Check my ideas for me please ?

TightGit

Hi folks , been browsing for a while but have just had the urge to sign up after seriously thinking about money in a few ways.

Let me pass it by you and see what you think.

I owe £56,000 on my mortgage, i have no outstanding debts.
Currently i pay £400 per month on a repayment mortgage and have 19 years remaining.

My idea is to wait for the mortgage 2 years fixed to end ( 12 months time ) and then take out a personal loan for £50,000 in order to pay the mortgage off , i have calculated i can then pay this loan off in around 3 years.

By this time i can sell the house im in for circa £88,000 and this will obviously all be my money no debts. I then intend to get another loan/mortgage or even nothing at all ( doubtful) to top this figure up to around £160,000 and then buy a bigger house. I can then do the same and pay this off in a similair amount of time and have no debts within 6 years and a bigger house , as opposed to what im living in now and paying for 19 years.

Let me know what you think anyways and bounce some ideas off me

One thing i will say is im not the type to sell and rent, always seen it as dead money and its not worth it around these parts, i can buy cheaper than rent in most cases.

Thanks guys

Old_No.7

Hi there, interesting idea! I'm not sure though why you would take out a personal loan to pay off your mortgage: isn't the interest on mortgages usually lower than on any other loan? If it's a flexible mortgage, or one with no tie-ins after the 3 years, you could just pay it off with your savings/early repayments during or immediately after that time, no?

angelavdavis

Hi TG,

But as Old No7 says, I think you stand to pay a lot more on loans than on the mortgage with interest. You would be better off putting the mortgage into a more flexible mortgage and saving your cash in a savings vehicle or an offset account to pay it off faster.

Example of comparison:

Britannia offset 6.1%
Northern Rock Loan 12.9%

I didn't do a lot of investigation on rate comparisons - there are no doubt better deals available, but its food for thought....

The other issue is that personal loans for £50k aren't as readily available. Most lenders will only lend unsecured up to about £25k.

Sorry to put a dampner on the idea....:o

TightGit

I did some calculations and although the interest rate might be "higher" on the loan.

over the period of the 19 year mortgage you will pay back a pound for every pound you borrow. i.e 110k, with the loan ill pay back 63k.

With a mortgage theres no way i could pay it off in 3 years like i could with a loan.

I have also had the loan agreed to but havent taken it out yet.

I will more than likely however pay some of the balance off with savings as you have siggested, probably circa £15k so only borrowing 35k on a loan.

CLAPTON

If you cn afford to pay 50,000 over three years then the best ways (i.e. cheapest) are likely to be

a. simply overpay on the mortgage once the fixed rate ends.

b. if the mortgage doesn't allow such a high level of overpaying then overpay as much as you can, save the rest until you have enough to pay off the mortgage completely

Unless you hava loan with an APR less than your mortage then the above methods will be cheaper

what is the APR of you mortgage?
what restrictions are there on overpaying once the fixed period is over?
what is the APR of the potential loan?

Miss_Penny_Pincher_2

When you come to the end of your current mortgage offer you could remortgage to a shorter length. My mortgage has 23 years left but I was considering getting another mortgage out fixed for 3 years but reducing the term of the mortgage from 23 years to 7 years. I calculated that by overpaying £500 each month the 7 year mortgage would be paid at the end of the 3 year fixed rate

I'd recommend having a play around with some mortgage calculators...

Miss_Penny_Pincher_2

Just wanted to add that you can also put in the different interest amounts of the loan and the mortgages to compare total costs etc.

Today I finally signed up to a remortgage. In the end I went for a 5 year fixed rate and reduced the term to 15 years. I calculated that overpaying £500 a month (the maximum the product allows) the whole mortgage would be paid off at the very end of the 5 year fixed rate. This product has no fees, 5.63% interest rate and no exit fees so it could be worthwhile you considering a remortgage instead of a loan?

Baileys_Babe

Miss_Penny_Pincher wrote: »

When you come to the end of your current mortgage offer you could remortgage to a shorter length. My mortgage has 23 years left but I was considering getting another mortgage out fixed for 3 years but reducing the term of the mortgage from 23 years to 7 years. I calculated that by overpaying £500 each month the 7 year mortgage would be paid at the end of the 3 year fixed rate

I'd recommend having a play around with some mortgage calculators...

This is what we did when we came to remortgage. Reduced the term of the mortgage, but so the repayments were still affordable and then over paid upto the max each month. If we had any money in excess of these amounts we saved them for a month when we weren't s flush.

The amount owed comes down surprisingly quickly and less interest to pay :money:

dimbo61

hi tightgit,
some maths £400 x12= £4800 a year mortgage now !
£50,000 divide by 3 = £16666 a year or £1388 a month plus interest.
save one thousand pounds a month for the next 12 months and
you can then afford the loan no problem EASY