Pay VR mortgages Early

G

greeneman

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I have a commercial property on a 20 year variable rate. Now in year 12. Loan is with a pillar bank.
I have been a model customer over the 25 years never missing a payment on many loans and mortgages. I got turned down for a car loan recently because they could not get "underwriters to approve it".
But I think I got turned down because I did have to re-work a BTL loan with another bank and I am honoring that every month as well. And am partly ahead on it. But I think it has messed up my credit rating.

My local manager promised to rectify the rejection, but despite many e mails from me he has never responded. I expect he has no say.

On one loan, I currently pay Cost of funds 0.37% plus 1.75%, total 2.12%. It is reviewed/rolls over ever 3 months. I have not spoken to the bank about this loan (or any other loan) for over 9 years.

I am now in position to pay down every loan. Its time to make things easier and spend more time on things that really matter.

If I offer to pay the bank down now, could I get a reduction/bonus ? Because they can re lend that money at a better rate. Is there any incentive for payng early ? I expect banks don't do horse trades.

Is that a stupid or greedy question ?
 
2.12% is still very profitable for the bank,so they will not give you a discount.

The net rate for you, assuming you are paying the top rate of tax, is 1%. Can you get a risk-free return of 1% if you put your spare cash elsewhere? Probably not.

Might you want to borrow again in the future? If so, you might not be able to get a loan, so keeping cash might be the right idea.

greeneman said:
But I think it has messed up my credit rating.
Click to expand...

Stop thinking. Get your report from the ICB.

Brendan
 
I should say that a net cost of 1% would be very cheap to borrow money to invest in your pension fund. So if you have scope to do that, you should probably do that before paying off such a cheap loan.

If you have non-tracker loans, then you should pay them off first. And loans on which you are not getting tax relief.

Brendan
 
Brendan,
Thank you for your prompt response and advice.

RE: Thinking, Yes, I know but...... Of course I got my report from ICB. Its spotless. So I have to speculate as to why I got turned down. All I got was a phone call about underwriters and my branch manager is missing. The ICB report does show that a loan was re structured but also that all the payments in past 36 months have been met. I am 56, in same successful job for 12 years, spouse is civil servant.
Yes, I may want to borrow in future, or at least guarantee a loan for a child, so I think I will pay off the lot.
 
greeneman said:
Yes, I may want to borrow in future, or at least guarantee a loan for a child, so I think I will pay off the lot.
Click to expand...

If you want to borrow in the future, you should not repay the loan.

You should keep the loan and your savings, so that you don't need to borrow.

Instead of guaranteeing the loan for the child, why not lend them the money at the 1% net cost to you?

Brendan
 
You can make a data protection request with the bank that turned you down. this should reveal why the decision was made to the extent that it was committed to paper (or computer storage).
 
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