Have we been given the correct advice?

deefadog

Hi, just wanted to check we have been given the correct advice.

We have 44% LTV on our current house and are on a variable rate of 4.79% (NRAM), but we have the house up for sale and plan on downsizing.

As we have 2 car loans and a credit card debit totaling 9k we have been advised to add these to the mortgage.

with current rates we have been given a deal of 3.29% (This product has not penalty on downsizing the mortgae) also (extending the years by 7 up to 32) - thus saving us over £450 a month which we plan to put into a pot for the moving costs, then when we downsize, we can overpay by double that amount!

Its all good on paper, but have we been advised correctly before we jump in.

Many thanks in advance!

ACG

It depends....

Some people choose to consolidate the debt into their mortgage. The pros of this are that your monthyl expenditure will decrease.
The cons are that it could potentially take you longer to pay off, you will be paying interest on that amount over however many years the mortgage is for - rather than how ever many years the loan was for.

If it suits you and your needs then yes you have been advised correctly, if it doesnt then no. It sounds like its what you want from what i can gather in your post though.

alleycat`

Things to consider:-

Is that 3.29% value a fixed real interest rate or is it flexible (i.e. can it go up?)
Your moving unsecured debts to secured debts against your property.
Does paying off the other debts have any early repayment costs?
Will you, honestly, stick to overpaying or will the £X be swallowed up by other "lifestyle" choices?
Are there limits to overpayments you can make? If so what penalties are there if you breach that threshold?
Can you draw down against the over payments (and will you?).

-

Theoretically moving short term debts onto better interest rates is a winner but people tend to come unstuck in either letting them fester for the "many extra years" a mortgage takes to pay off rather than really paying them down quickly.

I'm not a mortgage or money advisor type person but the above are things i'd consider.
If it helps at all.

Edit:-
ACG makes a very valid point that it sounds like you would like to do it anyway :-)

kjharve

One other thing worth considering is whether you'll be disciplined enough not to re-spend on the credit cards. The last thing you want is to transfer the £9k across to the mortgage only to then go and max out the credit cards again.