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Short(ish) Loan to pay off Mortgage

mortgage deals, ideas and discussion
Tempi
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Short(ish) Loan to pay off Mortgage

#124933

Postby Tempi » March 14th, 2018, 6:40 pm

I'm at a stage of only having 4-5 years left on my mortgage, and I've looked at getting a personal loan to pay off the mortgage.

I can get a loan that is at a lower interest rate than the mortgage, so that in keeping my loan repayments the same level as the mortgage, I can repay the loan a little more quickly than the mortgage.

I haven't looked at re-mortgaging as I assume there will be an arrangement fee for this. I need to check if there is any penalty in repaying the current mortgage early.

The outstanding balance on the mortgage is a couple of tens of thousands of pounds or so.

I have a similar amount, if a little more, in ISA share savings.

Are there any down sides to this route?

Many thanks

bungeejumper
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Re: Short(ish) Loan to pay off Mortgage

#129667

Postby bungeejumper » April 3rd, 2018, 12:08 pm

I'm a bit surprised that nobody's responded yet. But I suppose the reason is that the devil's in the details?

I have no personal experience of this - I actually did it the other way round! (I remortgaged to a BoE base rate tracker in 2007, so as to pay off loan debts. I have never regretted that move! :lol:) But off the top of my head, I'd say that the savings on a £25,000 mortgage over four years (say) would be slim enough to be into borderline territory by the time you've accounted for all the transitional costs.

One thing I would say is that paying off the mortgage from your ISA account would probably be a bad move. Not necessarily because it didn't work financially (it might), but because it also wipes out an important bit of your personal liquidity. If your car dies next month, or if the wife needs something medical, or the kids decide to get married, will you still have the instant-access cash to deal with it?

Oh, sure, you could soon borrow the money again, especially since you would now own your house outright, but in my book there's nothing quite like the feeling of being able to summon up £10-20,000 of cash at the click of a button in my ISA account. Your views might vary. :)

BJ


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