£95500 mortgage with £2000 overdraft - Advice

h34v3ns3nt

Hello all,

Bit of a dilemma, I have a mortgage in my name on a property of £95500 (90% with a £10k deposit paid 1 year 9 months ago on a property of £107500) over 40 years, I am currently 27. My property is roughly worth £130000 now. I dont have any store cards/credit cards at all, I just have a debit card and and overdraft of currently £2500 which at the end of every month seem to end up being about £2000 into. (I know I overspend!)

The house was run down when I bought it, it was on the market for £116,500 but I snagged it for £107,500. Similar properties on the same street are currently worth around £130k ish. Halifax tell me I have £20k - £30k in equity available to me.

My question is this, my mortgage fixed rate period comes to an end in May 2008 and I was looking into remortgaging to a 25 year mortgage which should save a huge amount of interest. Looking at current interest rates this would bring my monthly payments from £427 to around £550 ish. I am thinking about bolting £10k back onto the mortgage to clear my overdraft and to spend doing the house up (new carpets, laminates, decorating, furniture etc) and possibly dumping £3000 into an ISA (maybe?)

With the £10k it works out to roughly £615/month which I can still afford without stretching myself.

Is this a good idea to clear my overdraft as that is what is mainly bugging me at the moment.

Thankyou
Jamie

My SOA as follows

Monthly Incomings:

My salary - £1,366.41


Monthly Outgoings:


House/Bills
Mortgage (Halifax @ 4.39% fixed till August 2008 then SVR) - £427.86
Council Tax - (currently on 50% discount @ £30.90/month then £80.00/month <--- taken this into consideration in final total)
Home Insurance (Halifax) - £36.43
Gas (NPower) - £20.00
Electric (NPower) - £21.00
Water (United Utilities) - £16.47 on meter
Housing Association Service Charge - £22.73


Entertainment
TV License - £11.61
Landline & Broadband (Plusnet) - £31.42
Mobile Phone (o2) - £15.00
Gym Membership (Total Fitness, 3x week + 1x weekend) - £39.50
Haircut - £9.50 monthly
Giganews - £12.76


Travel
Car Insurance - £500 renewal due May 2008 (£42/month)
Petrol - £80.00
Car Tax - £105.00 annually (£8.75/month)



Total: £875.03



Debts
Overdraft - £2,076.00 (limit £2,500) 6.9% EAR
Mortgage - £95425.84 (Halifax @ 4.39% fixed till August 2008 then SVR)

You may wonder at some of the figures, well I have not actually moved in to my house yet! Its more of a doss house ATM! Just doing it up bit by bit etc.
Now that I look at it, I am spending way to much on nights out, clothes etc!

Update - Having looked at my finances in general It would seem I dont have a spending budget in place. I have decided to use my EGG credit card for all my purchases instead of my Current Account Debit Card. I dont use my credit card and am actually £2.75 in credit on the card. I got it a while ago to sort out my finances back then but never used it. My plan is now to load the card with £400/month from my current account and use that as a budget. All my spending from now on will be switched from my debit card to my credit card. It also has other benefits like 1% cashback and 4% interest on a positive balance as well as catagorising all my spending. This should leave me with roughly £150/month in my current account to clear my overdraft and if I can spend less than my budget on the card per month, should leave me with even more.

I will create and update a signature to let you all know how I get on.
Jamie

Kevicho

I think any borrowing against the mortgage is usually a bad idea as due to the time frame involved 1000s gets added in interest (thus long term it works out a lot worse).

Ill give the standard advice we give anyone on these boards and that is to post an SOA (see stick post on board called first time posters), we may be able to save you money every month so you dont need to resort to this.

Other than that it sounds like the best idea paying off the mortgage as soon as possible

Sea78

Hi there :hello:

Welcome to the board. I think that if possible it might be better to actually clear the overdraft yourself rather than add it on to the mortgage (then it won't be tying you into the higher payment for 25 yrs..)

Would it be possible to post your Statement of Affairs? (SOA) There is a sticky at the top of the board about this (for 'first time posters') and we could see if there are any major areas you could cut back on to clear the overdraft asap. as you've mentioned this is really worrying you.

Sea xxxxx

h34v3ns3nt

Ok so lets forget adding the £10k to the mortgage (guess I should start chipping away at my overdraft!), do you still think I should remortgage for 25 years?

I suppose I am answering myself really!

Thanks

Kevicho

If you can keep up with the monthly repayments then definately, not knowing your monthly statement I couldnt say how long it would take but clearing that overdraft would be handy before you switch mortgages.

The one thing I would say is look at it as a home, rather than investment, when you retire you will not have to worry about repaying a mortgae every month which i would imagine is a great feeling.

If you can manage putting some money into an ISA as well alongside this asap then fantastic, as that interest will grow quite dramatically, although debt repayment is always the first step and priority.

Going back to the overdraft clearing that you will havethe security of knowing that if times get tougher theres one less outgoing a month to worry about (or a buffer zone to work with)

immoral_angeluk

Have you asked this over on the mortgages board for their opinion?

Me_Myself_2

The mortgages board would be a better place for this question, but every pennt you can pay extra on your mortgage (if you are allowed to overpay) is a very good idea.

Sea78

I would definitely agree to changing it if you can afford it as it will save you so much interest.

Sea xx

Sea78

Do come back with your SOA though and let's see if we can't help you clear off that overdraft!

Sea xx

h34v3ns3nt

I am going to work out my SOA tonight, have done it before in the past, prior to getting my mortgage, but obviously things are different now.

Thanks for your replies
Will have my results tomorrow.

Jamie

h34v3ns3nt

Ok my SOA is attached...