Consolodating debt into mortgage

kidscash

I am wanting to be debt free, but after my third and final maternity leave, and getting our visas to the limit our out goings are out of control. Morgtage is fixed until october with a £5000 penalty. Options are get a loan and wait until fixed term finished, or consolodate now onto morgtage which will reduce outgoings by£900 a month. The thought of having a massive mortgage does scare me a bit though, any suggestions

noodle

Consolidating doesn't make you debt free.. it means that, unless you increase monthly payments significantly, you're in more debt for longer.

We'll presume that the debt is due to a lack of income during maternity, and not a spending problem. Are you now going to go back to work? If so, I'd recommend allocating as much of your income as possible, after any new unavoidable costs (eg. childcare) to debt repayment. The more of it that you spend on other stuff, the less debt you repay, the more interest you pay, and the less able you will be to adapt to future challenges.

The most cost effective thing to do, assuming you have the equity in your home to roll up your other debt and still get a decent mortgage rate, is to consolidate but to make mortgage payments high enough to ensure that the element of debt you rolled up is paid off as quickly as possible. You really don't want to be paying it back for 20-odd years. That £900 reduction in outgoings might work better for you if it's, say, a £300 reduction... with the other £600 being overpayments on the enlarged mortgage.

The best way to get debt free, including mortgage debt (and leaving aside obvious things like 'don't keep spending more than you earn') is to get debt on the lowest possible rate, and pay it off as quickly as possible. Most people only seem to go for part one of that, so don't make that mistake if you can avoid it.

noodle

Further..

Do consider the impact that consolidation would have on your mortgage. Say it meant you were at 80% LTV instead of 70% LTV, and this meant your mortgage rate was 0.5% higher... That 0.5% on your whole mortgage might more than use up the benefit of the interest saving on just the 'other' debt as compared to other sources of finance (e.g. a personal loan).

maninthestreet

You haven't give us any figures to go on - how much is outstanding on your current mortgage, how much is your property worth and how much unsecured debt do you wish to consolidate?

kidscash

Thankyou for all you comments. Outstanding mortgage 132000, Value of house approx 210000. Debt = £9000 LOAN, 21000 on several visa and running out of 0% offers. Mortgage term 14years, so havent extended this to pay of quicker and plan on putting cash aside each month for emergencys if not spent at end of year will pay off mortgage. Mortgage charges for early repayment are 5000 as not due for renewal till October but struggling with out goings. Mortgage rate currently 5.99% new rate 3.5%. My thought was should I get a loan for exsiting debt at 10% over 7 years and wait till mortgage is due or just go with mortgage now but remain aware of how much is our debt and continue to try to reduce it within the 10% your allowed each year.

Muscle750

Im in the same boat i went for a chat with Nat west who tried to make me re mortgage however in three years time my Debts will be paid off however if i do put it on my mortgage its gonna be cheaper in the first instance but in 3 years i wont of put much of a dent in it so i have decided to struggle on as i am and not put in on my mortgage.