Do I use endowment to pay off debt?

elephant003

We have credit card and overdraft debts totalling £39K and have been considering a debt managemant plan. We have a mortgage of £110K of which £63K is interest only. The 2 x endowments we took out to cover the interest only part of the mortgage are about to pay out approx £34.5K and we had planned to then convert the balance of the interest free mortgage to a repayment mortgage.
We are now wondering whether it would be better to use the endowment money towards the credit card and overdraft debts and convert the whole of the £63K interest free mortgage to a repayment mortgage. We have been given a quote to do this and it would mean that we would be approx £500 better off each month so on the face of it it seems a good idea.
Would any one be prepared to comment as to whether its a good idea to use endowments to pay off debts?
Thanks

shop-to-drop

I think it would be a good think to do but only if you can trust yourselves not to run up the credit card debt and overdrafts again.

If you can't there is no point as you will just end up in even more debt.

elephant003

Thanks. We figured that with the £500 saving to our budget each month we could tear up our cards and begin the better habit of saving money instead of relying on credit.

mildredalien

elephant003 wrote: »

Thanks. We figured that with the £500 saving to our budget each month we could tear up our cards and begin the better habit of saving money instead of relying on credit.

Absolutely - you could also check out the mortgage free wannabe board and get cracking on overpaying too!

Barbeduk

I'd definitely do it, as long as you do convert it all to repayment. It'll be a massive weight off your mind. Got to ditch the credit though.

elephant003

Thank you for your responses.
Its a concern that if interest rates go up, our £500 surplus could easily be swallowed up. Any further comments welcomed.

mildredalien

I'm not a mortgage expert, but would you really expect interest to add an extra £500 to your outgoings?

Personally (and following all the advice I've learned from MSE) I'd much rather use any savings to pay off high interest credit cards loans etc. rather than a much lower interest mortgage.

At least if you get rid of all your credit you can start fresh with a credit-free lifestyle (mortgage excluded). That doesn't mean you won't have to be careful with your money and keep a tight rein on your spending. If you were just thinking about starting a DMP it sounds like you are at the beginning of your debt free journey so it will be extra important to pin down how you built up that £39k of debt and make sure that any extra you have each month doesn't get lost in day to day spending. If you haven't already, it is probably worth posting a statement of affairs (SOA - link in the sticky) and getting some advice about your income/outgoings.