# Should I remortgage or take a personal loan?



## Finfun (3 Jul 2017)

Age: 45
Spouse’s/Partner's age: 45

Annual gross income from employment or profession: 43,000
Annual gross income of spouse:23,000

Monthly take-home pay 4,061

Type of employment: Both Private Sector

In general are you:
(C) breaking even


Rough estimate of value of home 435,000
Amount outstanding on your mortgage: 145,000
*What interest rate are you paying? *3.6- BOI(Fixed)-checked breaking cost- 250 euros

Other borrowings – car loans/personal loans etc- None

Do you pay off your full credit card balance each month? Yes
If not, what is the balance on your credit card? 

Savings and investments:€1,000- prize bonds

Do you have a pension scheme? Yes, both contributing 5% and employer matching 5%

Do you own any investment or other property? No

Ages of children: 10,8,6,4

Life insurance: Mortgage Protection, Live Cover(€400k ), & Serious Illness(€100k)


*What specific question do you have or what issues are of concern to you?*
We are barely keeping our head above water as a family of 6 .We need to upgrade an 11 year old car that is causing trouble and need essential home improvements. I have budgeted 10k for each project.As we have an good  LTV and our income is limited due to my partner working part time and minding the children after school I was considering moving (and increasing)borrowings to EBS. This would reduce our rate, we would get cashback and after using online calculators would be able to borrow €165,000 to take care of the house and our car at a low rate. I would attempt overpay the 20k lifestyle borrowing to clear asap. The alternative is to borrow €20k from the bank or the credit union at a much higher rate and monthly repayment. As we have no other borrowings and have an expensive household is this a good course of action or am I being naive in seeking to add to our mortgage risk?
Any advice/thoughts are welcome


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## Buddyboy (4 Jul 2017)

It's great to see someone who understands what they are doing. 
Borrow the money at the cheapest rate possible, in this case secured against your house, i.e. re-mortgage. And as you said, pay the amount for the car over the expected life of the car (i.e. match the liability against the asset lifetime).
It's what I'd do.
My only worry is your use of the word "attempt". This is the slippery slope of extending the repayments for the car over the life of the mortgage.
If the value of the home improvements improve the value of the home, then I would pay for those over the lifetime of the mortgage, but definitely cover the repayments of the car ( €10k) over the expected life (10 yrs?) of the car.


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## gnf_ireland (6 Jul 2017)

Finfun said:


> I would attempt overpay the 20k lifestyle borrowing to clear asap. The alternative is to borrow €20k from the bank or the credit union at a much higher rate and monthly repayment.





Buddyboy said:


> My only worry is your use of the word "attempt". This is the slippery slope of extending the repayments for the car over the life of the mortgage.



I agree 100% here with @Buddyboy  The logic is sound up to the point of the word 'attempt'. The unknown here is also the remaining term of the mortgage.

A personal loan would be in the region of 6.5-8% - this is very different to the 3.x% you would pay with EBS. And this is of course before the 3,300 euro cashback you would get for switching.

The right answer is to increase your borrowings as part of the switch process (as it is the cheapest borrowing you can do), but repay the mortgage + overpayment based on the personal loan repayment amount. So if your loan repayment would have been 300 euro a month, then you overpay your mortgage by 300 euro a month. That way you make sure you pay down the loan in the same timeline as the personal loan and costs you less in interest.

I fully appreciate this is easier said than done, but does require discipline. If the remaining term of the mortgage is in line with the term of the personal loan, then it could not be as big an issue as the discipline is forced on you.


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## Finfun (6 Jul 2017)

Thanks for the advice @Buddyboy & @gnf, much appreciated!
Yes the word "attempt" does sound vague. 

Having a clear plan to pay down the excess borrowing in the way you describe@ gnf is much better.
The remaining term of the mortgage is 20 years. Therefore I would potentially fix 145,000 with a repayment of 840.94- 20 year term and have a variable option on 20,000 and repay 197.77 per month using a 10 year term with Ebs.(as a personal plan)

@ buddyboy I like what you say re the house improvements that they will add value to the house so it is really the 10,000 car expenditure I need to prioritise paying down.

One thing I have not thought of is whether EBS will increase my borrowings or just insist on a plain switch of our existing mortgage? The only way of finding out is applying.


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## Monbretia (6 Jul 2017)

Well I wouldn't be telling them you intend to buy a car with some of it anyway, smacks of celtic tiger sort of thing


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## Finfun (6 Jul 2017)

I appreciate where you are coming from @Monbretia but life here is very far from Celtic Tiger, raising 4 kids with reduced incomes.

It isn't ideal but I am trying to borrow what we need at the cheapest option possible.


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## Monbretia (6 Jul 2017)

I'm not saying your life is like that but borrowing long term such as a mortgage for a short term asset like a car would I imagine be a total no no from any bank these days.  Regardless of what you say about paying it down quicker they will be looking at the proposal on the day and it wouldn't go down well with an underwriter.


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## Finfun (6 Jul 2017)

@Monbretia you are right. I will think about  whether I should remortgage, include the home improvements and borrow for the car separately.  
I can imagine ebs won't want to underwrite short term debt into a home loan regardless of the ltv. 
As I said all advice welcome.


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## Monbretia (6 Jul 2017)

There is nothing wrong with your plan provided you are disciplined enough to actually pay down the amount of the car debt quicker, maybe your home improvements are costing 20k


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## Buddyboy (6 Jul 2017)

What (s)he (Monbretia) said.
If asked, I would say that the mortgage move is to get the better rate, and also to make house improvements. And if you can get the €3000 cashback for switching - better again!
And borrow for the car separately only as a last resort - there's no point paying more (interest) than you have to.
And I'll say again, it's great to read a thread from someone who is acting very sensibly (and logically) with borrowing. You'd be surprised


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## Finfun (6 Jul 2017)

Thanks folks. That sounds like a plan!


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