Should I get a mortgage or a loan?

Q I'm looking at sorting out our debt as I'm planning to retrain as a teacher. This will mean a significant drop in our joint income so we're looking at ways of clearing debt between now and when my course starts in September.

I've worked out that if I get a loan that will more or less pay off everything (credit card and overdrafts) we will just about be able to survive (including the loan repayment every month). It will be tight, but we should be able to manage. However, if we bump up our mortgage a bit, the extra monthly payments will be less, but obviously the extra amount on our mortgage will stay with us forever, unlike the loan which will be paid off in a set number of years.

Also, we'll be bumping up our mortgage on the assumption that our house is now worth more than it was when we bought it, but obviously that will mean that when we come to sell, we're going to have less of a profit to put down on our next property. Is it a sensible thing to increase your mortgage to free up cash? Which is the best and most sensible way to borrow extra money? A fixed term loan (even if that means being slightly more stretched in the short term) or freeing up money on your home through your mortgage?

VM

A Personally l would definitely favour an increased mortgage over a loan. The main attraction is that the mortgage rate of interest will be considerably cheaper and more flexible. And you will have more time to pay if something goes wrong with your plans. For example if the retraining takes longer than expected and a teaching job is not available when you need it.

The extra amount on the mortgage need not stay with you forever. You may well be able to arrange to pay some back when you are in a position to do so. I am assuming that there is a sufficient gap between the value of your property and your existing mortgage to allow for the mortgage to be increased. If not you will have to go for the loan option, which could be very expensive.