When to take the additional loan?

jemjems01

Hi, I'm hoping someone can give me some advice. We're looking to put a downstairs extension on our property. We've had the drawings from the architect and submitted to building regs - all fine. We've booked in the builder but he can't get us in until September 2022. We want to borrow £55k which after going through the calculators should be absolutely fine. My issue is, the interest rate to take out an additional loan at the moment is 1.99%. Do we take it out now while the interest rate is good? Or do we wait and risk the interest rate to go up? I'm really not sure what to do, because obviously that's a lot of money to be sat on for an entire year. But we could also use it for things such as the new kitchen deposit. Any advice?

IAMIAM

The main thing I would look at when taking additional borrowing is whether I fix or tracker and how that impacts the mortgage dates on renewals so things become aligned nicely at remortgage stages without ERC. Usually you can apply and hold a rate for 6 months, so the 1.99 is irrelevant in terms of dates over next 6 months. 

IAMIAM

The main thing I would look at when taking additional borrowing is whether I fix or tracker and how that impacts the mortgage dates on renewals so things become aligned nicely at remortgage stages without ERC. Usually you can apply and hold a rate for 6 months, so the 1.99 is irrelevant in terms of dates over next 6 months. 

jemjems01

IAMIAM said:

The main thing I would look at when taking additional borrowing is whether I fix or tracker and how that impacts the mortgage dates on renewals so things become aligned nicely at remortgage stages without ERC. Usually you can apply and hold a rate for 6 months, so the 1.99 is irrelevant in terms of dates over next 6 months. 

The 1.99% is a 2 year fixed rate which would take us exactly to our re-mortgage date.

IAMIAM

well apply, secure rate, collect money in 6 months time? in 18 months time, can apply for remortgage no issues with erc. means a 6 month period of funds in your account ready.....

K_S

jemjems01 said:

Hi, I'm hoping someone can give me some advice. We're looking to put a downstairs extension on our property. We've had the drawings from the architect and submitted to building regs - all fine. We've booked in the builder but he can't get us in until September 2022. We want to borrow £55k which after going through the calculators should be absolutely fine. My issue is, the interest rate to take out an additional loan at the moment is 1.99%. Do we take it out now while the interest rate is good? Or do we wait and risk the interest rate to go up? I'm really not sure what to do, because obviously that's a lot of money to be sat on for an entire year. But we could also use it for things such as the new kitchen deposit. Any advice?

@jemjems01 To state the obvious, no one can guess which way rates will go, but how much will interest rates have to go up by in 12 months to make it worth taking out the loan now at 2% and plonking it in a savings account earning very little.