mortgage problem

spamus

my problem is my morgage is to small £24000
yes it is a problem
it still has 20 years to go and if left will cost £27000 in interest
so i want to change it to a 10 year one
but to change will cost me £500 + min morgage i can get is £25001
so this will cost me £1500 to change

so i thought on getting a unsecured loan

so i applyed for it and got one for £24000 apr 6.9 with NR
this way cost in interest will be £9000

good plan or not?

simon

MortgageGenie

Depends. Who's your mortgage with and what's your property worth in you don't mind me asking?

spamus

mortgage is with standard life it is the futureperfect mortgage product
house next door is up for £180000 i paid £33000 for this 10 years ago

house prices are MAD

simon

Ian_W

Spamus,
I was recently thinking of reducing my mortgage by a lump sum payment to something like your level and at the same time remortgaging as my current discount rate was ending.

Aware that many other lenders have £25/30k minimums I rang around a few. Nationwide told me, and you'd need to confirm it with them, that any remortgage over about £2k was acceptable to them.

Their website is HERE and they have some calculators where you can work out costs etc for yourself. They also have some good Fixed rates at the moment.

I did a quick calc and £24k over 10 yrs on their 10yr fixed rate at 4.89% is £253pm, total interest about £7k. That would have fees attached but they do have schemes where fees are included but at a slightly higher interest rate. If you wanted to fix for a shorter period their rates are even lower - none, not even their SVR, is as expensive as 6.9%.

I'm not recommending NW specifically, it's just that I know they will do smaller amounts on remortgages than a lot of lenders. You may find others and they may be even cheaper.

So no, not a good plan, unless good is spending £2k you don't need to!!

MarkyMarkD

To change will NOT cost you £1,500. The £500 is a cost but the £1,000 is an extra £1,000 to spend ... or which you can pay off the new mortgage straight away.

You can get FAR better rates on a mortgage than the 6.9% personal loan rate, either taking account of the fees or by opting for a fee free deal (almost always going to be better value on a £25k loan).

I would personally beware Nationwide if borrowing a smaller amount over a longer period, as their rate differentials for fee free products are (illogically) the same for all terms - so you pay an extra 0.4% per year on a 2, 3, 5 or 10 year fix, all for saving the same £389 fee. So that's an extra 0.8% (2 year) but an extra 4% (10 years). Mad! On £25k, the extra interest would cost £200 over 2 years but £1,000 over 10 years (assuming interest only - less on repayment basis).

And Nationwide give free valuation and legals on all their remortgages - so there's little point opting for the fee free option. With other lenders, the fee free option includes the valuation and free legals which you wouldn't otherwise get - so you get a lot more for the additional interest.

Anyway, certainly don't discount borrowing £25k and then repaying the £1k you don't need - most (though not all) deals allow some overpayment.

spamus

thanks
i had not found nationwide
i like the idear of fixed rate (this is what i allways have got in the past)

will look at them

simon

MortgageGenie

Nationwide has some good options but I've got a cracker for you to consider in your comparisons on this one but I don't want to post details on here as it's using a big loophole which I don't want to see closed.

The up shot - the interest element will cost you a maximum of about £6400 for the duration but could be a lot less as you have the option to offset savings, stooze pot etc... but draw funds back at any time if required.

Drop me pm for the full specs. (not a spam)