Loan to overpay mortgage?

I'm currently in a 2% fixed until November next year, and I'm thinking about getting a loan to overpay around 10% of my mortgage at 3.4% over 3 years. 

I suspect the rates will be higher than 3.4% when it comes to the re-mortgage and don't have any issues with affordability or credit rating, so to me this seems to make sense...
I'm obviously going to be paying around 1.4% more over the next year or so, but if I get a fix around 4% it should pay for itself?

Any thoughts?

Comments

  • So you want to get a personal loan to pay off another loan(mortgage)?

    I can understand the reasoning, but it just seems a bit back to front to me.
  • born_again
    born_again Posts: 13,552
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    Check for any penalties for over payment. Some will only allow a certain amount. 
    Life in the slow lane
  • So you want to get a personal loan to pay off another loan(mortgage)?

    I can understand the reasoning, but it just seems a bit back to front to me.
    the logic is that it'll cost more initially, but save money in the long run, especially if the mortgage rates keep increasing.  You have a point though

    Check for any penalties for over payment. Some will only allow a certain amount. 
    I can pay 10% per year without penalty.  I already slightly over pay, so will have to make sure I don't go over
  • Why not use the money you would be spending on repaying the loan and just overpay the mortgage anyway? You will still reduce the balance of your mortgage ahead of your fixed deal ending next year and won't have to pay additional interest (loan vs mortgage rate). 

    If you have spare money now pay as much as you can against the mortgage and reduce the term (rather than the payment). If you are able to save more than your 10% overpayment allowance between now and the end of your deal put that aside in a separate savings account to accrue interest and then make a lump sum payment when your current deal expires to reduce the balance further. 
    • Original mortgage end date: March 2041
    • Current mortgage end date: Dec 2032 (aiming for October 2025)
    • MFW 2024 #15 £446.24/ £2500 /// MFW 2023 #15 £8,617.84/ £10,000 /// 2022 #15 £7,315.24/ £7250 /// MFW 2021 #15 £8,530.07/ £8500
    • Daily interest is currently £4.44
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