Re-Mortgage or other method? HELP!!

Pike

Hello helpers!

I have a tricky'ish question and wondered if someone can advise if we're doing the right thing?

We have a current mortgage of 155.000, over 21 years, which equates to 925.00 per month (we are 6 months into a 2 year fixed rate at 4.44% with Nationwide).

We have an additional debt of approx 23,500, which is 7.500 AMEX and 16.000 which financed (HP) the purchase of a new car at the DREADED Car-Craft (don't do it!!). AMEX - minimum payment 250.00 per month and car - 420.00 per month. TOTAL: 670.00 per month!

Yesterday I approached Nationwide (my current mortgage lender) and asked for 24.000 additional borrowing on our current mortgage. The deal i have chosen is a 6.24% variable mortgage with repayments of 171.11 per month, over 21 years. I've chosen variable because we will probably look for another good 2 year fixed rate deal when the current one expires - I didn't fancy being tied in past my current deal as i'd like to take the lot to another lender should we decide to move.

Looking at the math we will be 500.00 per month better off by doing this.

Can I ask if this is the best way of clearing this additional debt? If not, can someone recommend an alternative?

I would really appreciate your help on this. I've received the forms from Nationwide this morning but i will not complete and return until i've heard from one of you experts!

Thanks a lot, Jamie.

terriblesaver

Hi there Jamie

There are many ways to do it and although lots of people told us not to remortgage we found it was a much better option for us. We had alot of equity in our house and it has enables us to pay off a crippling loan and start negotiating with all of our unsecured debts. I personally think that if you are better off by £500 a month its a good idea but I may be wrong as I am no expert.

Good luck

x

all_hours

Being £500 better off sounds good but its turning £24k of unsecured debt into secured debt. This puts your property more at risk and you could end up paying more interest in the long run.

Put your debts into the snowball calculator to see.

http://www.whatsthecost.com/snowball.aspx

If you post a full SOA - see southernscousers sticky thread for first time posters for a template -

http://forums.moneysavingexpert.com/showthread.html?t=107280

then posters will give ideas what you can cut back on to free up some cash to pay off your debts easier.

Pike

Hi there,
Hey you've made me feel so much better!

Our current mortgage is for 155.000 and our house is now worth 210.000 (55.000 equity). I guess the only drawback is that we've eaten into the equity, but we would have got rid of two bad debts and be 500.00 better off per month. Sounds like a plan to me. Oh, the other drawback is that the new 24k loan at 171.00 per month is us actually paying back 43k! But i hope it will be better once our 2 year fixed rate deal is up and we remove the whole amount to another lender at a new good fixed rate deal?! God this is so confusing, i thought life was supposed to get easier!!
Thanks again,
Jamie

lynzpower

Oh, the other drawback is that the new 24k loan at 171.00 per month is us actually paying back 43k!

:eek:

this was the figure I was hoping for before I passed comment. No moneysaver in thier right mind is going to recommend that you effectively waste £19,000.

Another thing to note is that you say your house is "worth" 210, but in all fairness your house is only worth what someone is willing to pay for it. If you choose ( or have to move) and the buyers will only give you 155 for it, where do you find the rest from? I am not a fan of securing at all.

I recommend that you look at posting your SOA first, adn then look if there are alternative ways of paying this back, before making any drastic or hasty decisions.

Welcome
Lynz
x

in*the*red_6

Jamie

Think of it this way, you will be still be paying off that car and credit card for the next 21 years! I agree with all hours, if you have any disposable income then snowball it, they'll be paid off in far less time. Your mortgage is already pretty big too - what if you have a change in your circumstances? And, can you guarantee you won't run up further credit card debt?

How long have you had the car? Many HP agreements give you the option to return it if half the payments have been made.

calleyw

I agree with the others it may free up £500 but at what cost.

What happens if you can't pay the mortgage then you loose your house.

Also this makes me sound harsh but will you have learnt anything. Will you change your spending habits. Or just go yeah extra £500 a month to waste.

If you do re-mortgage then use the extra £500 a month to over pay the mortage. As I have feeling that nationwide allwo you to do it even on a fixed rate.

The final choice is yours.

All the best.


Yours


Calley

regularsaver1

if you do this you have just got to be prepared for the fact that the debt is no longer unsecured - it will be secured on your home

and that the interest overall will be higher due to the longer term


but I suppose you will have the one payment and it will help you per month

kenshaz

In the long term you will be paying more for the goods and they will be secured on your home,consolidated debt ,but it will be at a competitive rate,not like some of the television celebrity adverts,and your property has increased in value ,so you are releasing equity,and your standard of living will increase and you will have the experience,and learning curve

tomstickland

"releasing equity" is a positive sounding phrase that actually means "borrowing more money".

regularsaver1

sometimes I see people that say I have £100k in equity that is mine and i would likew to release it, but yet they can't afford it - a lot of people seem to think that releasing equity (borrowing more money as tomstickland puts it) is simple - but it still needs to be affordable