What would YOU do??

rothers798

Here we go......

I currently own a house worth about £175K, I have an 88.5K mortgage which is currently fixed at 4.24% until 1st Sept this year.

I have a loan of 12k paid at £235 over 60 months due to be paid off in July 2011, apr 6.1%

I have a loan of 8.5k paid at £168 over 60 months due to be paid off in April 2009, apr 6.5%

I owe my dad £3250 which I am paying at £175 per month, due to be paid off about Nov 2008, interest free.

I can currently afford all the above payments and afford to live (without much fun money). My mortgage is obviously going to go up but do I put my debts onto it? If so I want to pay what I put on, off, as soon as poss, if you know what I mean! I don't want to end up with a bigger mortgage in the long run.

Any advice would be gratefully appreciated!

Lipstick_2

You don't mention your income but ask your existing lender for a new deal for existing borrowers.

Leave the loans alone.

Lipstick

rothers798

Thanks lipstick, my household income is about £40k. My instinct was to leave the loans alone too.

Cheers

homer_j_3

what term is your mortgage over and how much do you pay to the mortgage company?

rothers798

I have about 16 years left on my mortgage, it is an interest only mortgage with an endowment with PMAS.

Thanks

rothers798

Sorry, forgot to add, I currently pay £313 for my interest

homer_j_3

All my systems are at work but my thoughts are as follows:

It is normally best advice to keep unsecured debt unsecured because they cannot take your home away if you fail to make repayment.

Your mortgage debt is not reducing and from 1/9/07 you are going to be coming into todays rates which to get an interest rate like yours will cost a fee which will not be worth your while paying but will have to because you need to keep your monthly repayments down (you don't have much fun money you said).

It will be 1 year 5 months until you are £175p/m better off per month

It will be 1 year 10 months until you are another £168 better off per month (£343 subtotal)

It will be 4 years 1 month until you are another £235 better off per month (£578 overall)

You are currently paying £313 per month so this gives you a total monthly spend on your debts of £891.

Providing no rate changes happen between now and sept you could probably get a fixed rate around 5.8% without it hurting the wallet too much in setup fees this will increase your mortgage payment to somewhere in the region of £427 per month or another £114 per month (£1005 per month overall).

What would that do to your monthly expenditure?

Now looking at consolidating this all and putting it all against your home, for roughly £100 less a month you could do a 11 yr mortgage at 5.8% if my online mortgage calc has worked correctly. You have just saved yourself £427x60 (£25620) in interest payments to your mortgage.

Clearly there are risks to debt consolidation and you have to be strict not to get into the spiral of debt but if you do a 5yr fixed possibly you will have 6 years left to run on your mortgage and your overall debt will have decreased significantly rather than just by the unsecured amount that you are currently doing.

I would go and see a mortgage adviser who can full consider your circumstances and go through things with you more formally.

Hope this helps

rothers798

Now looking at consolidating this all and putting it all against your home, for roughly £100 less a month you could do a 11 yr mortgage at 5.8% if my online mortgage calc has worked correctly. You have just saved yourself £427x60 (£25620) in interest payments to your mortgage.



Thanks for your reply, it is greatly appreciated.

When you mention an 11 yr mortgage how would that work with my endowment which will mature in 16yrs? How much debt will I still have after 11yrs? Is that just a mortgage for my loans or the whole amount?

Thanks

homer_j_3

you would have no debt after 11 years so your endowment money would be all yours.

rothers798

Sorry if I am being a bit thick here, am I correct in thinking that I would go onto a repayment mortgage with payments of around £800 per month for 11yrs which would clear all debts?

homer_j_3

No your not being thick - the calculater I have used is rubbish! I just googled one. Looking at a more reliable one it would be more towards your current term to save 100 per month or about 13 yrs for paying the same.

The principal is still the same though - you are reducing all of your debt and therefore paying less overall.

How is your endowment doing? Is it on track to meet your 88.5k