Remortgage or loan

honeytree_2

Hi I have around 5,0000 of my mortgage to go with about 3 years to run. I also have a fixed rate loan forabout the same also with 3 years to run.
I am moving house and need about 15,000 to cover costs etc. plus a bit of work on the new house.
Looking at all the rates between mortgages and loans and the costs for setting up remortgages I am wondering if it would be cheaper to have a straight forward fixed rate loan for 25,000 of 5 years and pay off the existing loan and mortgage. Does anyone have any thought on this please

Ian_W

You need to check it out yourself, but using the calcs on Nationwide BS society website there is a small saving by remortgaging, even allowing for fees.

£25,000 on 5yr fixed @ 4.69% fixed = £472.81pm there are then fees of £389 arrangement + £95 admin [free legals & valuation] which you can add to the loan [but then pay interest on] but if you pay these up front, averaged over 60 months they're the equiv of just over £8pm. This means you're in effect paying about £481pm.

£25,000 on 5yr unsecured loan @ 6.7% = £489.19 - no fees.

On a remort there is also a deeds release fee* at the end of [currently] £95 with NW, so I make your total saving over 5 yrs by remort £445 or just under £7.50pm.

So not too much in it really. Depends if you can find lower rates for either the unsecured loan or the remort - not forgetting to add the fees on the latter to get a true comparison. Chose NW because they have low fees & will accept "small" remort's so also bear in mind some lenders have min remort amounts and £25k may not be available from all of them.

EDIT: *If you leave your current lender under either scenario there'll be a release fee of some kind [ave seems c£200] so if they have any decent 5yr fixed rates & you can switch and borrow extra, that is certainly worth checking as well as fees will possibly be lower to do this.

honeytree_2

Thanks very much for the advise Ian W. As you say not a lot of difference.
I have an Alliance and Leicester current account they are offering a feesaver mortgage that pays the search fee and I get £250 for opening an new mortgage. Rates are a little higher 4.99% fixed for 5 years.
I will just have to keep looking until I am ready to go.

Ian_W

Hi Honeytree,

The actual difference in in interest repayments between 4.69 & 4.99 on a £25k mortgage over 5 yrs is less than the effect of many lenders fees, so if the A&L mortgage is fee free and gives £250 cashback it's a better deal in MHO.

Put the £250 away though, as A&L are "market leaders" in release fees when you leave them!!

Still not a bad problem compared with many who post.