remortgage options with debt

carolanky

Hi

Our current mortgage deal runs out at the end of the year. We are looking for a new deal and it seems that our options are very limited due to the presence of outstanding credit card debts, currently standing at £23k:

The two options are:

Remortgaging with our current supplier (170k, with about 60k on interest only, the rest on repayment):
2 Year fixed
1.8% £995 fee
£699 / month (fee rolled in)
17 years remaining

Moving our mortgage, putting it all on repayment, adding the credit card debt:
£193,000 total
2 year fixed rate at 1.69%
£910 per month
21 Years term

The house is valued at about £395k (although it might be a bit more).

While we would love to get rid of our credit card debt, all of it is on interest free deals currently (4 cards), as long as we keep switching it around and can find a good deal at the time (paying fees each time of course)..

So we're asking for some advice, keep things as they are and reduce the CC bill over time, or roll it into the mortgage which will take us past retirement age and pay interest on it?

Any help would be very much appreciated!

getmore4less

Rough calc
£23k @ 1.69% £388.70
£170k @ (1.8-1.69%) £170

repayment of your £171k over 17y will be £970pm.

to pay off the lot in 17years you arelooking at £1100pm

how much do you have to throw at the CC debt over the £699.

carolanky

Thanks so much for your reply.
We are paying the minimum amount on the cc debt, £320 per month and hope to pay off chunks with my husband's commission (an irregular amount which fluctuates).

BFGibbons

getmore4less wrote: »

Rough calc
£23k @ 1.69% £388.70
£170k @ (1.8-1.69%) £170

repayment of your £171k over 17y will be £970pm.

to pay off the lot in 17years you arelooking at £1100pm

how much do you have to throw at the CC debt over the £699.

Hi, I'm trying to help understand this for carolanky.

She is trying to decide between the two mortgage options:
1. Stick with current provider on same deal (2/3 repayment, 1/3 interest only, 17 years remaining) and try to pay back the CC debt separately, or
2. Take the new deal (all on repayment, CC debt included, but for 21 years)

Option 2 looks to be easier, but could cost a lot more in the long run.

She is currently paying £320 / month for the CC debt, which is just affordable.

I'm not great at this and neither is she, so any help or suggestions would be really helpful.

Thanks

badmemory

Why not the second without the cc debt? The rate is lower anyway, or would it go up if borrowing less? Once you consolidate that debt you are paying interest, whilst at present it is on 0%. Once you have paid off the unconsolidated cc debt then you have that amount extra to throw at your mortgage.

BFGibbons

Hi
The second offer was only if the CC debt is included. Because of the debt this was the only offer available, except for carrying on with the existing lender.

The extra analysis lenders do now brought the CC debt up as a problem, as you would expect, so limiting options.
Thanks

Thrugelmir

Any longer term fixes available for option 2. If rates were to increase over the next 2 years. You might be faced with a sizable jump in outgoings.

BFGibbons

Hi
The 2 year deal is the only one that was offered, I believe.
Thanks

getmore4less

since it was not clear.

getmore4less wrote: »

Rough calc
£23k @ 1.69% £388.70
£170k @ (1.8-1.69%) £170

By adding the £23k to the mortgage @ 1.69% that adds £388.70 interest per year.

the lower rate on the rest saves £170 py
net down £218.70 py while the CC debt is at 0%


repayment of your £171k over 17y will be £970pm.

this is the amount needed to clear ALL the current mortgage with the fee added in 17years

to pay off the lot in 17years you arelooking at £1100pm

this is the amount to clear the ALL the current mortgage and the consolidated debt.

how much do you have to throw at the CC debt over the £699.

They don't say what their current payment is it may be different to the £699

The OP has £699 + £320 + husband's commission

Now if they stay as they are they keep the low £699 payment they have some(little) flexibility on the debt payments.

The fees to switch CC0% deals will costs so how do they compare to the 1.69% rate.

there are also free 0% deals like purchase cards to move the money around.

if they switch they lose the flexibility and have a higher cost initially.

The 21 years looks affordable and gets that £60k onto a repayment plan.

with some commission(£2k-£2.5k py) and control over spending(better budgeting) they can get back to 17 year or better full term and have the lot cleared.


When you factor in the fee on the deal offered by the current lender and the net increase in cost the first 5 years are nearly covered.

carolanky

Thanks so much for all the help everyone!

getmore4less - thank you for clarifying, I find this stuff really difficult to get my head around to be honest but I think I understand.....

just 2 more things....

If the new deal is the more favourable in terms of rate and lack of fee, should we perhaps divide up the debt by putting some, say 15k, on the mortgage and paying the rest off ourselves? (assuming this offer is flexible, need to check with financial adviser)

Also, with commission and my earnings increasing (hopefully) and now having sensible heads on (unlike our !!!!less past selves who got us into this muddle in the first place!) we can perhaps overpay sometimes? I am assuming overpaying is a really good thing to do?

Sorry yet more questions .
Many thanks

getmore4less

There is a trade of

Some extra interest now, or the risk you pay BT fees or higher rates in the future.

The is probably some middle ground depending on the cashflow analysis and the timings rates of the deals.

if you have one running out very soon might be worth sticking it on the mortgage to avoid the BT fees or worse the very high rate.

if you have one that has 18 months to go and can save up that on top of the mortgage then keeping it at 0% saves a bit of interest.

Its a numbers game, but don't forget other demands on you cash where you should be saving, white goods getting old, cars getting old, bit of maintenance on the house....