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Getting a loan to use as overpayment

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Hello everyone.

I just want to ask some advice really.

A little about my circumstances first. I'm currently making overpayments on my mortgage at just over two times my minimum payment. So in effect I'm making just over three minimum payments a month. My mortgage is a tracker as I'm paying over 10% a year as overpayment a year, I couldn't do that on a fixed rate.

I've been doing this for just over two years and have already greatly reduced my debt.

But I've got to thinking, with the interest rates due to rise to 6%, is it worth getting a loan for say 25k at a fixed rate of 3.6% and use that as an over payment?
This will reduce my mortgage by just over a third and as it's a fix rate, it will work out cheaper over the long run.

I realise my outgoings will decrease as I will now have a loan payment to make each month, so my overpayments will decrease but even with that it seems to make mathematical sense.

Am I missing something or does that seem a good option?

Thank you for your time.
Ben

Comments

  • powerspowers
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    I wouldn’t. 
    It takes away flexibility and a safety net, you could choose/need to stop the OPs temporarily or altogether. If you had a loan you wouldn’t be able to do that. 

    There were fixes where you can overpay more than 10%- YBS had a five year fix with a 50% op limit in June, whether it exists at the moment is another story!

    good luck with your mortgage free journey 
    MFW 2021 #76 £5,145
    MFW 2022 #27 £5,300 
    MFW 2023 #27 £2,000
    MFW 2024 #27 £1,850 / £3,600


  • DreamerUK
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    Hi Powerspowers

    Thank you for answering my question.

    That make sense but even with the extra loan payment, I'll still have almost £1k a month spare which I will be using for additional payments or not if an emergency happens (although I also have an separate emergency fund for that).

    With this plan, I should be debt free in less than five years.  :)
  • Thriftmaster1973
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    I personally wouldn't go down that road of taking on extra debt.

    It is basically borrowing off Peter to pay Paul.
    £52,365 owing December 2017.Now for the final countdown..1st Jan 2021 - £29,316 -- 1st Feb 2021 - £28,809 -- 1st Mar 2021 - £27,309 -- 1st Apr 2021 - £26,811 -- 1st May 2021 - £26,315 -- 1st Jun 2021 - £25,811 -- 1st Jul 2021 - £24,311 -- 1st Aug 2021 - £23,809 -- 1st Sep 2021 - £22,305 -- 1st Oct 2021 - £21,798 -- 1st Nov 2021 - £20,292 -- 1st Dec 2021 - £19,783 -- 1st Jan 2022 - £18,276 -- 1st Feb 2022 - £17,762 -- 1st Mar 2022 -£17,248 -- 1st Apr 2022 -£15,713 -- 1st May 2022 - £15,202 --1st Jun 2022 - £13,703 -- 1st Jul 2022 - £13,184 -- 1st Aug 2022 - £11,665 -- 1st Sep 2022 - £11,144 -- 1st Oct 2022 - £9,822 -- 1st Nov 2022 - £9,298 -- 1st Dec 2022 - £7,572 --1st Jan 2023 - £7,045 -- 1st Feb 2023 - £5,516 -- 10th Feb 2023 - £5,518 Overpayment Pot @ 10th Feb 23 = £5,518 / Primed = £0 / Actual debt = £0!!!! "Yes, the medicine is harsh, but the patient requires it in order to live, should we withhold the medicine?" Hopefully at zero mortgage debt by December 2022 or very close to it. Determined for freedom! 🍻🥂🍸🍹.
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