Best way to borrow?

We need to borrow approx 45K for house improvements. The only other borrowing we have is a Credit Union Loan for 26k through my husband's employment. We have been advised by NIB, where we bank, to take out a mortgage rather than a personal loan for the 45K. Would we be better to amalgamate the 2 amounts and take out a mortgage for 71K? The rate quoted by NIB for mortgages is APR3.3%,as of yesterday. Any help would be greatly appreciated.

NIB are doing rates as low as 2.80%APR according to the Best Buys - but it depends on the value of your home vs. the amount you are borrowing. You are always better off borrowing at the lowest cost to you, which is a function of both the interest rate and the term.

A mortgage for the home improvements would seem to make sense, but you should allow for the associated costs of taking out a mortgage when adding up the figures. Whether or not you should include the other CU loan depends on the interest rate the CU is charging. Some CU's offer poor value in loans, especially when you take in to account the requirement to hold fund on deposit with them at the same time.

I would think it's fair to assume your CU loan is more expensive than a mortgage so I would move the 26k loan to the mortgage, and reduce it by using any funds you have on deposit at the CU or anywhere else but leaving yourself with whatever amount on deposit you feel comfortable with (remember that having funds on deposit while borrowing elsewhere is costing you money). It is important to continue to pay off the 26k loan in the original time frame rather than spreading the repayment over the (possibly longer) term of your new mortgage or you may be paying interest on this long after you have gotten any value from it and end up paying more in the long run.

Many thanks for your speedy reply!!

As far as I know the CU charge in the region of 7.5% but I will definitely check this out.

I find AAM great for tips and hints so thanks to everyone in general!!

The only downside with the Mortgage is the term.

Also you should see this as 'equity release' and some FI are better at allowing further extractions without the BS of going through the legal side again and again;

Also if the repairs are for the PPR ..the interest may qualify for TRS.

You may get a better rate than NIB, but the advice was essentially correct.

Many thanks for your reply WizardDr. Have been away for a couple of days so have not been able to check the board.

Hope this is not a stupid question but what is PPR?

We have been approved in principle for the Rural Renewal Scheme on this work. Also, regarding the term, we would hope to have this loan repaid within 7 to 9 years. I know there may be a better rate out there than NIB (but not according to them!!) but we already bank with them, so we would get a decision very quickly, and have to produce less paperwork in order to apply in the first place.

PPR = Principal Private Residence

Assuming you have a good credit history, then you'll get a quick decision from any bank, so don't let that sway you from getting the best value for your money (i.e. lowest APR). At least run the figures though a calculator and know how much not going elsewhere might cost you and make an informed decision.

Many thanks - I will make some more enquiries on the basis of the good advice here.

Thanks for all the help.