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  • FIRST POST
    • paul332
    • By paul332 6th Oct 17, 5:52 PM
    • 8Posts
    • 1Thanks
    paul332
    Should I move unsecured to secured?
    • #1
    • 6th Oct 17, 5:52 PM
    Should I move unsecured to secured? 6th Oct 17 at 5:52 PM
    Hi money saving experts!

    I hope you can give me some advice here. Two years ago my wife and myself borrowed £50,000 in total, for home improvement (10 years, unsecured, 5.1 APR).

    Currently we are totally fine with paying this back on a monthly basis and with a bit of budgeting I think we may be able to pay more every month and pay the whole thing back sooner.

    The news is that there might be a possibility that my wife may be redundant, which basically means we will lose almost half of the household income. In that situation it will be difficult to pay back the loans and continue to live!

    I have negotiated with my bank and it seems like I can move this amount to secured loan on our house. The house is on interest only mortgage and seems to have enough equity for borrowing what is still on loan from 50,000. If I do this it will be a remortgage where I keep the interest only mortgage and add this amount to it on capital and interest. It will be a 14 years loan.

    (If it helps to clarify the situation, I will be able to pay for the capital at the age of retirement using the lump sum)

    Question is this:
    Should I go for it and switch this to secured loan now?
    or
    Should I wait and do this only if and when the wife gets redundant?
    or
    Should I never do this?

    Any advice is highly appreciated and I thank you for your time.


    Paul
Page 1
    • zx81
    • By zx81 6th Oct 17, 6:05 PM
    • 13,683 Posts
    • 14,148 Thanks
    zx81
    • #2
    • 6th Oct 17, 6:05 PM
    • #2
    • 6th Oct 17, 6:05 PM
    Given you're on a low rate, and your income is uncertain, no.

    Defaulting on a debt is one thing. Coming home to find all your stuff out on the front lawn is quite another.
    • jonesMUFCforever
    • By jonesMUFCforever 6th Oct 17, 8:01 PM
    • 24,098 Posts
    • 11,376 Thanks
    jonesMUFCforever
    • #3
    • 6th Oct 17, 8:01 PM
    • #3
    • 6th Oct 17, 8:01 PM
    ..............no!!
    What goes around - comes around
    give lots and you will always receive lots
    • DCFC79
    • By DCFC79 6th Oct 17, 8:11 PM
    • 30,124 Posts
    • 19,067 Thanks
    DCFC79
    • #4
    • 6th Oct 17, 8:11 PM
    • #4
    • 6th Oct 17, 8:11 PM
    Reduce your spending, cut back on anything unnecessary.
    Can people stop loaning money/being a guarator to family/friends, it rarely ends well and you lose out as your money is gone or you get shafted with being a guarantor.
    • Nebulous2
    • By Nebulous2 6th Oct 17, 9:44 PM
    • 1,598 Posts
    • 972 Thanks
    Nebulous2
    • #5
    • 6th Oct 17, 9:44 PM
    • #5
    • 6th Oct 17, 9:44 PM
    What is the interest rate on the secured loan?

    You may well be putting your house at risk without saving any money - in fact the longer payment time may mean it will cost you more.
    • Pixie5740
    • By Pixie5740 7th Oct 17, 8:43 AM
    • 11,010 Posts
    • 15,187 Thanks
    Pixie5740
    • #6
    • 7th Oct 17, 8:43 AM
    • #6
    • 7th Oct 17, 8:43 AM
    You are facing losing half your household income so I would not recommend taking your unsecured borrowing and securing it against the roof over your head. There are mechanisms in place for when you can't keep up with repayments for non-priority debts such as an unsecured loan. The same cannot be said for priority debts such as those secured against your home.
    Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds nought and six, result misery.
    • Tarambor
    • By Tarambor 7th Oct 17, 9:25 AM
    • 1,336 Posts
    • 924 Thanks
    Tarambor
    • #7
    • 7th Oct 17, 9:25 AM
    • #7
    • 7th Oct 17, 9:25 AM
    I have negotiated with my bank and it seems like I can move this amount to secured loan on our house. The house is on interest only mortgage and seems to have enough equity for borrowing what is still on loan from 50,000. If I do this it will be a remortgage where I keep the interest only mortgage and add this amount to it on capital and interest. It will be a 14 years loan.
    Originally posted by paul332
    And then what? 14 years down the line not only are you going to have to find the money to pay off the mortgage but another £50k on top. I'm guessing you actually don't have any vehicle in place to repay what is owed when the interest only mortgage comes to an end? What is your plan then given you'll be 14 years nearer retirement and finding that the length of term of mortgage you'll be offered is going to be shorter as very few lenders now like terms going beyond retirement age?

