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Cash and Endowment to Clear Credit Card Debt
wheado
Posts: 1 Newbie
Hi
We have credfit card debt of £21k that in part built up through a redundancy situation in 2009. It had been our intention to release equity at the end of a fixed rate mortgage period in Feb however my own bank refused to agree our mortgage (as transferees from another lender) with much of the decision based on the unsecured debt.
Their advice was to clear the credit card debts before they would reconsider an application.
At the moment, we have stabilised our income/outgoings and can afford to meet our bills and payments but there is little if anything surplus to start paying back the actual money owed on the credit cards.
Running alongside this, we pay £111 per month into an Aviva endowment that like others isn't projected to reach its target amount (this only covers about a 3rd or the mortgage with the remainder repayment). I had been planning to move to a repayment mortgage anyway and keep the endownment running for a nice payout in 2033 but now think it would make sense to cash in the endownment and clear the majority of the debt and ease the monthly pressures on us and then within the next 6 months move to the repayment mortgage as planned.
Is anyone able to suggest why this wouldn't be a good idea?
The endownment has been running for 12 years and has a cash-in value of about £15k which is more or less what we put into it. This would enable me to clear a credit card, eat into the other one and release about £300 per month to pay against that.
I understand that I will then be short on my life insurance so will need to review this.
My thinking behind this plan is not to think about having a chunk of money in 13 years which might get us out of a serious hole right now when we need it.
Appreciate any views.
Paul
We have credfit card debt of £21k that in part built up through a redundancy situation in 2009. It had been our intention to release equity at the end of a fixed rate mortgage period in Feb however my own bank refused to agree our mortgage (as transferees from another lender) with much of the decision based on the unsecured debt.
Their advice was to clear the credit card debts before they would reconsider an application.
At the moment, we have stabilised our income/outgoings and can afford to meet our bills and payments but there is little if anything surplus to start paying back the actual money owed on the credit cards.
Running alongside this, we pay £111 per month into an Aviva endowment that like others isn't projected to reach its target amount (this only covers about a 3rd or the mortgage with the remainder repayment). I had been planning to move to a repayment mortgage anyway and keep the endownment running for a nice payout in 2033 but now think it would make sense to cash in the endownment and clear the majority of the debt and ease the monthly pressures on us and then within the next 6 months move to the repayment mortgage as planned.
Is anyone able to suggest why this wouldn't be a good idea?
The endownment has been running for 12 years and has a cash-in value of about £15k which is more or less what we put into it. This would enable me to clear a credit card, eat into the other one and release about £300 per month to pay against that.
I understand that I will then be short on my life insurance so will need to review this.
My thinking behind this plan is not to think about having a chunk of money in 13 years which might get us out of a serious hole right now when we need it.
Appreciate any views.
Paul
0
Comments
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Is anyone able to suggest why this wouldn't be a good idea?
Usually with Aviva, it comes down to the value of the mortgage endowment promise. If its a small amount you would be writing off by surrendering then it may be worth it. If its a large amount (and I have seen some in the tens of thousands of pounds) then it may be worth keeping.
Obviously the mortgage payments will go up for the amount you switch to repayment and will probably go up more than the £111 you will save.
Plus you will need replacement life cover (and possibly CI).I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0
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