Overdraft help

bcfclee27

My wife currently has £1000 overdraft and I have a £500 overdraft.

We basically live in our overdrafts but don't go over them.
So when paid I go into credit for about half the month then slip down to my limit.

My wife the same however she's in her overdraft about 75% of the time or more.

We are about to get a big mortgage and just wondered should we look to clear or reduce these overdrafts or just leave them as they are and concentrate on over paying the mortgage ?

Many thanks
Lee

CLAPTON

ODs are repayable on demand

how much do they cost
how much does/will your mortgage option cost

bcfclee27

I think my wife pays £8 a month I charges for the o/d and I pay about £6.
The mortgage is just shy of 1400 a month.

In other words should I bother reducing or paying off the ods or just carry on as they are ?

opinions4u

If you can clear the overdrafts then clear them.

Why pay for debt you don't need?

david39

As said earlier, you need to clear the overdrafts, which can be withdrawn by the banks at any time and without notice.

The fact that you are changing your financial situation by taking out a large mortgage means that your bank will almost certainly be reviewing your accounts and may well reduce the o/d facility as a result of your increased commitments.

grumbler

bcfclee27 wrote: »

We are about to get a big mortgage and just wondered should we look to clear or reduce these overdrafts or just leave them as they are and concentrate on over paying the mortgage ?

It's highly unlikely that the mortgage interest rate is higher that you pay for your overdraft (plus, probably, a fixed fee on the top).

If so, it make no sense to "concentrate on over paying the mortgage". Pay the most expensive debt first - it's a common sense, not a rocket science.

And, as said above, overdrafts, unlike mortgages, are repayable on demand.

gupalsmurthpadacal

Personally I would clear out the overdraft first and request it to be either removed from my account or decreased as at the end of the day an overdraft is just another debt with a different name. If anything I find them more risky as its 'available debt'.

If your bank refuses to decrease it or work with you to pay it off it might be worth opening a basic account (no overdraft) and change your payment details for the moment just to stop you from going into your overdraft each month as it can become a force of habit after a while.

YorkshireBoy

gupalsmurthpadacal wrote: »

If your bank refuses to decrease it or work with you to pay it off it might be worth opening a basic account (no overdraft) and change your payment details for the moment just to stop you from going into your overdraft each month as it can become a force of habit after a while.

That'd be a risky move, as it's likely to prompt a demand for full repayment (perhaps within 30/60 days...perhaps immediately!)...especially since they appear to have been "living" in their overdrafts for some time, but at least were crediting the accounts each month.

gupalsmurthpadacal

YorkshireBoy wrote: »

That'd be a risky move, as it's likely to prompt a demand for full repayment (perhaps within 30/60 days...perhaps immediately!)...especially since they appear to have been "living" in their overdrafts for some time, but at least were crediting the accounts each month.

Oh yeah you would still make monthly payments to it (should have been a bit clearer on that bit!) but just from personal experience I found keeping my wages going into the overdraft each month made it harder to track and keep motivated.

Must admit I found that as long as I made some sort of payment to my overdraft account (round £40 a month) they were happy and no demand for full payment was ever asked so I don't have much experience on that front.

bcfclee27

Thanks all for the advice, think I shall chip away at our overdrafts ASAP then and after that the mortgage !!