Big debt, mortgage with an unsecured loan

mumto2monkeys_2

I feel like a total idiot as I write this.

DH and I bought our house two years ago on five year fixed mortgage. We bought at the end of the stupid borrowing period, heavily in debt, and took a 100% mortgage, bunging the fees and a little extra on to it.

Anyway, we have had a big fat LBM in late August last year. We owed around 46k unsecured. I've been chipping this down, and we currently have about 40k. I was surmising, after visiting this part of the site, about whether to throw a bit of our unsecured debt over-repayment at the mortgage instead so as to start to reduce that beast (which I thought currently stood at £172k).

Things have taken a nasty turn for the worse when I remembered that part of the original mortgage was an unsecured loan for £11k, to run over the life of the mortgage (which I have just found will cost £20k in interest :eek:). I realise how utterly stupid I am for not really considering what this really would mean when we took the mortgage - we had been turned down by a lender and panicked. In today's climate there is no way we would have been given a mortgage by anyone.

We can afford to make all of our repayments and a bit extra, so we aren't overstretched. I'm just totally horrified at how much this borrowing will really cost, so I suppose I'm now on to my second LBM.

I would really appreciate any advice on how is best to proceed.

Am I able to overpay the unsecured loan without overpaying the mortgage?
Should I be overpaying any of the mortgage related debt, or focus on all of the other lenders first?
And, to sound really thick, how do I overpay either the mortgage and the loan, or just the loan?

I tried to contact the lender, but they are closed. I tried to register online, but they my mortgage is not available to look at and I have to phone them.

The loan is at around 8% APR, which is less than other loans that we have, however, at the end of the fixed term period (Oct 2012) we will possibly remortgage with another lender, and if we do the loan will stay with our current lender, but the APR will go up to something like 16%. (I'm attempting to settle the baby away from the paperwork; I can provide more exact figures.)

I realise that we are in a mess . I can provide any additional information that is needed to clarify.

As I said, I would really, really appreciate any guidance.

This whole business just seems to get bleaker, and believe me, I have learned many valuable financial lessons in an extremely short space of time.

Thank you for reading.

DisgruntledGoat

Hi mumto2monkeys - based on what you said, it sounds like the 8% loan would be a good target to pay down before it jumps to 16%, but I suspect the small print of the loan agreement(s) may be important in working out your options here, so trying to speak to the lender is a good idea. Keep calling until they're open.

Generally your mortgage is relatively low down the list of debt repayment priorities (assuming no very low/zero percent lifetime deals elsewhere) so your unsecured lending should be the first target, but it depends on the details of APRs. If your mortgage allows you to claw back overpayments if necessary then that changes things too, mine doesn't so I only overpay with money i'm pretty sure I don't need for anything else.

And don't be too harsh on yourself about past decisions, we've all done it - I cringe at the thought of some of the dumb loans I signed up to in the past...

clearmydebts

Great advice from Disgruntled Goat and I can't really offer anymore advice than that, other than to check with your lender if you can overpay on your 8% loan so you can rid of that.

Don't be too hard on yourself. Myself and OH have been ridiculously stupid with money in the past, invested in shares the week they crashed and have lost lots of money as well as being in debt.

The important thing now is to focus on the future and on paying back your debts as soon as you can. The Up Your Income section on here is really good for some hints and tips as well. Try to concentrate your energies on bringing down the debt and you will be surprised how quickly you will be able to get rid of some of it.

mumto2monkeys_2

Thank you to both of you; I appreciate your replies.

I will definitely contact the lender. According to the contract there is no charge for overpayment or early repayment on the loan.

I'm going to re-do my snowball calculator with this loan in it. It's so very depressing when you realise that you've got it wrong again.

What is the saying, 'this too shall pass'

Thank you again

someday_soon

Hi mumto2monkeys

I suspect you will be setting the table for most of us on here at your 'ever been daft with your money' party. Thing is that was another day. We and you move on.

Good Luck

Someday Soon

mumto2monkeys_2

Thanks Someday. I am moving on, albeit rather slowly!

dimbo61

Pay off the highest debt first so start with any high rate credit cards and then loans
It seems a hugh mountain to climb but keep chipping at it
Bear in mind you may be happy to stay with your existing lender at the end of the fix ( check what the mortgage reverts to after the fix ends ) GOOD LUCK

mumto2monkeys_2

Thanks :-). I'm going to recalculate my snowball so I know which is the best order to pay them. It feels like such a massive amount, but at least I'm heading in the right direction.

mumto2monkeys_2

An update: I have phoned my lender. They are super flexible and I can overpay as much as I like of the unsecured loan with no penalties as often as I want to. :j

I'm overpaying my CC at the moment to get rid of it, and that is my priority. But, I might still overpay both the mortgage and the unsecured loan attached to it too by a little each month so that I know I'm making a difference to it, even if it is just a few pounds.

Might even get myself a mortgage pig!

Thank you all again, and best wishes for your MFW quests.

ernie_3

someday_soon wrote: »

Hi mumto2monkeys

I suspect you will be setting the table for most of us on here at your 'ever been daft with your money' party. Thing is that was another day. We and you move on.

Good Luck

Someday Soon

:Abeen there done that, wont be the first , wont be the last..but you have seen the light and are hitting the problem head on..good for you

someday_soon

mumto2monkeys wrote: »

An update: I have phoned my lender. They are super flexible and I can overpay as much as I like of the unsecured loan with no penalties as often as I want to. :j

I'm overpaying my CC at the moment to get rid of it, and that is my priority. But, I might still overpay both the mortgage and the unsecured loan attached to it too by a little each month so that I know I'm making a difference to it, even if it is just a few pounds.

Might even get myself a mortgage pig!

Thank you all again, and best wishes for your MFW quests.

Good news. I am sure you are right to attack the CC first, but no harm giving the rest a little punch in the ribs too!:D

Keep Smiling

Someday Soon