Decisions,Pay off 2nd charge(armed forces loan)or pay off mortgage

TrickyG

Forgive me if this is a little long,
Jan 07 bought houes for 117,000 (joint mortgage with the wife but based on affordability of just my wage)
Mortgage for 105000 Armed forces Home purchase help £8000

Looking to re-mortgage on a lifetime tracker as personally believe rates will go down within the next 12 months, and we have spare capacity if they go up so are willing to take the risks innvolved with the tracker.
Very much like the hsbc 5.99 deal, however as i understand they do not accept 2nd charges on their mortgages, We currently owe 6,700 on the army loan(which is interest free) but restrictivly they place 2nd charge on.Which in the current climate may reduce our choice of mortgage lenders.
Now our dilema is this we have managed to save 12,000 which initially was going to be used to reduce our mortgage to roughly 90,000 Do we-pay of the army loan and have no concerns about 2nd charges and pay the remainder of the mortgage, or pay all of the mortgage and keep 2nd charge loan and see, what mortgage we can get, Is it possible/worthwhile to pay 12k of house+ get a loan to get rid of 2nd charge army loan....?
Any constructive opinions would be gratefully recieved if you have not died of boredom from reading this.

opinions4u

Most lenders will accept a second charge, with a "letter of postponement". In other words, as long as the army respond to a request saying "if we repossess, are you okay to let us have the money before you get yours" everything should be ok.

If you find this isn't the case, you will probably have to pay off the army first.

But in an ideal world, you want to retain interest free borrowing and repay the interest charging.

getmore4less

Keep the Interest free loan if you can, I would ask around the lenders first to see what they say about the 2nd charge

Army loan interest free £8k jan 07, now £6700, paid £1300 over 20 months thats about £65pm so at a guess a 10y interest free loan so payment is actualy £67pm.

Definately worth keeping and paying off the main mortgage first, don't forget to keep a buffer/emergency fund.

I would put the savings in a cash ISA if not allready, this will pay close to the mortgage rate anyway and give you tah emergency fund.