Best way to pay off low mortgage please

Hexham

I took out a 10 year, £40000 mortgage fixed rate for 2 years. Fixed rate term ends end of this month and I will have a final settlement sum of £31,828.
I have £20k I have saved and would like to use this to reduce the remaining debt to around £12K.
What would people suggest as the best/least expensive way to do pay this off quickly? I can get a personal loan of £12K over 3 years for 3.6% 9meaning the loan would cost me around £600) Thanks in advance

TheAble

Hexham said:

I took out a 10 year, £40000 mortgage fixed rate for 2 years. Fixed rate term ends end of this month and I will have a final settlement sum of £31,828.
I have £20k I have saved and would like to use this to reduce the remaining debt to around £12K.
What would people suggest as the best/least expensive way to do pay this off quickly? I can get a personal loan of £12K over 3 years for 3.6% 9meaning the loan would cost me around £600) Thanks in advance

Sounds a reasonable suggestion. Check that the personal loan allows overpayments as well which would allow you to potentially save some interest.

SusieT

It may be worth looking at what rate your mortgage provider would give you for a product switch fixed for 3 years and compare it to the loan. 

madaboutspots

Have you considered hanging on to the £20k and getting an offset mortgage? 

Add the £20k to the offset account and then all overpayments as well and you’re lowering the loan without penalties and keeping a safety net. 
Just a thought.

Hexham

SusieT said:

It may be worth looking at what rate your mortgage provider would give you for a product switch fixed for 3 years and compare it to the loan. 

They want  5 years at 4.9%

RobM99

What's your Hexham said

They want  5 years at 4.9%

Not 3.6% for 3 years as in your OP?

What's the mortgage rate?  I don't see the point of getting a higher interest loan to pay a low interest loan.

Ebe_Scrooge

RobM99 said:

What's your Hexham said

They want  5 years at 4.9%

Not 3.6% for 3 years as in your OP?

What's the mortgage rate?  I don't see the point of getting a higher interest loan to pay a low interest loan.

The way I'm reading it, the mortgage offer is 4.9% over 5 years, the loan is 3.6% over 3 years.

OP, if that's the case then it would make sense - with one big caveat.  When you say you can get a loan at 3.6% over 3 years, what are you basing that on?  Remember that lenders will advertise "representative" rates which are given to 51% of successful applicants.  But each application is assessed on the individual's circumstances and credit history - so you may well find that, even if you're accepted for a personal loan, the APR they offer you could be a lot higher than 3.9%.

One other thought - will there be an early redemption penalty for the mortgage?  I'm guessing probably not once the fixed rate deal comes to an end, but worth just double-checking.

kimwp

Are you making sure you have an emergency fund when you put this 20k into the mortgage? 

kimwp

I think another important question is how quickly do you expect to pay off the 12k?