Just faced our debt head on

SallyinWales

By a lot of standards our debt probably isnt that huge, we had £23k on the mortgage and then cards and a loan that together totalled about £12k, but because they were fragmented the repayments each month were about £1000 and we were getting horribly panicked by keeping up with them. So, today we sat down and have applied for a remortagage to cover the lot, and to my immense shock the repayments will drop to about £350 in one fell swoop, and its the sort of mortgagae where we can overpay and drive it down much faster as well.

Course, we have to have the valuer agree that the house is worth £40k first, and a few bits of paperwork, but I'm moderately confident that will go without too much hassle. I just can't believe that lumping them all together on the mortgage could save us so much money.

Not getting too excited until I know the paperwork is ok, but it feels like a little light has gone on somewhere.

Once I know this is sorted, its all systems go for a concerted getting our finances in order drive. We've already stopped using the cards, we live a fairly sensible lifetyle but can easily be a bit more frugal, and with it all in one place at least I won't be worrying about which one is due out next.

chevalier

hi there
but isn't the reason why your monthly payments falling because you are borrowing the money (ie your remortgage) over a MUCH longer time. In the long run you may well pay masses more in interest now. If you look at https://www.whatsthecost.co.uk, you can plug in the figures for the remortgage and it will tell you how much interest you are going to overpay on the life of the mortgage. Then you can do the same for the loans and credit cards and see what the difference is.

The other issue you must think about seriously is that by signing up to the remortgage, you are changing 12k of unsecured debt into 12k of secured debt ie on your house. If you don't keep up with the new repayments then you could lose your home. You also have to look at just why you were spending this money too. Because if your spending patterns don't change, then in a few years time you could be in the position of securing 12k on your property, and then running up the cards again, thus being in a worse condition.:eek:

Sorry to be so down, but I wanted you to think beyond the 'woohoo are monthly payments are less' bit, to see what this remortgage might really cost you.

chev

Vickicb

Chev is right of course but you will still have a small-ish mortgage even with the increase by today's standards. I agree that one payment is much more organised and easy to manage and gives you more peace of mind. You can counter-act some of the mortgage interest by overpaying, many mortgages will let you change your DD permanently once it's set up so you still have one DD but are overpaying, My new mortgage when I move is £928 but I'm going to call them once we've moved and change the DD to £1K, only a small overpayment for now but makes a difference in the long run. Good luck.

Xbigman

Most on this board are wary of consolidation, and for good reason. As already stated you pay much more interest long term. So, are you extending the lengh of your mortgage back to 25 years or keeping the completion date the same? If you extend you WILL pay more interest. Keeping it the same means higher payments but much less interest.
Another problem with consolidation is that the underlying problem persists. Your mentioning having a mortgage that allows overpayments is good. Its the mindset of clearing debts, rather than running them back up that is the most important factor in making consolidating work.
Also, make sure you only borrow the bare minimum to clear the debt, in your case 35k. Don't be tempted to borrow 'a bit extra'. Although if you have a loan to clear make sure you get a settlement figure first. Borrowing 35k and finding you need 36k to clear your debts is really disheartening.
Regards


X

SallyinWales

All good points, but we've thought all that through as far as we can. The new mortgage is over 12 years- which is less than the old one had to run, and the main debt we will be clearing was originally got for something specific which won't crop up again. The plan is to use much of what we were paying before to overpay this new mortgage too, our problem originally wasnt so much amount of cash it was having it in the right paces at the right time, plus the stupid interest rates. If all goes well, we can have the entire lot paid off in maybe 5 years, and will have saved a lot of interest into the bargain.