Over Payment Query

Colin_Jackson_2

Hi We have a Northern Rock Together Mortgage - £180,000 secured and £20,000 unsecured. It is a 5 year 6.49 fixed ending 2013. The house is proably worth £190,000

I want to make an overpayment of around £50,000 which we can without any penalties I have a few questions.

If i'm looking at re-mortgaging in 2013 is it best to pay the unsecured loan off, will other mortgage lenders penalise you more for having an unsecured loan or do they look at it together. I'm conscious that if another mortage provider in the future only takes on the secured loan that the unsecured loan will increase significantly with NR.

The other option i keep thinking but i'm told that i'm wrong is that if i pay off £50,000 from the £180,000 i should in the long run be paying less interest of by reducing this amount and keeping the unsecured loan at £20,000 but they keep on telling me that it is daily interest so it does not matter but surely one figure greatly reduced would save you more money in the long run.

Any help would be appreciated on whether to pay off the secured or unsecured or if it really does not matter either way.

Thanks

Colin

Stoke

Rabiddog_2

Pay off the unsecured loan completely and then pay off either £15000 or £20000 on your main mortgage. Keep the other cash in the bank to allow for emergency's and fees when you re-mortgage. If you add say £2000 fees to a typical mortgage you end up paying £5000 (approx) over twenty five years, so its better to pay them up front. Always pay off the debt with highest interest rate...

Colin_Jackson_2

Thanks, but the interest rates are both the same as it is a together option. If i can get the LTV down, i'm more likely to get a better deal anyhow.
Could you just clarify why you think it is best to pay the unsecured loan off.

many thanks

Colin