To consolidate or not??

welshgirl78

Hello all, some good stuff here - am usually lurking on DFW!

Would appreciate any advice on whether to consolidate loans into a mortgage, my partner and I are First Time Buyers with good credit ratings and decent incomes

We are looking to buy a house for £120,000 - we have about £8000 deposit/fees but around £22,000 worth of debt between us. We typically pay just over minimum or a little more but are not very good savers. The debts have built up over time but now we live within our salaries.

Over a 30 year period the mortgage broker has "suggested"

5% deposit (£6000, the rest on fees etc)
Rate 5.99% for 2 years fixed rate
Repayments £689 per month
... and we will of course be repaying debts too at £600 ish per month

OR

No deposit, consolidate debts into £134,000 mortgage
Rate 7.09% for 3.5 years fixed rate
Repayments £900 per month
... but with the plan to overpay by £400 per month


I know this is very detailed but if anyone has any ideas we would be VERY VERY grateful. Instinctively the consolidation option seems better to me - we would make the overpayments as would just "accept" it as the mortgage and therefore get rid of extra outgoings with the very real option to keep on going and pay off early.

Thank you to anyone who has read this far!! I've read Martin's guide but can't really find advice in this specific situation... I have a feeling that some people may say go snowballing or tarting but not sure we have the organisational capacity between work and all else!!

Thank you, thank you, thank you for any comments :A

Qual123

does the mortgage allow you to make over payments? if it does then it is the slightly better deal, but there is not much in it.

it also depends how long it would take you to clear the 22k debt if you dont consolidate. if the current £600 is just paying the interest and a tiny bit of capital then it will take forever to pay off.

its really down to personal preference as there are no great savings to be had. if it were me id consolidate.

herbiesjp

What you also need to do is understand the implications of what you are doing i.e. turning unsecured debt into secured debt against your house. The overpaymenst will help reduce the debt, but potentially you could end up paying more in interest as you will be paying it back over a longer period of time.

What you also need to do it cut up your credit cards and not take out any new loans, so that way you cannot start building up the debts all over again - I see this all too often. People have comsolidated, then build up the same lebel of debts that they had in the first place, so it defeats the whole object of what you wanted to do.

You say you do not have the organisational capacity, but do you have the self discipline not to build up the debts again?

sarkin

I would take the 100% deal consolidate debts and cross your fingers. If it does go belly up on you you will have not lost your savings. £22,000 of debt ias a lot for a young couple, you must have the blingiest gaff on the street. I've got £800 on my card and it streess me out., most of which is business exspence. Good luck which ever way you go but as others have said cut the cards up man otherwise you will just get further into debt.

welshgirl78

Thank you for all the advice, we are still thinking but will prob consolidate. £22,000 does sound way too much but none of it is from the last few years sohopefully this will sort it - I haven't spent on my card for at least a year so is going well on that front!!