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paying off mortgage with a loan
harrased-gf
Posts: 21 Forumite
Hello all
I am hoping someone may be able to give me some advice regarding my boyfriends financial affairs. He is convinced that he has been ripped-off by his mortgage lender - Abbey. He took out a 25 year mortgage over 25 years ago. He doesn't know why he is still paying it. He contacted the Abbey and they sent him a letter which was meant to explain it, but he is still not convinced. I have explained that when he was 'on the sick' only the interest got paid for him so the original ammount was not touched. He still doesn't get it.
Anyway he is now debating whether it would be quicker and cheaper to get a loan to pay off the mortgage. I suggested probably not because loan interest rates tend to be higher than mortgage rates.
Here is our statement of affairs - can anyone suggest the best course of action to pay of the outstanding debts (which I appreciate are not that big compared to others but they do cause us problems)
Total joint monthly income £1500
Mortgage - £80 per month (Abbey 7.9% variable - outsanding balance £5291.94). We have overpaid by £40 a month for the last few years (paying £120 a month)
Car loan £114 per month (interst of around 19%) I suggested he would be better paying this off but last time he checked he didn't get any discount for paying it off early.
He has a legal aid bill, following his divorce, added to his house. As i understand it when the house gets sold the bill gets paid and last time they contacted us the bill was around £5000. He is not bothered by this as he said he will have to be dead before they get the money out of the house!! However it does bother me because it is building up interest.
Household bills
Gas/electricity £200 a quarter approx
Water - £120
Phone,tv, broadband - £70 a month
Food/household stuff - £240 a month
Car insurance - £500 a year (2 cars)
House insurance - £250 a year
Going out/entertainment etc - £200 a month
We have around £4000 in savings
Can anyone offer any advice regarding
...why he is still paying off a 25 year mortgage
...whether its better to get a loan and pay of the mortgage
...any other advice regarding saving money considering our outgoings
Thanks
I am hoping someone may be able to give me some advice regarding my boyfriends financial affairs. He is convinced that he has been ripped-off by his mortgage lender - Abbey. He took out a 25 year mortgage over 25 years ago. He doesn't know why he is still paying it. He contacted the Abbey and they sent him a letter which was meant to explain it, but he is still not convinced. I have explained that when he was 'on the sick' only the interest got paid for him so the original ammount was not touched. He still doesn't get it.
Anyway he is now debating whether it would be quicker and cheaper to get a loan to pay off the mortgage. I suggested probably not because loan interest rates tend to be higher than mortgage rates.
Here is our statement of affairs - can anyone suggest the best course of action to pay of the outstanding debts (which I appreciate are not that big compared to others but they do cause us problems)
Total joint monthly income £1500
Mortgage - £80 per month (Abbey 7.9% variable - outsanding balance £5291.94). We have overpaid by £40 a month for the last few years (paying £120 a month)
Car loan £114 per month (interst of around 19%) I suggested he would be better paying this off but last time he checked he didn't get any discount for paying it off early.
He has a legal aid bill, following his divorce, added to his house. As i understand it when the house gets sold the bill gets paid and last time they contacted us the bill was around £5000. He is not bothered by this as he said he will have to be dead before they get the money out of the house!! However it does bother me because it is building up interest.
Household bills
Gas/electricity £200 a quarter approx
Water - £120
Phone,tv, broadband - £70 a month
Food/household stuff - £240 a month
Car insurance - £500 a year (2 cars)
House insurance - £250 a year
Going out/entertainment etc - £200 a month
We have around £4000 in savings
Can anyone offer any advice regarding
...why he is still paying off a 25 year mortgage
...whether its better to get a loan and pay of the mortgage
...any other advice regarding saving money considering our outgoings
Thanks
0
Comments
-
Firstly, it's very unlikely that he won't save any interest at all by consolidating the car loan and the mortgage. If the lender claim that there is no discount for early settlement, something's wrong either in their calculations or their honesty.
Secondly, you won't get a mortgage for £5k (or even £5k plus the car loan) at a decent rate because it's simply too small.
Thirdly, whilst you may be able to get a loan for £5k or £5k plus the car loan for less than the present Abbey mortgage rate, it's not going to be very easy to do so and I'm not sure it's worth the hassle to be honest.
I would:
(1) check the loan settlement amount and review whether you are really getting some sort of rebate;
(2) get quotes for a new loan for the combined mortgage and car loan, and compare to your current total interest cost - not total monthly repayments, as the terms will differ;
(3) then come back and discuss again.
It would help to know the settlement amount for the car loan and the number of payments o/s at £114 per month.0 -
Has your bf been paying the full amount of the mortgage payment every month since it began? Have his payments ever been late, so that charges might have applied? Your post implies that he was off sick for a while and only the interest was paid for a while - if that is true, that would be a good explanation of why it didn't end at the original date.
By the way, I assume it is a repayment mortgage, not endowment or anything else?
If there is no discount for paying the car loan off early, there is no point in getting a new loan and paying interest on that as well. It is a high APR though, so if you did save money by ending it early, it would be worth shopping around and seeing if you could get a loan that would save you money overall.
How long are Abbey saying it will be until the mortgage is repaid? Have you asked them for a settlement figure if you did decide to repay it now? It might well end up that the best thing to do is just to continue overpaying as you are now - at least that way you don't have to pay any commission etc.0
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