Best way to borrow £25-30k?

[papillonrouge]

What is the cheapest way to borrow this sum? We are mortgage free so assume it would be to take out a mortgage against the house (can you do this?) rather than a loan? Looking to repay about £400 per month with the option to overpay some months. Thanks in advance.

A mortgage would usually be the cheapest way, I'd suggest getting both loan and mortgage quotes and looking at total amount repayable, as this way you can include any arrangement fees. Just be aware that unless you choose a mortgage which is fixed for the full term, the rate can increase whereas a personal loan is (almost) always a fixed rate. Also obviously mortgage is secured on your house, loan wouldn't be so if you got into difficulties you could potentially lose your home.

I was going to say mortgage too. Check the rates, length of time etc and any early repayment penalties. It is generally the cheapest rates to borrow on.

Or speak to an IFA.

Mortgage is definitely the cheapest way, as you are borrowing at a relatively low interest and over a much longer period of time (compared to a personal loan, for example). This means your monthly repayments will be much, much, much lower.

As you're mortgage free as well, your loan amount is never going to overtake the equity in your property, so I'd definitely go with this option.

An interest only mortgage and then overpay We did this a few times to renovate places we bought for cash and it worked well and was very cheap

How quickly can you pay it off? You may be able to get a decent period of interest free on credit card. I have two cards with 9k limits on interest free for 13 months. Alternatively you could just take the cards, pay As much as you can and at the end of the interest free period take a loan to pay of remaining balance

nowaynohow if taken over longer to keep monthly payments down, there would be significantly more interest paid back. I was assuming the OP meant take loan or mortgage over approx 5-10 years, but would choose the same term either way. If it's a choice between a loan over 5 years or a mortgage over 20 years on a lower APR it would work out better usually to take the loan, as total amount repayable would be far lower.

Any debt should be taken over the shortest term you can afford, to minimise the interest you repay. Only exception is car finance as they usually quote you on a flat interest rate, so you pay the same interest back however long you take it over.

RockChick, sorry, was thinking about it from own perspective, as we're planning on selling property soon, so it wouldn't matter if we chose lower repayments over total repayment period, as loan would get swallowed up in equity out of sale.

OP says they can afford about £400 a month, and on the BBC mortgage calculator, that would take 7-8 years repayment based on 5% interest

Have a look at HSBC/First direct. They do lifetime fee free trackers with no early repayment penalties so can overpay, at really great rates but don't use brokers so you have to go direct. No connection except a really happy customer (we got 0.38% over base rate 3 years ago so are saving loads - its not as good now).

Just to say thanks so much for all the responses...I'm terrible for doing this on Mumsnet (ie posting then not getting around to responding for days - that's what 2 under 2 does for you!) I thought mortgage was probably cheaper although will do a quick comparison with loans to be sure.

as people have said it depends on whether you mean cheaper on a monthly basis - which would be eitehr intere-free crdit cards (if you can swing that much!) or mortgage. Or over the overall term borrowed - investigate fixed term loans. If you pay it off over 5-20 years mortgage will undoubtedly be cheapest but will also have otehr costs built in - upfront legal costs and exit costs like mortgage redemption payment.