Best thing to do...

fleagle21

This relates to mortgage and credit cards, so wasn't too sure where to post it! Looking to see what others would do in this situation:

I'm just finishing a four year degree, graduate in June. Going to start temping initially which brings in about £1500 a month. Whilst at uni, we've been living off hubbys wages (approx £2200 pcm) and £300 a month from my student loan. We manage quite comfortably on that as we have no kids. We have some credit card debt - approx £6500, but it is all on a reasonably low rate 4.94% life of balance. And we have a £5000 loan too at 8.9%. We have a mortgage of £103,000 approx, and we hit lucky with this getting it when interest rates were still high and people were quite wary of trackers - our rate is 0.85% above base lifetime tracker, and our payments went from £725 a month initially to £425 a month now, so for a mortgage it's ridiculously low.

Anyway, not sure whether to a) keep paying the credit card and loan steadily as we have been and put my wages to paying the mortgage b) pay the credit card and loan then put the money in lump sums to the mortgage or c) a bit of both?

You may just say well pay the cc/loan as it's higher rate, but what I don't want to do is miss an opportunity with the mortgage before rates start to go up again.

opinions4u

I think it's unlikely that the mortgage rate will rise above the credit card rate in the next couple of years.

Because of this, I'd focus on paying off the credit card debt ahead of the mortgage.

You can, of course, change plan should my interest rate prediction prove to be unhelpfully inaccruate!

getmore4less

Manage comfortably and £11k+ debt don't really add up.


Min payments on CC and mortgage.

Target the loan the cheapest way possible its the highest rate, it will depend on how flexable it is which is the best way.

Then once that is paid off it will depend on the mortgage rate which is next(unless the mortgage rate overtakes the loan rate).

fleagle21

getmore4less wrote: »

Manage comfortably and £11k+ debt don't really add up.

How not so? £2500 a month into the bank account. Approx £1100 bills/outgoings, then £200 per month shopping, I do a regular monthly payment of £100 to the credit card (min payment is about £60 - may have just gone up with the recent bal tfr) and then £158 on the loan. Still leaves £942 disposeable (of which I try to pay more c/c if it isn't needed for anything else).

dimbo61

Quite simple really if you are paying £60 a month in interest on £6500 CC debts and clearing an extra £40 a month how many years will it take you to clear the whole CC debts 25/40 YEARS !!!!
Once you start working then try and clear the CC debt and contact the loan people to see if you can either overpay the loan ( saving interest) or OP the mortgage.
You are on a great rate for the mortagge at the moment but if you can clear other debts and then overpay the mortgage (GOOD LUCK)

getmore4less

fleagle21 wrote: »

How not so? £2500 a month into the bank account. Approx £1100 bills/outgoings, then £200 per month shopping, I do a regular monthly payment of £100 to the credit card (min payment is about £60 - may have just gone up with the recent bal tfr) and then £158 on the loan. Still leaves £942 disposeable (of which I try to pay more c/c if it isn't needed for anything else).

You completely missed the point.

Somewhere along the line you have spent £11k+ more than your income so you have not had £942 disposable income.

fleagle21

The £60 a month isn't in interest, its the minimum payment which I'm overpaying by £40 (and have just increased by another £50 for next month)

So for £6500, at 4.94% paying £150 a month it would take about 4years. (Got that calculation off thisismoney.co.uk) Still a long time, granted, but not 25/40!

fleagle21

getmore4less wrote: »

You completely missed the point.

Somewhere along the line you have spent £11k+ more than your income so you have not had £942 disposable income.

This isn't from frivilous monthly overspend - these debts come from the house purchase, the reason we got our house at the price we did is because it was a mess. It needed new everything, was ripped back to a shell and cost far more than anticipated to fix. It's now worth around £125-130k, so the money is there - it's just in the house!

We've had a crappy few months lately, everything going wrong that possibly could, plus all the car insurance, tax etc has all come at the same time, along with a friends wedding.... the list goes on! So the £942's have all been used rather than being able to make extra payments

new_home_owner_3

fleagle21 wrote: »

It needed new everything

I moved house and ideally we would have liked everything new, some things you just have to wait, ive got a old boiler and we are currently saving up to get it replaced, im not going to wack it on the credit card.

I would clear the card first then the loan, you never know if interest rates go up you could be in a right mess.

fleagle21

We did up quite a considerable amount without credit cards (£7500 worth, to be precise) - but unfortunately as things were taken out of the house, more and more was uncovered that needed to be done. I wouldn't have expected a tramp to wash in the bathroom the way it was, so that needed ripped and replaced, the whole central heating system was naffed unbeknowns to us, again a total replacement which we didn't budget for. It took us 18 months to do up, working every weekend on it, so you can imagine the state of it! Luckily hubby is in the forces, so we were living in a married quarter til it was ready.

dimbo61

This forum is all about becoming mortgage free asap
Most of the people on here become a bit obsessed about clearing the debt and you have your head screwed on and know how to budget well.
Lots of tips about getting best value for your hard earned money when buying anything!! Insurance, shopping ,gas/elec/water etc
Using Credit cards to earn money and not pay interest even at 4.94%.
Quidco/cashback etc so keep up the good work and good luck