Repaying Part interest and Part Repayment??

ShazzaUk

Hi i am just after a little bit of advice regarding our mortgage and loan we have.

We currently pay £489/month on a £145,000 (3.99%) mortgage as interest only and have a personal loan paying £189/month for £10,000.

We do not have any spare cash at the moment as finances are tight but we would like to start actually paying off some capital on our mortgage. Not happy to keep paying interest only.

We were thinking of maybe adding our loan to our mortgage then paying £80,000 on repayment and £75,000 as interest only. After checking against a repayment calculator our payments would be about what we pay now with our mortgage and loan.

Does anyone have any advice, i know in the long run the interest would be more by adding the loan but at least something would be paid against our mortgage.

Any thoughts please??

Thanks
Sharon

Thrugelmir

My concern , if I was a mortgage underwriter, is that you admit to struggling at the moment. Even though your mortgage rate is only 3.99% on an interest only basis. This will be very apparent in terms of affordability when you apply for a remortgage.

Personally I would recommend visiting the MSE money saving boards and taking your budget apart. To squeeze some money out to start making overpayments on your mortgage. However small they may be.

getmore4less

What was the £10k loan for?

Whats the rate on the loan

Can you overpay the loan or just redeam it, any penalties?

Any other debts?

Whats the house worth?

maninthestreet

Why would your mortgage lender what to take on this extra risk? There is nothing in it for them. How much is your property currently worth?

ShazzaUk

We have had the loan a while the rate is 7.9%. We have no other debts and our house is worth 190k so we have a bit of equity.

My main reason i want to do this is so i can start paying some capital of my mortgage instead of just interest only. We have just re-mortgaged and were told that we could switch to part/part at any time.
We cannot afford to pay extra off our loan so i was thinking if we can add it to the mortgage we can pay the same amount as we pay now for the loan+mortgage. Plus we will be paying some capital off.
By paying capital off means that each time our mortgage rate needs re-newing we can increase the part repayment figure.

Our finances will improve shortly as i am increasing my hours at work.

Does this make sense to anyone??

Thrugelmir

Makes perfect sense. Though mortgage lenders are increasingly unwilling to consolidate debt.

Once you start working the extra hours. Use that cash to overpay the mortgage. Keep the mortgage interest only so as to give yourself flexibility.

The danger I foresee is that as interest rates rise in the future your finances will come under even greater pressure. As its going to take some years to bring the capital balance down. The more you start doing now the better.