    There seems to be a lot of kicking the can down the road going on with the only thing happening is that the can keeps getting made bigger. You've had years of living beyond your means in a house that you can't afford because it would've been on repayment if you could, and now is the time you need to start to seriously cut back, rein in the spending and repay that borrowing. Adding to your mortgage is just likely to lead to even more borrowing and the can getting even larger just as happens with most people who consolidate their debts.
    Last edited by Tarambor; 07-10-2017 at 9:28 AM.
    • ratrace
    • By ratrace 7th Oct 17, 2:42 PM
    • 460 Posts
    • 311 Thanks
    ratrace
    • #8
    • 7th Oct 17, 2:42 PM
    • #8
    • 7th Oct 17, 2:42 PM
    Does your wife drive if so can she get a delivery driving job to do 5 days a week such as dominos/pizza hut or a chinese takeaway, i did this when i was told my hours are going to be cut at work it took a lot of pressure off me, its not for ever just untill she finds another job

    or she could do pet sitting/walking/cleaning for older people etc... the possibilitys are endless

    I have a good mate of mine who was redundent a while ago and he started up a window cleaning round cleaning shop window's and hes doing really well not even has a lad working with him
    Last edited by ratrace; 07-10-2017 at 2:47 PM.
    People are caught up in an egotistic artificial rat race to display a false image to society. We want the biggest house, fanciest car, and we don't mind paying the sky high mortgage to put up that show. We sacrifice our biggest assets our health and time, We feel happy when we see people look up to us and see how successful we are”

    Rat Race
    • paul332
    • By paul332 9th Oct 17, 12:20 PM
    • 8 Posts
    • 1 Thanks
    paul332
    • #9
    • 9th Oct 17, 12:20 PM
    • #9
    • 9th Oct 17, 12:20 PM
    Thanks all for the helpful advice. What was tempting was that securing the loan would have resulted in less monthly payments. That then would have given us more room to pay more every month on mortgage, trying to reduce the outstanding capital money.

    However I value your advice that I need to be cautious. In fact that was the reason that I wanted to seek your advice otherwise the bank was ready to go!

    I got it! Will keep the loan as it is. As for my interest only mortgage, as I wrote my retirement lump sum can cover it but we also pay extra every month trying to reduce the capital. Hopefully in 7 years when the unsecured loan is cleared we will be able to pay even more every month (within the bank limit of course) to reduce the capital as much as possible before my retirement.

    Thanks again and any further advice is much appreciated.

    Paul
    • Herzlos
    • By Herzlos 9th Oct 17, 1:58 PM
    • 5,794 Posts
    • 5,275 Thanks
    Herzlos
    I wouldn't unless you're getting it at a much cheaper rate (~2%) and you've got a lot of equity in the house / have very low risk of defaulting. You're probably best either paying a chunk of the loan down with the redundancy payment, or using the redundancy payment to tread water whilst your wife gets another job.
    Last edited by Herzlos; 09-10-2017 at 2:05 PM.
    • Clive Woody
    • By Clive Woody 9th Oct 17, 4:57 PM
    • 4,393 Posts
    • 5,007 Thanks
    Clive Woody
    Threat of redundancy is a stressful time and not a time to be making big financial decisions such as moving unsecured debt to secured debt and putting your house at risk.

    Lots of good advice already, but now is the time to look at your outgoings (SOA) and see what can be cut (SKY, mobile phones, excess spending, etc...). Even if the redundancy does not happen this is no bad thing.

    Also get your wife to get her CV up to date and maybe even start applying for new jobs just in case. Best to be proactive than waiting to see if something happens.
    Rugby Union - The Greatest Game
    • MEM62
    • By MEM62 10th Oct 17, 10:58 AM
    • 1,356 Posts
    • 971 Thanks
    MEM62
    My thoughts;

    1) Would your wife be entitled to any redundancy settlement. If so, what are your plans for this money? (Maybe some of this could be used to reduce the loan balance)

    2) There seems to be no assumption that you wife will secure new employment. Is it unrealistic to expect that she would find a new job?

    3) Interest only mortgage? Why? Are your finances already stressed?

    Of course, we do not have the full story or your background but these points would be influential in dictating your strategy.
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