Advice - Short term vs Long term

Nidgey_laa

Hi there,

Basically new to this forum, but seeking some advice on my mortgage situation which ill try explain the best i can lol.

My current mortgage is a 5yr fix at 4.49 % with 26.9 yrs left and i owe £77k. 3 yrs left on this term and pay £412 pm.
So was thinking of getting a better deal to reduce my monthly payments for some breathing space short term or consolidate my total debt.

I also have an outstanding loan of £12k which was for home improvements. I pay £276 pm and have 3.5 yrs left on this.

Per month i pay £688 on Mortgage & Loan.
Total outstanding debt = 77+12 = 89k
Unfortunately if i choose to get a better mortgage deal i would have to pay just under 4k early repayment charges
= £93k.

So after speaking various ppl like a mortgage advisor & my bank, they said one possible option to consolidate & reduce your monthly payments which would save me some money short term - monthly.

As follows - 90k mortgage, which is my max i can borrow. The term on that is at 4.05 % on a 2yr fix. Monthly = £448.
By borrowing 90k max, is to wipe out the majority of my loan and reduce monthly payments.

That would mean only leaving 3k of my loan left.
I would then be paying £448 & £90 approx
Total per month = £538
Saving £150 approx pm.

So i would like some advice from ppl in the know, what you think is best in my situation short term or long term as im adding more on to my mortgage from my current deal which does concern me a little. Also using up the little equity i do have would be gone ?

Sorry for the long winded post and hope it made sense, but any advice would be fully appreciated - many thanks :T

Foxy-Stoat_3

Saving £150 a month for 42 months is not enough to risk turning 75% of your unsecured debt into secured debt...what happens at month 43, you only save £114 a month? It may be worth it if you didn't have to pay £4,000 for re-mortgaging and be able to clear all of your debts at the same time.

How much equity do you have now?

Nidgey_laa

Thanks for your input

The way i was seeing it though, is that i wouldnt have big loan hanging over my head. I could clear 3k quicker than 12k and still have breathing space each month.

After 42 months, look for a better mortgage deal ?

Early repayment charges have annoyed me as i wasnt advised about them at the time and all new to this mortgage game. Although i have been told there has been new law was passed last April to make sure things like that dont happen again ?

House value is £98k....

Equity = ?

Foxy-Stoat_3

You do not have enough equity at the moment

Nidgey_laa

So you would think its best to stay as i am on my current deal and continue to pay my Mortgage & Loan off = £688pm.

Instead of consolidating my debt and saving each month ?

Foxy-Stoat_3

Nidgey_laa wrote: »

So you would think its best to stay as i am on my current deal and continue to pay my Mortgage & Loan off = £688pm.

Instead of consolidating my debt and saving each month ?

If your house value is £98,000 and your outstanding mortgage is £77,000 then you have a LTV of 78%, most lenders will only allow you to draw out equity upto 80%, assuming they think its affordable.

Have you actually been offered the £90K mortgage at 4.05% with the draw down of equity for debt consolidation?

You have to weigh up the "thought of having a big loan over your head for the next 3.5 years" against "going from a 78% LTV mortgage to 91% LTV mortgage".

Nidgey_laa

Foxy-Stoat wrote: »

Have you actually been offered the £90K mortgage at 4.05% with the draw down of equity for debt consolidation?QUOTE]


Yes i have been offered this but have not accepted until 100% sure, hence i thought of getting some advice off here first before making any confirmed decision. So i appreciate your feedback so far

Foxy-Stoat_3

Nidgey_laa wrote: »

Yes i have been offered this but have not accepted until 100% sure, hence i thought of getting some advice off here first before making any confirmed decision. So i appreciate your feedback so far

Personally I would wait for 3.5 years and then remortgage on a much better rate debt free, as you maybe less than 75% LTV allowing you to get less than 3% interest rate and saving you the most money in the long run.

Paying £4000 to switch deals to save £150 a month for 42 months and increasing your LTV by 13% doesn't seem like a very good move, unless your struggling to meet all the repayments.

I bid you the very best of luck with it and hope other folks can come on and give you their opinions.

Nidgey_laa

Foxy-Stoat wrote: »

Personally I would wait for 3.5 years and then remortgage on a much better rate debt free, as you maybe less than 75% LTV allowing you to get less than 3% interest rate and saving you the most money in the long run.

Paying £4000 to switch deals to save £150 a month for 42 months and increasing your LTV by 13% doesn't seem like a very good move, unless your struggling to meet all the repayments.

I bid you the very best of luck with it and hope other folks can come on and give you their opinions.

Ye that 4k ECP has totally annoyed me, but its done now. Honestly its a struggle, but at the same time getting by, just !
This why i was thinking of biting the bullet and getting some breathing space on a monthly basis. But as you have mention the LTV has gone up, which does concern me. You have open my eyes even more now so many thanks for your input - fully appreciated. :T

It would be great to here other ppl opinions on this matter as well.....

Nidgey_laa

Does anyone else have any further advice on the above topic

Thrugelmir

Nidgey_laa wrote: »

Early repayment charges have annoyed me as i wasnt advised about them at the time and all new to this mortgage game. Although i have been told there has been new law was passed last April to make sure things like that dont happen again ?

ERC's have been imposed on fixed rate products for many years. All perfectly legitimate as well. Be little point in offering a fixed rate product if all the benefits accrued to the borrower. The ERC is imposed on commercial grounds.

The ERC would have been clearly stated in the product literature, mortgage offer etc. People normally focus on the headline rate quoted and dismiss the detail as it's not relevant at the time.

Net result is you'll just have to work round the issue. As there's no grounds for complaint.