Equity release to offest other debts

bluep

We've currently got a mortgage for £80,000 on a house we bought for £85,000. The house is now worth in the region of £140,000 but the last time we had it revalued for a fixed mortgage 2 years ago it came up massively undervalued at £92,000. I know house prices are good because the house next door to us just sold for £130,000 and it is smaller in every aspect, not been decorated since 1970s, has less victorian features than ours and needs a new kitchen, bathroom and central heating. Other houses in the same road again the same size or slightly smaller than ours are on the market for £160,000 - £180,000 so I think I'm being conservative.

We have around £16,000 of student debts that we want to consolidate in our mortgage and the monthly payments on that increase would be far more affordable than the monthly repayments on the loans that are due to start in April.

We're in a repayment fixed mortgage until 2007 with the Royal Bank of Scotland at 5.2% and 1% redemption penalty. Our salaries combined are £40,000 so we are only just back in a position to have the multiple to remortgage.

Their equity release loan at RBSC is around 6.5% over 25 years with a valuation fee of £200 approx and £400 arrangment fee i think. We'd be looking to have the money on the mortgage for a couple of years as we are both in professional careers where our wages have set rises with qualification and seniority, so I know we'll have spare income in a few years time especially with children going to school rather than childminder.

Should I look around to remortgage for the whole amount and swallow the costs for redemption and arrangement? Or should I stick with RSBC and arrange the equity release loan. Bearing in mind that we'll be looking for a new mortgage deal next spring anyway but can't afford to pay the £300 repayments on the student debts until then.

missile

Get at least three valuations, it costs you nothing. Tell them you are considering selling.
I thought interest rates on student loans were low and payment could be defered? Speak to the bank and ask their advice, then a mortgage adviser. Your best option may be a part time job and/or a loan and remortgage when the penalty expires in 2007.

bluep

Thanks for the comments missile. We are both now working full time after finishing studying, hence the repayments starting in April. The problem is that the debt isn't just students loans from the government but also a career development loan from the bank to fund post-graduate study and although I don't regret getting my masters etc.. at all, its going to hurt when the payments hit!