Remortgage or Bank Loan

M

Monica

Guest
Hi there,

We've owned a house since 1998 and now need to do a few renovations i.e. new windows, new bathrooms, floor coverings etc. to the value of 15,000 but we want to sell this house in 3-5 years time (still have to do the renovations because they can't be left for 3-5 years).

We find that we will come into money to the value of more that above in 1-1.5 years time.

Should we remortgage now or get a bank loan over a three year term?

My concern is that I can't afford to pay the bank loan over 1 year and need to know if a large down payment can be paid off the mortgage or can this down payment be paid off a three year loan or will severe penalities occur.

Please advise.

Does anyone know a good financial advisor??

Regards
Monica
 
You should always borrow at the lowest cost to yourself. The cheapest borrowing available is generally your mortgage. Therefore you should extend your current mortgage to cover the cost of renovations - it's probably fair to assume your house has appreciated significantly in value since 1998 - and this shouldn't have much effect on your re-payments (although you should pay off as much as you can as soon as you can). Assuming you are not on a fixed rate mortgage this shouldn't be a problem, nor should paying off the lump sum when you receive it.

If you are considering re-mortgaging altogether then be sure to check out our mortgage best buys.

Does anyone know a good financial advisor??
I know the best.
 
> The cheapest borrowing available is generally your mortgage. Therefore you should extend your current mortgage to cover the cost of renovations - it's probably fair to assume your house has appreciated significantly in value since 1998 - and this shouldn't have much effect on your re-payments (although you should pay off as much as you can as soon as you can).

Just to reiterate the last point...

Bear in mind that lowest interest rate doesn't necessarily/always mean lowest cost as you need to factor the term in too. For example consolidating otherwise short term credit at a relatively high rate (a personal loan, car loan, home improvement loan etc. at 10%+ over 2-5 years for example) onto the mortgage at lower rates but spread over the full term of the mortgage (e.g. c. 3%+ over 20 years) could leave you paying MORE in interest. If you are consolidating otherwise short term high interest loans onto the mortgage in order to save money then it's worth checking if you can schedule the repayments for the top up over a shorter period than the full mortgage term to make sure that you don't end up out of pocket in the longer term.
 
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