++ Re-Mortgage Advice ++

Summary with notes.

Nick_00 wrote: »

Hello Everyone,

I have an interest only mortgage with £143k outstanding. House is valued at £180k.

LTV 80%

Interest only mortgage as per Bank of England + 2%
paying £263 (interest only) but I could afford the £780 pm

£143k @ 2.25% = £268pm repayment over 25y is 624pm

Total debt to date £25k can afford a £800 monthly repayment.

Card 1 = APR frozen at 16.9%
Card 2 = APR at 16%
Card 3 = APR at 21%
Store Card = APR at 16%

Permanent
Gross £56k ( NET around £3,300pm)

It's the credit cards and store card that are killing me each month totalling £600 pm.

There are two things to consider here,

1. Why the debt in the first place.

you need to understand how this happened and the steps needed to not need more debt.

consolidating and not fixing the underlying problems just means more debt and a bigger mortgage.


2. the plan

to formulate a plan you need a proper analysis of your finances

Now the consolidating route looks attractive one simple payment but the numbers for that could result in a non optimum solution especially if NO 1 is not fully sorted.

Two issues with consolidating(use Nationwide for a guess of rates).

More money, higher LTV=higher rate and will have to go repayment.

£143+25)/£180 LTV 93% now that is more than Nationwide will give you suspect it may be for quite a few lenders or higher rates, eg the rate for new mortgage without consolidation would be well over 3% and a 25y payment in excess of £850pm

another option may be to review the mortgage, is the base+2% a tracker what are the best rates your lender has for 80% LTV(allthough even a really good rate like 1.84%(3yfix) only reduces the I/O payment to £220pm) and you would lose the base+2%

there may be something that can be squeezed with the mortgage but not a lot.

The real issue seems to be the spending, assume you have fixed the problems then with the mortgage at £263 and debts £600 that leaves £2,400 to live off.

This is one for the debtfreewanabee board
http://forums.moneysavingexpert.com/forumdisplay.php?f=76
and a SOA
http://www.stoozing.com/calculator/soa.php

you need to find out where your money is going.


doing a very rough calculation as the details are missing
interest debt free date using £600pm payment
£25k @ 20% = £416 6y 0m
£25k @ 17% = £355 5y 4m
now if you can get the rates down with some 0% cards
£25k @ 10% = £209pm 4y 4m

So with a £600pm payment you will be eating into the debt and be debt free relatively quickly.

if the debt is not going down suggest you are spending any capital payments you make so back to the SOA and finding out where the money is going..


With careful analysis of the SOA and a migration to lower rates a 3/4/5year plan would need.

£25k @ 20% £930/£761/£663pm
£25K @ 17% £892/£722/£622pm
£25k @ 10% £807/£634/£532pm
£25k @ 5% £750/£576/£472pm


I would say that the
3y plan looks over ambitious,
4y doable with a belt tightening and some rate reductions
5y very achievable.


That's the debt sorted but once that is done then the mortgage needs tackling, what is left on the full term now?

picking up on this bit

doing a very rough calculation as the details are missing
interest debt free date using £600pm payment
£25k @ 20% = £416 6y 0m
£25k @ 17% = £355 5y 4m
now if you can get the rates down with some 0% cards
£25k @ 10% = £209pm 4y 4m

So with a £600pm payment you will be eating into the debt and be debt free relatively quickly

You said the £600pm on the CC is the problem but could afford £800 total thats (£800-£263)= £537

only £63 less is there nowhere to cut?

if we do the numbers above on your I can afford £537pm your debt free target is
£25k @ 20% 7y 7m
£25k @ 17% 6y 5m
£25k @ 10% 5y 0m

Nick_00 wrote: »

WOW !! Great advice, thank you.


Maybe I haven't been clear on the income part, I have other outgoings such as Car on finance £300pm, Child Support £300pm, cost of living bills etc . . .


Basically I'm left with about £400, so the £600 on CC's would be great to clear.


I do get it about paying off the debt first, but I worried I'm not paying anything off the capital of the mortgage, I have 15yrs left . . .


Everyone's advice is greatly appreciated!

As suggested please consider doing a fill SOA and post on debt free board.

As said before 56k equals around 3300 in net income per month . Even considering car finance, child support, interest only mortgage you have around £2000 left. Of course cost of living depends on your living standards and its your choice what you prioritise. but it is clear that the underlying problems is debt management.

Nick_00 wrote: »

WOW !! Great advice, thank you.


Maybe I haven't been clear on the income part, I have other outgoings such as Car on finance £300pm, Child Support £300pm, cost of living bills etc . . .


Basically I'm left with about £400, so the £600 on CC's would be great to clear.


I do get it about paying off the debt first, but I worried I'm not paying anything off the capital of the mortgage, I have 15yrs left . . .


Everyone's advice is greatly appreciated!

That will need sorting but unless you find a lot more spare cash you cannot do both at the same time.

debt is debt you just have it in multiple places change it to one place does not change the total and the numbers suggest that the net position in 5 years will be no different which ever way you do it.

One for the brokers,
you have decent income to support the mortgage but the debt and other commitments in their current form may make extending the term a problem as most lenders will want you on repayment.

to achieve that you will have less to throw at the debts so any interest rate juggling will be for longer and renewal of 0% etc might get harder.

a period of focus on the debts should make the refinance of the mortgage easier and better rates than if you up your LTV,, it may be that in a year or two the debt will be lower the LTV will be better and you will have control over you finances to allow a review.

total payment £800pm once debt free and throw the full £800 at the mortgage to clear your your £145k
rate, term needed
2.25% 18y 6m
2.50% 19y 0m
3.00% 20y 2m
........ Longer.

This just leads us back to the real problem you need to cut your commitments if you want to speed up clearing all your debts including the mortgage.

PS: car on finance is more debt


if you can find an extra £50pm(£850 total) you will be debt free sooner and the mortgage numbers look much better
rate, term needed
2.25% 17y 2m
2.50% 17y 7m
3.00% 18y 7m
........ Longer.

read up on snowballing.

The key to your Mortgage free date will be
find more spare cash(spend less).
get better rate on the debts.
snowball

I think you would benefit by posting the SOA on the debtfreewanabe boards because like others I suspect there is quite a lot you could do to make you money go further and create a plan to get lower rates on your existing debts,

you don't want to be applying for new cards without a plan.

it is likely that
Card 3 = APR at 21%

Will be the one to go for first but hat will need an analysis of all your existing debts and commitments......