General Mortgage Debt Advice

wellsie

Hi All, just would like your opinions on the following:

Current re-mortgage taken out last year, £90,000 over 25 years, variable because we hope to move in the next 12 months.

Re-mortgaged due to debt consolidation, partner had £25k, myself £15k. We are currently 28 and had loads of debt from past lives.

Equity in house now lies between £30-£40k.

Over the last year we have been irresponsible with credit cards (vowing never to abuse them again). Total now is around £7000. We have identified why this has happened, and come up with a budget plan, so that we stop overspending each month.

There is £3500 0% until 01/07. £1500 0% until 11/06. And £2000 6.9% for life.

As I see we have the following options:

1. A consol loan for £7k. Have been offered one over 3yrs @ 7.5%.

2. Pay off cards @ £200 per month, and swap 0% deals. However I notice lots are charging 2-3% BT fee now, so not sure about this.

3. Remortgage, drawing £7k to pay all off.

Which option will be best when we come to remortgage and move. Will they lend less to us if we have a personal loan, or lots of credit cards?

Any help/info we would be really grateful for.
Thanks

homer_j_3

The main considerations to ask yourself are:

1-if I consolidate, will we be certain that these debts will not be run up again and will we be responsible enough to cancel these cards once we have repaid them or have one with a credit limit of one months salary on for emergencies at the very most. You have demonstrated bad financial behaviours and would consider this long and hard.

2 - If you want to consolidate, do you want it against your home or unsecured? If you can answer honestly to 1 and can afford the loan payment on the unsecured loan then this should be your first port of call as securing against your house will potentially have you paying it for the rest of the mortgage term. Should you get into financial difficulty due to this in the future at least as long as you keep payments on your house up, you will keep a roof over your head.

3 - Should the personal loan be pushing you too much financially then securing against the home may be an option but seek professional advice and avoid all these companies that you see advertising on the TV. If you are to secure against the property then look for a mortgage that allows over payments so you can cut the interest down. A good broker will be able to show you how long it will take you to clear the additional borrowing from the debt.

wellsie

Thanks for your quick reply.

1. We are happy to say this won't happen again. We understand why we are now in this situation again - our budget planning was flawed and we have now corrected this.

2. I'm a bit confused about types of loan then. I can have an unsecured loan, or a secured loan, or remortgage. I don't understand the point of a secured loan, when I can get an unsecured one??? Why would I want to risk the house if repayments couldn't be kept?

Regards the remortgage, the A&L have only quoted an extra £12 per month to go from 90k to 97k. This seems to be the better option, don't you think? With a personal loan we are going to have to make more severe cutbacks, but this way not as much.

Sorry if I sound a bit short, I just have a lot of questions.
Thanks