Would a third loan be crazy?

[Brightside]

Wondering if any of you could give me some advice.

I have two loans with Bank of Ireland (mainly used for furnishing a new house and misc related expenses):

1) 5,000 left to clear, paying 360 a month, finishes March 2008

2) 6,500 left to clear, paying 350 a month, finishes July 2008

No problems (so far!), I’m able to clear that 710 comfortably enough each month.

I could actually manage about another 300 a month on top of those loan repayments without too much pain and have been thinking about getting a third loan (between 10,000 and 15,000) to do some more work on the house (eg kitchen and bathroom), etc.

Would this be crazy? Should I wait until the first two loans are cleared before thinking about a third? The work isn’t urgent but it would be great to have it done, and, as I said, I can afford the extra 300 a month.

Would love to hear some opinions and get some advice, thanks.

 

[Bank Manager]

Given that your existing loans and your proposed loan all appear to be 'home' related - I'd suggest you look at option of equity release on your house - cheapest money you can borrow. I'd further suggest you maintain repayments at current levels to ensure same is paid off as quckly as possible.

Regards,

BM

 

[Brightside]

Given that your existing loans and your proposed loan all appear to be 'home' related - I'd suggest you look at option of equity release on your house - cheapest money you can borrow. I'd further suggest you maintain repayments at current levels to ensure same is paid off as quckly as possible.

Regards,

BM

Thank you Bank Manager (never thought I'd hear myself utter those words )!

So do you think topping up my mortgage would be the better option? I bought three years ago (260,000), the house is now worth 440,000 - would that put me in a reasonable position? Thanks again.

 

[Bank Manager]

The reason I'd suggest you place on equity release rather than topping up your existing mortgage is:-

if you place on existing mortgage you'll end up paying over a period of say 20 years (currently you'll pay off your two existing loans in say 2 years). By topping up mortgage you'll be paying interest on this element for say 20 years or so. If you can afford to make repayments as you suggest, you'll minimise your interest cost (while at the same time availing of the cheapest money available).

Regards,


BM

 

[Bank Manager]

Thank you Bank Manager (never thought I'd hear myself utter those words )!

I'll frame this ! BM

 

[Brightside]

The reason I'd suggest you place on equity release rather than topping up your existing mortgage is

Forgive my stupidity, but could you explain 'equity release'? Thanks.

 

[Bank Manager]

Think of it as a second mortgage on your home. Therefore your home is held as security. You can maintain your existing mortgage on it's original payment terms while paying off the 'equity release' much quicker (if that's what you want), as I've explained this will save you on overall interest costs. One thing you'll need to check before you go the route I'm suggesting, is what legal fees you'll incur, though these should be at a minimum (but better to check first). Your mortgage provider will advise......

Regards,


BM

 

[Brightside]

Think of it as a second mortgage on your home. Therefore your home is held as security. You can maintain your existing mortgage on it's original payment terms while paying off the 'equity release' much quicker (if that's what you want), as I've explained this will save you on overall interest costs. One thing you'll need to check before you go the route I'm suggesting, is what legal fees you'll incur, though these should be at a minimum (but better to check first). Your mortgage provider will advise......

Regards,


BM

Brilliant, thank you SO much for your help, will speak to my mortgage provider tomorrow. Thanks again.