Some advice needed please

Jacko909090_2

Hi everyone

I have been lurking on here for a few months now and have noticed how helpful you all are and wondered if someone could give me some advice please.

We have an unsecured loan that we are currently repaying at £362 per month with a balance of around 9k and an interest rate of 5.6%. There are just under 2 years left to pay on the term and an early redemption penalty of one months payment.

We have been overpaying our mortgage and currently have almost enough in the overpayment fund to pay off the loan. The interest rate on the mortgage is at 1.2% below base rate and is a variable rate.

Our dilemma is - should we pay off the loan and then use the additional money to make extra overpayments on the mortgage or continue with the loan.

Any help gratefully received.:beer:

Tracey

chica_fi

You've got to go with what's right for you. But if using your overpayment fund means you're paying off the debt with the higher interest rate, that's probably a good thing. Especially if you then use the extra amount a month from your loan repayment to go right back to paying off the mortgage.

The only thing is that it does mean the unsecured debt is now secured. And remember the the BoE base rate may well go up again - you say your mortgage is flexible, and although 1.2% below br is very good, you need to factor in rate rises.

Not very helpful, am i? Basically, yes it's a good idea and no, it's not a good idea

GirlRacer_2

I'd use the money to pay off the loan, then use the extra money from the loan repayment each month to overpay on the mortgage.

hypno06

GirlRacer wrote: »

I'd use the money to pay off the loan, then use the extra money from the loan repayment each month to overpay on the mortgage.

I'd do exactly the same.

Annie_Fanny

Jacko909090 wrote: »

Hi everyone

I have been lurking on here for a few months now and have noticed how helpful you all are and wondered if someone could give me some advice please.

We have an unsecured loan that we are currently repaying at £362 per month with a balance of around 9k and an interest rate of 5.6%. There are just under 2 years left to pay on the term and an early redemption penalty of one months payment.

We have been overpaying our mortgage and currently have almost enough in the overpayment fund to pay off the loan. The interest rate on the mortgage is at 1.2% below base rate and is a variable rate.

Our dilemma is - should we pay off the loan and then use the additional money to make extra overpayments on the mortgage or continue with the loan.

Any help gratefully received.:beer:

Tracey

We have been overpaying our mortgage and currently have almost enough in the overpayment fund to pay off the loan.

Just to clarify a few things:

So you haven't technically paid anything off your mortgage. You are putting the money into a savings account - is that right?

How is your mortgage calculated? Daily?

Have you got any other debts?

Annie

Jacko909090_2

Goodness - you are all so helpful and really quick at replying - thanks ever so much.

Annie - the overpayment fund sits alongside the mortgage and reduces the debt but is still available for us to use if we want to (hope that makes sense). The money doesn't technically disappear unless we specifically ask it to be removed from the outstanding balance - so in effect we have the best of both worlds in that the money is accessible in emergencies but is still reducing the interest payable if we don't withdraw it.

The mortgage interest is calculated daily and we have no other debts.

chico/hypno/GR and albert - we were thinking this was the way to go but wanted a second (third or fourth opinion) - we thought we may have missed something glaringly obvious and didn't want to make a big booboo!

T

Annie_Fanny

Jacko909090 wrote: »

Goodness - you are all so helpful and really quick at replying - thanks ever so much.

Annie - the overpayment fund sits alongside the mortgage and reduces the debt but is still available for us to use if we want to (hope that makes sense). The money doesn't technically disappear unless we specifically ask it to be removed from the outstanding balance - so in effect we have the best of both worlds in that the money is accessible in emergencies but is still reducing the interest payable if we don't withdraw it.

The mortgage interest is calculated daily and we have no other debts.

chico/hypno/GR and albert - we were thinking this was the way to go but wanted a second (third or fourth opinion) - we thought we may have missed something glaringly obvious and didn't want to make a big booboo!

T

Is it an offset mortgage?

How would you feel if you paid off the unsecured loan?

I would personally pay of the unsecured loan and wave goodbye to that ball and chain around my ankle. A lot can happen in two years and it may not be convenient for you to be paying that amount at some point. I would pay it off and promise myself that I would continue to pay that amount into mortgage account for the forseeable future.



Good luck!

Jacko909090_2

I'm not sure if it is officially an offset mortgage - we are with the Co-operative Bank and it is a standard mortgage but they allow overpayments, underpayments, payment holidays etc. It's not the same as a One Account mortgage (gosh I sound really financially unaware - I'm not honest, just not good with product names and stuff!)

Our gut feeling was that getting rid of the loan would be a real weight off our minds and the extra money would be better used on reducing the mortgage term rather than paying out x amount each monthy, plus as you rightly point out a lot can change in the next 2 years and to reduce our overall committed outgoings can only be a good thing.

Thanks All for your advice - you are fantastic! Hopefully at some point I will be able to return the favour and help out one of you.
:beer:
T