What to pay off first, or pay off all of them?

longwalks1

Im looking to make some additional borrowing on my mortgage, for a small extension and home improvements etc and been offered a rate of 1.58% fixed for 5 years. (looking to borrow £35k over 13 years)



I have 3 outstanding debts currently, they are:


£6,000 - Credit card, 0% interest until Jan 2021 (currently pay £180 by DD pcm but this is overpayments)

£1,000 - Creation finance, new sofas from DFS (pay £55 pcm)
£1,800 - Barclays finance, new combi boiler (pay £60 pcm)


What should i pay off first, or in what order so I'm more likely to get approval for the additonal borrowing please?

EssexHebridean

Firstly, calculate how much you will actually repay on the additional borrowing - generally speaking debt added to you mortgage is likely to cost you more than you think. Allow in particular that by the time your 5 years fixed rate is up it may well be that interest rates are a lot higher than currently so remember to factor that in.

Secondly on the three existing debts - the MSE question of which to pay off first will always be answered with the reply "the one with the highest interest rate" but you've not give us rates, here.

If I were in your position now, I'd not be looking at this from the perspective of "how can I make it easier to borrow more" but instead "How can I clear the debt I have currently, giving me more disposable income to enable doing the work I want to get done to my home" - two different mindsets.

I'd also be looking without question to set up an emergency fund to save me from needing to go into dent in the future when something like a new boiler is required. have a think about where you stand in that circumstance in the future - are you, for example, saving money aside the need to replace a car in the future, assuming you drive? Have you money set aside to clear the balance on the 0% card when that becomes due? Allowing that you already have a mortgage (unspecified amount) and an additional 9k of debt, taking a further 35k of debt on top might not be the soundest of plans.

(And before you think "oh what does she know!" I'm speaking from the perspective of someone who actually overpaid the mortgage to get that gone, prior to getting a much needed new kitchen and bathroom that we have been "managing with" for our previous 13 years in the property! That work, when done, was also saved up for and paid up in cash.)

Willing2Learn

EssexHebridean wrote: »

… I'd also be looking without question to set up an emergency fund to save me from needing to go into dent in the future when something like a new boiler is required...

Thought I would quote this sentence so that I could stress it's importance. Basically, an Emergency Fund is an essential component of all successful monthly budgets.