balance transfer to 'pay off your overdraft' even if you don't have one and hey presto - cash from a credit card.

The banks offer isn't that competitive and it is a tracker so if rates go up your loan goes up. You should be able to beat this looking at the best personal loan deals. There may well be an arrangement fee on the mortgage which will make the rate even less attractive.

The key to minimising your interest cost is paying back the home improvement loan faster than 22 years.

If you are remortgaging in the middle of next year anyway, I'd try Egg and see if you can get the £5k that way. Come June next year you can then review your finances and decide what amount of mortgage you need and whether you want to pay your egg card off using it or transfer to another deal.

If you want to keep your mortgage interest bill down and you have the cash flow, consider remortgaging over a shorter period than the standard 25 years. Alternative get a flexible mortgage product where you can make overpayments and reduce the term of your loan if you want.

Good luck.

R

blue_bear

Rafter

many thanks for the advice

Did not know about the Egg cash to bank deal. I have an egg card with a high enough limit so this is an option worth considering. Shame that the 0% for life Barclaycard offer I got couldnt have included this as well - then not an issue !!

Also northern rock were quoting a very low figure for a 5 year loan. 5.9% I think - so interest was around £725 but repayment was around £100 a month

But as you point out it is the low repayments just now which are the draw for me. £33 instead of £100 per month. But still the amount eventually paid back sticks in the throat !!

This deal (I will check) I think has no early settlement charges - but yes has a £125 arrangement fee which can be added or paid now so it looks less attractive in that way.

But Im just not sure how finances will be in June.

Was definately looking at rolling mortgage plus advance into one lump sum and remortgaging but at 21 or less years - not going back to 25 - did that with first one - ie 25 to 23 years fixed rate 23 to 21 next fixed (current deal) rate - next one 21 to ??? etc etc

this should be possible I believe as both run for same length.

I am still in several minds what to do about the £5000.

it seems choices are
a) take advance - pay lots of interest but low repayments just now
b) use credit card for cash as described and try to move balance about at 0% until paid = eg 50 months at £100 per month - but possibly upto 9 - 0% cards needed for this period - is this plausibe / possible?
c) loan - £100 per month but £725 interest

unless anyone has any other bright ideas? and no no family can help - unfortunately

Robert_Sterling_3

We have both borrowers and savers on this site.
Borrowers like low rates of interest.
Savers like higher rates of interest.
we can't have both.
You like not only low rates but also low total amounts of interest.
You actually get Lower amounts on short loans and Higher amounts on long loans.
You can't have both.
Take your pick and shovel up the money.

Freddie_Snowbits

When I did the pad up with the Missus, I used a 'Offset' Plan with IF. This way I only paid interest on the money I used to do the place up, as and when it was needed. At the end, I converted it to a fixed rate mrtgage.

Debt_Free_Chick

Did not know about the Egg cash to bank deal. I have an egg card with a high enough limit so this is an option worth considering. Shame that the 0% for life Barclaycard offer I got couldnt have included this as well - then not an issue !!

In which case, BT from BCard to Egg. Egg is £5k in credit. BT the credit from Egg to your bank account.

The debt is on your BCard at 0%

Rafter

Blue,

DF Chick is right - use your existing egg card as a 'medium' between a new 0% card and your current account.

Barclaycard offer the longest deal (with 2% fee), MBNA anecdotally are the most generous with credit limits and have a £5 minimum repayment (with 2% fee) and there are some 8-9 month offers out there with no fee.

It has been possible to play the 0% shuffle over the last few years, whether you can in future is anyones guess.

Given your additional info I'd apply for an MBNA Card (either direct from MBNA or from Virgin, A&L or Abbey who also use them). Make a £5000 transfer (if you get enough credit) to your current account. This will cost you £35 or £50 in fees.

Pay £5 per month for 9 months off your card, any anything else you can afford into a savings account. (no point paying off a zero % card if you can be earning 5% on the cash)

After 9 months.......

a) apply for another 0% card and shuffle

b) apply for a 'life of balance' transfer card eg Texaco or Mint which offer 3.9% for the life of the balance transfer. If you pay £100 a month off this, it will cost you £450 in interest over 5 years.

Both these are cheaper than the Northern Rock loan or your mortgage. Both these are still fallbacks if the offers aren't as good by next year.

Good luck

R

blue_bear

Debt free chick

i think the problem with your suggestion - I may be wrong - is that I consolidated all my debt onto barclaycard at 0% for life thanks to hearing Martin on radio a year or so ago.

So i have been making small but regular payments to it whilst ensuring i spend the required £1 a month to keep within the terms and conditions of offer.

IF i put anything else on it then I think i am right in saying the payments pay off my existing debt first and my new debt immediately accrues interest?

Rafter - I had considered the card swopping option - but I think I would need a SERIOUS amount of cards over 5 years - average 6 months 0% = 10 cards - not sure how feasible this is.

Lifetime rate is possible too - but that is us back to the £33 v £100 dilemma.

I think a possible solution is a hybrid - could be to try to do the 0% shuffle but fall back on lifetime rate if/when 0% cards run out

decisions decisions - just got the bank stuff through to at least look at  - 10 pages of goobledigook

and at moment house bomb site with workies doing no more till cash forthcoming !!

oh the joys