Pay mortgage off early with personal loan?

jg31984

I have a small mortgage (sub £25k) with 7 years left to run. Last fixed deal ended about 11 years ago and been on base + 2% since. All good when base rates were low.

Now on 7% which is not ideal although no early repayment fees apply as not locked into a deal. Considering using a personal loan at 5% over 4 years to repay the mortgage. No arrangement fee being a big appeal over another mortgage deal and limited cost of early repayment, should I wish to do this. Any negatives to this? Will the bank consider source of funds an issue? I have made some overpayments previously and source has never been checked, albeit not more than £1k at a time. Do not have sufficient savings to repay in full. 

Any thoughts appreciated!

dimbo61

Have you looked at new deals for existing customers with your current lender ?

Marky4040

jg31984 said:

I have a small mortgage (sub £25k) with 7 years left to run. Last fixed deal ended about 11 years ago and been on base + 2% since. All good when base rates were low.

Now on 7% which is not ideal although no early repayment fees apply as not locked into a deal. Considering using a personal loan at 5% over 4 years to repay the mortgage. No arrangement fee being a big appeal over another mortgage deal and limited cost of early repayment, should I wish to do this. Any negatives to this? Will the bank consider source of funds an issue? I have made some overpayments previously and source has never been checked, albeit not more than £1k at a time. Do not have sufficient savings to repay in full. 

Any thoughts appreciated!

You can pay off the mortgage at any point under the conditions of the mortgage, the source of funds isn't relevant as long as it can be identified and is not the proceeds of criminal activity.

A mortgage charges interest daily on the remaining balance, a personal load does not. As long as the PL isn't more expensive you will save alot of the remaining mortgage interest and is a great way to shaft the bank. 

jg31984

It looks as though they don’t have new deals for borrowing under £25k - I’d have to borrow more to get a deal which isn’t ideal. I’m with Lloyds at the moment.

mark55man

Try stoozing on interest free credit cards and then repay or put money into savings.  Depending on your credit score you may get a couple of cards that will do most of the £25K it for 3% fee - especially if money transfer not balance transfer

If you haven't done it before read up on the risks and the do's/don'ts - especially if you need more time than the interest free period as you may end up in a hole

https://www.moneysavingexpert.com/credit-cards/stooze-cash-credit-cards/

TheAble

Overall it seems a reasonable plan. A few points to consider:

• Your mortgage company may impose a fee for early redemption, though it's probably fairly modest. Have a check first to see how much it is
• A loan over 4 years will require higher monthly repayments than a mortgage over 7, so be sure you can afford these
• Applying for the loan will have an impact on your credit file

Just things to take into account before you go ahead.