Remortgage to add car loan?

jarvo

Hi,

My current mortgage is a fixed 2 year @ 4.3% ish with Halifax and it runs out in the near future.

My house is currently worth £120,000 and the mortgage will be roughly £75,000 when it needs to be remortgaged.

I was thinking of remortgaging for slightly more than £75k to pay off my car loan and my girlfriends car loan.

Is there a mortgage where I can pay extra each month if I choose?

To pay off the extra amount within 3 years ?

MortgageGenie

Hi,

There are a few issues you need to be aware of:

1. By adding the car loans to your mortgage you are in effect transferring unsecured debts into a secured loan against your home. If you experience any payment difficulties this could place your home at risk.

2. You also need to check with the loan providers to establish if there are any penalties for clearing the loans early and what interest rate you are being charged.

2. If you don't pay extra on your mortgage to clear the amount you've added for the loans over the same (or shorter) term than they're currently structured over, then they could end up costing you more as you would be paying interest for longer.

Provided your happy with the points above then yes most of the popular remortgage products around at the moment allow some form of overpayment. (typically 10% per annum)

MarkyMarkD

Or unlimited in some cases (e.g. most of A&L's discounted products) or £500 per month (most or all of Nationwide's products IIRC).

I should certainly choose a product which allows a degree of flexibility, if you think you will use it - bearing in mind that some of the smaller building societies sometimes have very competitive rates but generally don't allow as much flexibility as some of the larger lenders whose systems can cope with it.

The only thing to point out is that many people pay a premium for flexibility, and then don't use the flexibility to any meaningful extent. The most extreme case of this is buying a current account/offset mortgage arrangement and then offsetting a smallish amount, which is not cost-effective as the rates are far higher than standard mortgages.

jarvo

Thanks,

Well my current car loan is £6,500 with Northern Rock at 7.1%.
I dont think there is an early repayment fee, and there is 32 months remaining.

The girlfriend is gonig to borrow around £6,000.

so in theory i would add £12,000 to the mortgage and pay the extra needed to repay it within 3 years.

So how much would i need to pay a month to repay the extra £12k in 3 years?

MortgageGenie

It's not possible to answers... it depends on which lender, product, rate you go with.

Just an idea for you... If you didn't add these two loan to your mortgage and kept the loans, how much would they cost you monthly over 3 years? If you can afford that amount then why not overpay your mortgage by the amount you would have paid on the loans. This way the £12K should be cleared even quicker than 3 years. (provided the mortgage charge rate is lower than loan rate and lender allows the overpayments)

Just a thought

MarkyMarkD

Good advice Genie.

Choccyholic

Our circumstances are quite similar to Jarvo's.

We've got a variable Halifax mortgage with the discount and tie-in period ending in the new year. We have a house worth £130,000 and our mortgage is currently £57,000.

We would like to buy a new family car by getting a loan or adding it to the mortgage, say £12,000. As I'm pregnant with #2 we need some potential flexibility, there could be some months where it would be very easy to pay the car loan, others would be tighter.

I proposed to hubby that we choose our next mortgage 'product' on the basis of making large over payments each month to cover the extra for the car money, and without penalty. This would take advantage of the interest rate on the mortgage being lower than personal loans and that there would be flexibility.

Is this a good idea? or what MortgageGenie had suggested to Jarvo? Further advise would be greatly appreciated.