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Which debt first to tackle?
Some advice would be much appreciated!!
Me and partner are in a 1 bedroom flat with 1 child and have some debts which needs shifting quickly but dont know what direction to go in!
Mortgage 76898
Welcome finance 16000 at 8% paying 128
Rbs with Wescott 16000 at 0% paying 20
The property is worth 85000 ish. We need to get out of here for little ones sake so 2 year is our aim. We just don't know which debt to concentrate on more. I hear welcome finance don't usally do settlement discounts but Wescott would so should I scrape together another £300 extra to WF or pay a extra £100 which would cut the term from 20 years to 6 years and then pay off in 3 years ( with a ppi being taken off) and save £200 in a account and go to Wescott and settle them and then tackle WF when we sell??
Me and partner are in a 1 bedroom flat with 1 child and have some debts which needs shifting quickly but dont know what direction to go in!
Mortgage 76898
Welcome finance 16000 at 8% paying 128
Rbs with Wescott 16000 at 0% paying 20
The property is worth 85000 ish. We need to get out of here for little ones sake so 2 year is our aim. We just don't know which debt to concentrate on more. I hear welcome finance don't usally do settlement discounts but Wescott would so should I scrape together another £300 extra to WF or pay a extra £100 which would cut the term from 20 years to 6 years and then pay off in 3 years ( with a ppi being taken off) and save £200 in a account and go to Wescott and settle them and then tackle WF when we sell??
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Comments
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I think you are taking too many things for granted.
Do you know for sure that they will offer you a discount.
You seem to be in negative equity so moving may not be possible without getting rid of the two loans before mortgage.
Pop over to the debt free board for more advice.
The only thing I can think of is to make the mortgage interest only and use the surplus to reduce the loans off quicker (assuming they will allow this).0 -
You are in a pickle aren't you.
No problem is insurmountable and the first priority is to tackle the loan with the highest APR and at 8% welcome finance have you over a barrel taking over £100 a month in interest payments alone it'll take nearly 50years to clear at current rate, even upping the payment to £150a month will clear this in half that time.
Re. the mortgage I'm assuming (as there is some equity there) that the IO element is ~£3-400 a month? Why not rent this property out and rent a two bedder yourself for not much more, takes out a lot of the hassle without the pain of realising a potential loss.0 -
You are in a pickle aren't you.
No problem is insurmountable and the first priority is to tackle the loan with the highest APR and at 8% welcome finance have you over a barrel taking over £100 a month in interest payments alone it'll take nearly 50years to clear at current rate, even upping the payment to £150a month will clear this in half that time.
Re. the mortgage I'm assuming (as there is some equity there) that the IO element is ~£3-400 a month? Why not rent this property out and rent a two bedder yourself for not much more, takes out a lot of the hassle without the pain of realising a potential loss.
One bed flat rent won't cover 2 bed rent and the debt will still be there assuming you get permission from the mortgage company in the first place.0 -
You may be better off selling the flat (provided can get around your 85k), using the profit to pay a big chunk off the 8% loan and rent a 2 bedder.This is a system account and does not represent a real person. To contact the Forum Team email forumteam@moneysavingexpert.com0
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jonesMUFCforever wrote: »Sorry can't see how last paragraph will help at all.
One bed flat rent won't cover 2 bed rent and the debt will still be there assuming you get permission from the mortgage company in the first place.
The rent of a one bed room flat won't cover that of a two bedroom home. Thank you for that intervention of genious. The difference will be no more (and probably a lot less) than raising a mortgage on a bigger home.
In the ideal world they should perhaps sell their flat but house prices are on the decline and flats more so. So expectations of 85k could fall short.0 -
What world are you living in jamiefly?
Do you think you can just rent out a MORTGAGED property without the lender's permission?
Perhaps you can put some figures on here explaining exactly how your idea would work?0 -
jonesMUFCforever wrote: »What world are you living in jamiefly?
Do you think you can just rent out a MORTGAGED property without the lender's permission?
Perhaps you can put some figures on here explaining exactly how your idea would work?
I'm living in the real world thank you very much.
I have done exactly the same as I own a 2.5bedroom house with a mortgage and rented it out with the permission of our mortgage provider paying an additional 1% and if I recall correctly a £105 administration fee.
My numbers:
Mortgage £120k IO (I have a separate repayment vehicle in place) before £500 a month repayment AFTER £600 per month.
I am renting a 4 bedroom house more suited to my family's needs (bigger+good school) for £895.
You are a prolific poster and clearly your world is virtual. Get off your high horse and stop trying to be 'right' all the time.
Edit: house we are currently living in is valued at £225,000 and if we were to buy this one now with an additional £100k of leverage against a depreciating asset then that would push our payments over £1k a month. Kindly explain the 'obvious' floor because I can't see one and am living this scenario???0 -
Did you have other lending like OP?
If not then it makes no sense at all especially if the other lending is secured as well.
What is the point of posting on here if not to try and help by giving useful advice (whether this be good or bad news to posters). I tell it as it is - perhaps you should try it.0 -
Stop bickering, the suggestion may be impractical but it is meant with good intent and May be useful to others.0
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I would suggest selling up and using the released cash to settle as much of your debt as possible. RBS are very generous with 0%, so take advantage by paying them last. 8% is cheap, but the payments are merely servicing the interest with a tiny reduction in the amount owed - overpay that one as fast as possible. IMHO0
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