Pay the mortgage or loan?

moggy382003

Has anyone else found themselves in this situation?

I have a mortgage of £30,000 and a loan of £8000.

I have 3 endowment policies to pay my mortgage which mature this year and my mortgage ends this year but will have a shortfall of about £1000.

The first has just paid out £22,000 and as my mortgage interest rate is so low now I would like to pay off my loan as the interest on this is higher and extend my mortgage. I have yet to speak to my building society about this.

Has anyone any thoughts or experiences of this and whether this is a good idea?

I am the only wage earner in the family, my husband is on incapacity benefit after falling sick 3 years ago and my 21 year old daughter lives with us and is on income support so money is tight at the moment and I am trying to find the best way I can to manage.

Any help would be much appreciated.

17Dave

It is generally a good idea to pay off higher rate finance first.
However, you must arrange some way of paying off the mortgage - either going to part repayment over the remaining term or having another savings plan.
Before you act check how much you will save by not paying the loan and how much the new repayment on the mortgage will be if you transfer to part repayment.

Your mortgage lender will almost certainly be happy to transfer you to part repayment as it guarantees this bit will be paid off if you keep up the payments - there may be a small admin fee to change the terms.

moggy382003

UPDATE. I have now paid my loan off and am still paying my mortgage. I have spoken to the Building Society who are quite happy to extend my mortgage as long as I have paid it by the time I am 70!
I now have another dliemma. With the interest rates being as low as they are I am tempted to use more of the endowment money for much needed and very essential repairs to my house. Plus I will need a new car in the next couple of years, do I keep some back for that? I need to find out how much all this will cost me in repayments but does anyone have any thoughts on what I am proposing. Am I acting wisely or not? Your constructive comments would be much appreciated.

Trying_to_be_good

I would be vary wary about using this money for things other than the mortgage UNLESS you have switched the outstanding mortgage to repayment. It is vital you are able to pay back your mortgage.

You can get a decent car taht will last years for well under £1,000 - dion't be tempted to 'blow' your hard saved endowment money on 'luxuries' if you may later not be able to afford to pay back the mortgage money. Please think very carefully!