In this new post, we’re putting your questions to our most trustworthy expert when it comes to homebuying, Stephen Kerrigan a Mortgage Advisor in Doncaster. He is here to answer any questions you may have about renegotiating a mortgage, or taking out a loan.
Q1 We are hoping to clear the remaining £48,700 of our mortgage. We envisage being able to pay it off in full in two years’ time. However, we have £35,000 in savings, which we plan to use to pay off that much of our mortgage next month, due to our fixed-rate mortgage up for renegotiation, leaving us with £13,700 left on our mortgage.
We think the best thing is to get a two-year personal loan and pay the whole mortgage off next month, leaving us with the personal loan of £13,700 to pay off over the next two years.
Is there any reason why we should renegotiate our mortgage instead of getting a loan?
Stephen Kerrigan, Mortgage Advisor:
Yes, there are several reasons why you should Remortgage rather than take out a personal loan. However, first you should look at whether using your £35,000 in savings to pay off your mortgage is the best course of action. For instance, using up all your savings would mean that you had no financial cushion to fall back on, and using them partly to repay your mortgage is not a good idea.
Using some of your savings to pay off some of your mortgage, while leaving a big enough emergency fund, could make sense. However, it wouldn’t if your savings would be better used to pay off an outstanding credit card debt or an unsecured loan.
The way to clear your mortgage in full next month is not by taking out a personal loan, and certainly not by paying the mortgage off before the fixed-rate period has come to an end so incurring an early repayment fee of about £600.
The thing to do is to Remortgage with a lender willing to grant you a £13,700 mortgage with a term of two years. Given that the minimum term with most residential mortgages is five years, this won’t be easy. Although, according to Mortgage Advisor in Doncaster, Stephen Kerrigan, it can be done. For example, short term mortgages are available, and they can be for as little as six months to two to five years. Lenders all have their own minimum terms, which vary from no minimum to a 15-year minimum.
Lenders vary in the minimum amount they are prepared to lend. Some however, put this at £25,000, while others are prepaid to lend as little as £5,000. So, to find a lender that can offer the two-year term you require as well as the relatively small amount you want to borrow. For instance, you could consider getting help from Stephen Kerrigan of Mortgage Remortgages’.
The main reason why a short-term mortgage is better than a personal loan is because the interest rates on a personal loan tend be higher, and in some cases as much as ten times higher than mortgage interest rates.
Want more expert advice with finding a new mortgage? Call or message us, so that we can help search for thousands of deals from more than 80 lenders. Here at Mortgages Remortgages – Doncaster Fee Free Mortgage Advisor.