What would you do?

safeashouses

Can anyone help?

Background:

8k of debts
102k mortgage

mortgage payment each month £650 interest only.

Income 20k (1250month)
Tax credits £400 month
CB £200 month

So really struggling with 4 kids, gas, elec, life insurance, phoone, cars (both essential car users for work) etc.

Mortgage companies generally won't touch us due to poor credit (although improving, and no CCJs etc)

Been to a broker who suggests:

remortgage to repayment. £120k to include all fees
Monthly payment £800
Includes all debts to date.
30 year mortage term, fixed rate 6.5% for 3 years

Positives are:

Would leave us way more money each month
We would actually be reducing the amount owing due to repayment
I have a new job starting in April so our income will increase (buttax credits reduce I assume) leaving us in a better financila position.
At the end of the term we should be able to get to a better lender with our improved credit by then.

Negatives are:

Mortgage will be 6 times my husband's base salary, but as I said I will eb earning and he also has self employed income which hasn'e been accounted for in our budgetting.
Rate is quite high due to our credit history.
Redemption on our current mortgage is 6k which we effectively "lose", hence new high mortage.
All the fees are included but are high

Any opinions?

safeashouses

Bumping this up cos I could really do with some input!

silvercar

What I would do:

Find out when that £6k redemption penalty would end. £6k is a lot of money to throw away.

If that penalty is not going away soon, ask your current lender if you can increase the loan to cover the debts. (do remember that your home is at risk if you don't keep up repayments...)

Depending how confident you are that your income will make these paymetns affordable, I would consider making the new mortgage interest only but resolve to make extra payments each month to cover some capital (check the lender will aloow this penalty free).

Mr_helpful

well i certainly wouldnt add 6K to reduce my debt. I would look at the smallest debt you have and get that paid off releasing a few extra pounds this could be done from hubbys self employed income. Once that debt is paid off use some of the money you were paying to pay off the next smallest debt and so on. I would wait until your credit is good enough to remortgage on a high st bank. Brokers get quite a bit of adverse past Abbey as long as the adverse is a bit stale. Cut up the credit cards once paid off.

EdInvestor

I would look at the smallest debt you have and get that paid off releasing a few extra pounds this could be done from hubbys self employed income. Once that debt is paid off use some of the money you were paying to pay off the next smallest debt and so on.

AFAIK the best way of attacking debt is to pay off the loans starting with the one on the highest interest rate,and moving progressively downwards ( the "snowball" idea). Size of the loan is not relevant.

CLAPTON

how much are you paying on the 8K debts and what are the details.. without these its impossible to see if its a good deal or a bad deal

MortgageMamma

If you have a mortgage of 102k and 8k of debts and a 6k early repayment charge thats 116k not 120k. That four grand could make quite a difference.