Paying off mortgage - start a new one to buy a car?

superbmum

Next year my husband and I will finally be paying off our mortgage. We're both in our 50's working full-time. I know there are possibilities of taking out a new mortgage and have read about the different types (probably we'd opt for capital repayment) but can we get one to buy a car, possibly avoiding higher loan interest rates? We'd probably be looking at around £25k.

sammyjammy

Probably not if you tell them the reason for the mortgage. Why would you buy a car and want it secured against the home that you live in, I'm sure you think the risk is low but its a risk all the same, life happens. I'm sure there would 0% credit as well.

Woodstok2000

That sounds like a bad idea - any default on the car and the bank has a hold over your house! Mortgage rates are cheap(er) precisely because of that leverage.

Have you looked at car finance, thats often cheaper.

kimwp

I thought mortgages were usually for about 40k minimum.

la531983

Wont let me quote the above ^^^ but have you seen the prices of cars these days?

Even something basis like a Vauxhall Corsa has a £24k price tag and that wont have any of the add ons.




born_again

https://forums.moneysavingexpert.com/discussion/comment/82154720#Comment_82154720

Go on autotrader & a brand new top spec for £18K

Keep_pedalling

Have a look at leasing deals rather than purchasing.

StewedApple

If you pay cash for a car (as you're suggesting) you are also missing the very significant advantages of taking-out a loan against the car. In the event the car goes wrong or the supplier goes out of business you would not have the S75 Consumer Credit Act liability against the lender.

This alone, may be reason enough not to mortgage the house to pay for a car.

Exodi

https://forums.moneysavingexpert.com/discussion/comment/82154720#Comment_82154720

You're not wrong that cars have increased in price significantly recently, but to give credit to @kimwp they were responding to the OP explicitly saying "We'd probably be looking at around £25k."

I'm not sure if OP is after a new low-price car (e.g. like a Corsa as you say) or a used high-price car (e.g. like an 8 year old land rover)? With even low LTV mortgage rates at ~5% now, I'd imagine you'd get a better rate from the car dealership (ignoring the obvious concern of securing a car against the house).

ritz55

I'd be in favour of a 0% credit card with a fee.

LukeB_92

The headline rate isn't the whole story here — it's the total cost of credit that matters. A car is a depreciating asset, so stretching £25k over a long mortgage term can quietly cost you far more in interest than a shorter, higher-rate loan.

Very roughly: £25k at 5% over 10 years means around £6.5–7k in interest; over 15 years it's around £10k+. A personal loan at 7% over 4 years costs around £3.5–4k in interest — even though the rate looks worse. (Illustrative figures only; your actual quotes will differ.)

Two other things working against the mortgage route:

- Most lenders want the loan repaid by retirement age, so being in your 50s likely caps the term at 10–12 years anyway — you wouldn't get the ultra-long term that makes mortgage rates look attractive.

- Arrangement fees, valuation and legal costs on a new mortgage can easily add £1k+, which on a £25k loan wipes out much of the rate advantage.

And as others have said, it puts your home at risk for a car. I'd compare the total repayable on a personal loan against the mortgage quotes, rather than just the headline rates.