Mortgage and Loan advice needed for newbie

jemw

Hi All

Me and my husband are first time buyers looking to purchase a new property. We have £21k of credit card debt between us which we want to either consolidate with the mortgage or take a loan out to pay the debt off.

We have the option of taking a 30 year mortgage at 5.95% (10 yr fixed) but then would need to arrange a loan separately, as the mortgage provider would not offer us a joint package

Alternatively, we have the option of taking a 35 year mortgage at 6.7% (5 yr fixed) and then taking an unsecured loan attached to the mortgage (over how ever many years we want)

The interest rate is lower with the initial company, but we wouldn't be able to get a loan at such a low rate. Although the rate is lower with the second company, everything would be all included...

Can anyone give us any advice?

Kiernan809

To pay £21k over 35 years at 6.7% would likely cost you > £35k in interest alone.

Although the rate may be smaller compare to paying over 10 years at 10% which may cost £10k in interest.

In real terms this may cost an extra £100-150 a month. How desperate are you to pay this much less?

jemw

Kiernan809 wrote: »

To pay £21k over 35 years at 6.7% would likely cost you > £35k in interest alone.

Although the rate may be smaller compare to paying over 10 years at 10% which may cost £10k in interest.

In real terms this may cost an extra £100-150 a month. How desperate are you to pay this much less?

well we could actually afford to pay up to £400 per month to clear the debt in 6-7 years, rather than keep it over the entire mortgage term...?

Griptool

jemw wrote: »

Hi All

We have £21k of credit card debt between us which we want to either consolidate with the mortgage or take a loan out to pay the debt off.:rotfl:

Can anyone give us any advice?

To have run up 21K of debt on credit cards would suggest that you have been living beyond your means. Rolling debt into a mortgage just prolongs the pain and exposes the house to repossession.

A common outcome in circumstances like this is that the consolidated CC debts magically reappear in a year or two leading to a spiral of secured debt resulting in the loss of the house.

Cut back! work the 0% balance transfer offers and any disposable income should be spent paying down the CC debt - it may be difficult for a couple of years but you would be much better off in the long run

Dan_Collins_2

If you can afford it and behave then take the short term loan and ditch the cards, cut them up, leave one take the limit to £1000 (They can be useful to have if you are careful) and take that rate, although before you enter in to a 10 year fix make sure you check the tie ins and that you can pot it to another property, also make sure that you are ready to tie your self in for 10 years. Its a good rate but a long time!

Ps. Thats my opinion not advice!

jemw

Griptool wrote: »

To have run up 21K of debt on credit cards would suggest that you have been living beyond your means. Rolling debt into a mortgage just prolongs the pain and exposes the house to repossession.

A common outcome in circumstances like this is that the consolidated CC debts magically reappear in a year or two leading to a spiral of secured debt resulting in the loss of the house.

Cut back! work the 0% balance transfer offers and any disposable income should be spent paying down the CC debt - it may be difficult for a couple of years but you would be much better off in the long run

The loan would be an unsecured loan and not secured on the house - also, we weren't considering having the loan over the mortgage term, i.e. 35 years, but to pay it off over the next 5-7 years, as we can afford to pay an extra £400 per month.

We obviously have lived beyond our means and the cc debts have crept up for the last 5 years or so. Expensive holidays, continually eating out (5 times per week), part time working hours and 4 years of full time uni certainly saw to that. However, we have managed to save a lot of money over the last two years (maybe the savings should have gone towards the debt, but they didn't, they were used for another personal reason).

Anyways, I digress. Once the CC debts have been paid, those cards would be cut up and not used. We have looked at our budget and found areas that we can seriously cut back on without it being impossible to live comfortably. So, would the lower rate mortgage be better for us, arranging a loan elsewhere, or would the higher rate mortgage be better for us, with the loan rolled into it as an unsecured loan over 5-7 years?

jemw

Dan_Collins wrote: »

If you can afford it and behave then take the short term loan and ditch the cards, cut them up, leave one take the limit to £1000 (They can be useful to have if you are careful) and take that rate, although before you enter in to a 10 year fix make sure you check the tie ins and that you can pot it to another property, also make sure that you are ready to tie your self in for 10 years. Its a good rate but a long time!

Ps. Thats my opinion not advice!

Which option would you choose though?

5.95% mortgage plus loan with separate company (higher APR?)

6.7% mortgage plus unsecured loan for 5-7 years at same interest rate?

tomstickland

You should pay off some more debts before borrowing money for a house. Interesting things might happen in the housing market over the next 18 months.

Dan_Collins_2

jemw wrote: »

Which option would you choose though?

5.95% mortgage plus loan with separate company (higher APR?)

6.7% mortgage plus unsecured loan for 5-7 years at same interest rate?

Whatever is cheapest per month but the one lender will make it a smoother and eaasier process. If something goes wrong with the personal loan and you cant get you are stuffed!

Look at C&G and Alliance and Leicesters mortgage plus products