Right, heads together please!

iwanttohavesomemoney

Hello lovely people

I've got a bit of a dilemma to pick everyone's brains with. I'm a little behind with our mortgage, not a lot as Paul Daniels would say, just a little. I aim to repay the arrear within a few months. The interest rate drop has helped as the mortgage amount has dropped by £160pm so I'll continue with what I was paying before to pay the arrear off quicker.

Now, the question is, after the arrear is gone, do I continue overpaying while the monthly rate is lower than before to lower the amount outstanding (we're interest only atm), or do I use it to repay other debts (approx £5-6k) quicker than the agreed payments to get rid of um and so improve the old credit rating and get a better rate mortgage. Or do I save the extra in a different bank account until I have a decent whack to put as a deposit on a new mortgage?


I'm sure a better brain than mine can decipher this gobble-de-gook!

ps thanks to chunkytfg for the inspiration to post again lol

boredofbeingathome

I might be wrong in this, but the fact that you are behind with your mortgage will affect your credit rating for a while as lenders can see that you are behind. This may affect your ability to get a better rate of mortgage in this economic climate.
So with that in mind i would concentrate of clearing the arrears, then paying off debts as a mortgage is a priority debt..hope that makes sense..
By the time you have cleared everything, then there may well be a different turn of events and you will be in a stronger position to get a better mortgage rate.
I go and check on experian for the free trial(you can see at a glance how your payment history is) may be worth a sign up to see if you can tell what your credit file looks like, it will also help to see where you stand at the moment as well.

Jesthar

I'd say definitely pay your other debts first once you have cleared your arrears (which must be priority!), especially if they are costing you interest or likely too - check out the snowball calculator to work out which to pay off first:

http://www.whatsthecost.com/snowball.aspx

After that, up to you - it would really depend on whether you could get a higher tax free/after tax interest rate on savings than the interest rate on the mortgage. If you can't guarantee that, definitely overpay - my parents cleared their mortgage several years and a less interest ahead of schedule a couple of decades ago by maintaining their previous level of payment when their mortgage interest rate dropped. It may also allow you to take payment holidays in the future if your circumstances change.

~Jes

savingholmes

Some of the cashback sites pay you around £6 to take out a free trial with a credit check company... so perhaps you could start there.

With regards to your mortgage arrears obviously they are your top priority. What you should pay for the rest - perhaps you should look at the snowball calculator at whatsthecost (another website) - that will give you an idea of the relative cost of paying off which debt first....

What led to you going into arrears in the first place? In your position I would try and understand that first - as I would in that situation have sacrificed my other debt / bill repayments to ensure that I always paid my mortgage and council tax... If you haven't already it might be worth posting an soa (statement of affairs) using makesenseofcards (another website) where you list all your income, outgoings, assets and liabilities (what you owe) and then reformat it for mse and post it here. Then we can give you some hints and tips on where we have saved money that might also work for you.

hth

iwanttohavesomemoney

ok, that makes sense :-) I did use the experian thing, my credit file is poo but hopefully getting better; I used to owe a bit over £10k outside a mortgage but have managed to chip away. The thing that I think affects me most (apart from the mortgage arrears I guess), is that I used to suffer from the ostrich effect and got a whole bunch of Defaults. These are marked in RED on the credit report, for 6 years which must make potential creditors shudder!

Thankyou for your input!

savingholmes

I did the soa thing a month or two after I joined - I'm really glad I did as I got loads of useful ideas that are saving me a fortune still. Good luck on your journey and welcome to mse

boredofbeingathome

iwanttohavesomemoney wrote: »

ok, that makes sense :-) I did use the experian thing, my credit file is poo but hopefully getting better; I used to owe a bit over £10k outside a mortgage but have managed to chip away. The thing that I think affects me most (apart from the mortgage arrears I guess), is that I used to suffer from the ostrich effect and got a whole bunch of Defaults. These are marked in RED on the credit report, for 6 years which must make potential creditors shudder!

Thankyou for your input!

It does, but then again those 6 years will give you a good grounding in saving money and getting rid of the ostrich effect, something which we can all say we have suffered from.:rotfl:
Well done for chipping away at your debt,:T i found the biggest way to save money is a good budget, a regular overhaul of everything and coming on here.It keeps me sane, although some folk would heartily disagree at times:rotfl: :rotfl:
Although in all honesty i am learning something different everyday and taking advantage as much as i can of every single tip..

chunkytfg

Get you statement of affair up quick as and then the more experienced MSE'ers can pull it apart and teach you how to 'REALLY' save money!!!

iwanttohavesomemoney

thanks everyone :-)

Savingsholmes, the reasons that I missed a couple of months was that one month the car (which we can't live without) needed some work to pass the MOT and the exhaust needed replacing, and another month I had to settle a debt that they were threatening court action on and wouldn't take a reduced payment on.

matbe

In these times paying mortgage is no1 top priority in my opinion. I would miss payments on cc and go without before i missed that, roof over head is first and foremost.

cc companies can only ring and harass you mortgage can reposess after 3 months i think i read on here.