Hopeless MFW needs help!

moments_of_sanity

Hi All,

A little about us and our situation.....

I'm going to be 40 next month (shh don't tell anyone) and DH will be 48 in June. We met on 2005, have 2 teenage DD's (mine from previous marriage) and married in 2010. Unfortunately DH's Mum passed back end of 2010 and we have (subject to house completion on the 17 January 2012) £118k inheritance.

We have lots of CC debt (approx £32k) and 2 secured loans of £30k (both loans together). We are planning to pay off all the CC debt and the secured loans, DH is going to buy a new car at a cost of £22,500 and we want to put £7k into savings (rainy day and all) and we are having our heating system (currently 23 years old) replaced at a cost of £4,500. So the things mentioned about will take about £96k - the rest of the money (£22,500) we plan to pay off part of the mortgage. We have a penalty to pay when paying off the £22,500 but am not sure what that amount will be yet.

This will leave us with a mortgage of about £75,500 which is currently on interest only payments. I have a couple of questions:

1. are we best to take the mortgage off the interest only and back onto repayment (cost is £50 admin charge) or keep it on the interest only and overpay by the amount the normal payments would be if we switched to repayment

2. we can overpay by £500 per month into the mortgage each month without incurring any penalties but are tied into a fixed rate of 6.16% until September 2017 and as our credit rating is shot we cannot move to another lender for the foreseeable future

So can anyone advise on what is the best thing for us to do, I take it we are doing the 'right thing' by paying off the £22,500 from the mortgage?

Apologies for the long winded note but really want to get my head around overpaying as in the past I have taken no interest in the mortgage at all and have to confess to just paying it every month!

I look forward to hearing from you all

moments_of_sanity

Bit of an update - have rung the mortgage company and got the following figures:

Mortgage currently at £97,195.11, to reduce by £22k will incur a penalty charge of £660 (current interest rate 6.18%)

Secured loan 1 currently at £14,241.30, to pay off will incur a penalty charge of £427.38 (current interest rate 6.18%)

Secured loan 2 currently at £13,952.89, to pay off will incur a penalty charge of £418.73 (current interest rate 6.44%)

I take it we are better off to pay the penalty and clear them completely rather than over pay by £500 per month and clear them in 22/23 payments?

originalmiscellany

Can you persuade your OH not to spend 22k on a new car? That's a lot to spend on a car - when you could get a lovely second hand one for 10k?
When does the secured loan 1 and 2 finish? It would normally be better to clear in one go, certainly for peace of mind it would be!
Also you have a very high interest rate - it might be worth paying down, then re mortgaging as you will have a much better interest rate, and you could get a 5 year fixed rate at 4% thus saving you more money every month?

moments_of_sanity

Thanks for your post originalmiscellany, I also think £22,500 is a lot to spend on the car but it is DH's inheritance and I feel it's not really my place to tell him what he can and can't spend the money on.

With regards to the mortgage, I feel we are stuck with the one we have as we would need to remortgage and our credit rating being as bad as it is, I can't believe anyone will give us another mortgage for quite a while yet!

We are planning to pay off the two secured loans so that will reduce our outgoings by £240 per month and then reducing the mortgage to £75k will mean we are paying less per month for the mortgage.

We want to clear the remaining mortgage as soon as possible but can only realistically op £100 a month which isn't going to make any kind of dent in it for some time to come

someday_soon

Hi There

Just had a random search on autotrader and saw a brand new 0 miles Passat Estate for £22,500. The same model with less than 5,000 miles and less than a year old is £12,500. Just a thought.

Someday Soon

originalmiscellany

Well then, if you're in a slightly tricky situation, can you see if you can continue to save the £240 a month and put it off your mortgage?
Plus keep your mortgage payments as they are, and you could be getting close to £300 a month to overspend - which is 4k a year?

That's not to be sniffed at is it.

someday_soon

At the top of the page there is a great guide 'should I repay my mortgage?' You will find what you need in there. Good decisions and logical thinking now will have a massive positive impact on your future.
Good Luck
Someday Soon

dark^knight

The only thing I would add is that you have a lot of CC and loan debt. You need to make sure you don't take on any more debt, as this is a golden opportunity for you to wipe the slate clean and go forward without any non-mortgage debt.

moments_of_sanity

dark^knight wrote: »

The only thing I would add is that you have a lot of CC and loan debt. You need to make sure you don't take on any more debt, as this is a golden opportunity for you to wipe the slate clean and go forward without any non-mortgage debt.

Your right, we do have a lot of debt and unfortunately most of it has been since DH's Mum was diagnosed terminal and her unfortunate passing - taking unpaid leave from work, extra expenses associated with her illness etc and I certainly don't want to take on any more debt once this is cleared - your right, it's not everyday you get such an amount of money and we intend to be very careful in the future