Just wondered what you all thought?...

susiet_3

Hello,

Well I thought i'd ask you lot for your opinion on this.

Had £15,000 worth of debt (from uni).

My husband and I had come out of our 2 year fixed rate mortagage back in april but forgot to change it. Stupid i know!! It was a horrible interest rate! So we looked into it this month and we changed to a different lender, we added £15000 to our mortagage but still pay the same mortgage a month!! Mad eh? So we did it, got £15000 in the bank and are now debt free.

I have heard that some people reckon consolidating loans on mortgages is bad. But we benefit cos the % is 2% lower than our last mortgage and we are paying the same each month.
Hope that makes sense?
What do you think?

mountainofdebt

To be honest I don't think you are debt free.....you've just transferred the unsecured debt into a secured debt.

Also is the term of your mortgage changed in any way? Is there a danager that you may build up these debts again?

Sorry I think you did the wrong thing in adding them to your mortage.
......but that's just my opinion

notes

This is a difficult one as we dont know all the figures etc.

Well consolodation isnt always bad, it depends on the circumstances.

What is bad if you now know you are debt free and spending increases and can easily get back into debt ending up in a worse situation than before. This is one reason why consolidation can be bad.
Also if mortgage rates go up then can you afford an extra 15K ?
Secondly in the long run you may end up paying much more than if you had tackled the debt before paying mortgage.

Another problem with consolidation on mortgage is that if you cant afford to pay then you lose your home. At least If this was unsecured you could remain at your house with only a bad credit record.

If you know this is never going to happen again (get in debt) and could afford it if rates went up, then maybe you have done the right thing as its peace of mind. However, i suggest you now aim to pay off mortgage asap before you end up paying thousands of pounds extra interest on what you have borowed.

Perhaps nows a time to check your SOA and budget and make sure you stick by it.

susiet_3

notes wrote:

This is a difficult one as we dont know all the figures etc.

Well consolodation isnt always bad, it depends on the circumstances.

What is bad if you now know you are debt free and spending increases and can easily get back into debt ending up in a worse situation than before. This is one reason why consolidation can be bad.
Also if mortgage rates go up then can you afford an extra 15K ?
Secondly in the long run you may end up paying much more than if you had tackled the debt before paying mortgage.

Another problem with consolidation on mortgage is that if you cant afford to pay then you lose your home. At least If this was unsecured you could remain at your house with only a bad credit record.

If you know this is never going to happen again (get in debt) and could afford it if rates went up, then maybe you have done the right thing as its peace of mind. However, i suggest you now aim to pay off mortgage asap before you end up paying thousands of pounds extra interest on what you have borowed.

Thank you for that, its useful. Yeah i do agree with you. I am pretty sure that we are never going to have debt like that again as we earn together £3500 a month. so i have decided from you said to overpay on the mortgage, if we overpay by £300 i can't believe how much it reduces our mortgage in years.

I think you are right we did it for peace of mind.

notes

I am pretty sure that we are never going to have debt like that again as we earn together £3500 a month.

Before my lightbulb moment and before i started to do my soa and budget on here i said the same as you on more thn one occasion.

This is dangerous otherwise as you still have the same spending pattern / ideas / reasons etc and need to stop yourself spending / change patterns.
Honestly, take it from me if you dont its so so easy to slip back into it.
Thats why i think often the best way is to reduce balances by budgeting instead of consolidation - after the 3 years or whatever are up then your mindframe and accounts are in save mode so its less likely to happen again.

Im like you and have a little equity in my flat but have decided this time that im not going to consolidate as it can only go on so much !

Another problem if equity / mortgage levels are now levelled out so little spare, what would you do if house prices fell ?

Not trying to lecture you - just dont want you to fall into trap i used to fall in.

All the best.

susiet_3

mountainofdebt wrote:

To be honest I don't think you are debt free.....you've just transferred the unsecured debt into a secured debt.

Also is the term of your mortgage changed in any way? Is there a danager that you may build up these debts again?

Sorry I think you did the wrong thing in adding them to your mortage.
......but that's just my opinion

Ok well thank you for that. It makes sense what you said. The terms of our mortgage were mostly the same accept that we wanted one that you could overpay with. I can't see us ever being in debt again because mainly it was my stupidity of being a student. Hopefully we will overpay by £300 ish pounds we can reduce our mortgage by 8 ish years!! wow!