personal loan consolidate in mortgage

robpwylie

Hi all

Having seen something on Martin's programme the other week about consolidating loans into mortgages, i was wondering if someone could give me some advice:

I have a personal loan with First direct with £8202 outstanding balance, paying £227.85 each month. Interest rate is 3.6%.
I also have a first direct flexible mortgage at a rate of 2.09% with enough spare capital in it that i could transfer the loan into it and pay the £227.85 directly into that.

Speaking to first direct today I would save £365 on interest if I paid the loan off today, but would I save even more on my mortgage payments in the long run by upping the payment from current £700 to £927.85?

Many thanks

[Deleted User]

If you can overpay by the same amount, yes.

robpwylie

Thanks - is it possible to work out how much I would save?

[Deleted User]

Yes - use a loan calculator, and put run the two scenarios, based on terms and rate.

enthusiasticsaver

Difficult one. Generally it is a no no to turn unsecured debt into secured as you are putting your home at risk if for any reason you are unable to pay the mortgage. I would also query whether the fees you would pay would save on interest given the differential is so low between the personal loan and the mortgage. Is the flexible mortgage an offset one? Can you guarantee that you can continue with the same payments and are not going to be tempted to reduce the monthly payment? How secure is your job? These are all things I would consider before deciding whether to increase my mortgage by £8k simply to pay off debt. Is a 0% credit card an option to reduce the loan? That would be my preferred route.