Mortgage Advice Please (NR together)

Bigchief

Hello, I am aware there is a Northern Rock thread but i was looking for some advice specific to my situation.

Me and my partner took out a Northern Rock together mortgage 2 years ago. This was a 5 year fixed rate mortgage with a fixed rate of 6.29%.
The mortgage is made up of 100k mortgage and 18.5k in an unsecured loan.
The reason for taking this loan is my salary was low as i was on a training salary but this has now increased. Up until this point we have been on an intrest only repayment but are now going to get this changed to a repayment option.
We bought the house from a relative for 110k but the house was valued at 135k.

What i want to know is are we better making repayments to the unsecured loan part for the next 3 years till the remortgage date comes around or better to just have a repayment on it all?

Also how will this work when it is time to remortgage as part of it is made up of an unsecured loan? the house is worth more than the mortgage and the loan but i'm not sure what effect this will have.

early repayment charges are around 4k so thats not really too helpful.

Any advice that can be offered on this will be greatly appreciated.

Thanks.

Derek_Hercules

Hi Bigchief,

I'm in almost exactly the same situation as you. (NR together mortgage, 5yr fix @ 6.29%, instant negative equity, etc)

I decided that our regular overpayments should go against the secured part, and NOT the unsecured part. (i.e. I've consciously decided to to leave the unsecured balance high)

The thinking behind this is that the words 'secured'/'unsecured' are from the perspective of NR.

A secured debt might sound better, on the face of it, than an unsecured on but it is really only better for the person lending the money, as they have something the debt is secured against that they can take from you if you don't pay.

So, if I'm going to have any debts it seems better to me that that they be unsecured.

Now, I have no intention of defaulting on my mortgage, so this should all be academic. Also, the fact that the secured and unsecured parts are both at the same rate means that it probably doesn't make any difference which you pay off - you'll still ultimately owe the same. However, I nevertheless decided on the above strategy for myself, and will continue with it unless I get good advice to the contrary.

Hope this rambling shambles of a message makes some sense.

Good luck
Derek

Bigchief

The thing is i dont think im in negative equity as the house was worth more than what i paid for it.
Will this have any effect when changing mortgages in the future?

mick_1967

House Value approx £78000, oustanding £70000 mortgage and £6500 on unsecured loan. We've decided to over pay by £200 per week to the unsecured part.

Bigchief

mick_1967 wrote: »

House Value approx £78000, oustanding £70000 mortgage and £6500 on unsecured loan. We've decided to over pay by £200 per week to the unsecured part.

I'll be able to overpay but not to the extent of 200 a week!

Leon_W

I would advise overpaying the unsecured part.

If you ever get to a point where you can remortgage to a different lender on better terms with the secured element, it would be wise to have any unsecured element as small as possible because the interest rate charged increases dramatically on this part if the mortgage is moved.

Bigchief

Hi guys,

just want to know if anyone could offer any advice on my original post in this thread?

wife is expecting so looking to get the finances in order or at least a plan so i know where i'm going.

From what i gather i will not be able to get out of my fixed rate motgage without paying a penalty charge.
When my current deal expires will i be able to remortage for both the secured and unsecured part of my loan as my house is worth more than the total amount i have borrowed, or will i simply be looking to remortgage the secured part only?

would trying to overpay on the unsecured loan be my best option at the moment?

any help would be greatfully appreciated.

VIGILANT22

When deal expires if you fit criteria, new lender etc etc, the two can be added together to remortgage...if this is what your planning to do it makes no difference to you what element you overpay.......