Consolidating Loan into Mortgage - good idea or no?

CXG1979

Hi all,
I currently have a 2.19% repayment mortgage with Santander, have had this mortgage since buying the property in 2015, remortgaging once with same provider.
I also have a £30k loan I took out over 10 years with Natwest at 16%; worst mistake of my life hands down, as has been the worst managed loan I've ever had the displeasure of doing.  

Our mortgage is split into two parts, as when we remortgaged last time, we took out some more to do home improvements.  Part 1 is £112,312 left to pay over 17 yrs 10mths, and part 2 is £18,695 over 13 years 1 mth.  

The bank loan repayment is £566 per month, and our mortgage payment is £771 per month.

Our property is currently estimated at £670,000, so we have excellent LTV in the current mortgage.

My question is, by adding the loan to the mortgage when we are due to remortgage in November, as I'm barely making a dent in the laon with my payments, as there is little in the way of years between part 2 mortgage and the loan, I wondered if I renewed the mortgage at 4-4.5%, adding the loan, would this be the best way to manage this?

I'm crap when it comes to working out all the finances when it comes to %'s and all that stuff.  I don't mind if it means I pay slightly more overall, as with this cost of living crisis, and my partner was on furlough for a year (he was in sales so had basic, no commission so barely earned anything), we had to seek out bill paying via credit cards and are having to pay those off too.  We are managing now just about, and anticipate being debt free by the end of 2024, but want to try and seek the best way to manage this loan that's crippling me.

Hopefully that's enough info to go on!

Thanks in anticipation.

K_S

@CXG1969 Whether or not it is a good idea to consolidate unsecured debt (your NatWest loan) on to your secured mortgage depends on a few factors such as -

- if you are struggling to meet monthly payments with your current income, consolidating a medium term 16% loan on to a long term mortgage at 5% might help give you the breathing space to sort out your finances and avoid having to take on even more expensive short term debt (such as spending on credit cards) because of cashflow issues.

- if you do consolidate, do keep in mind that if you only stick to minimum mortgage payments, over the lifetime of the mortgage you may end up paying more in interest on the 30k than you would if you just kept the 16% loan. Nothing stops you from using any excess funds to overpay the mortgage (and thus save on interest), most lenders will allow a 10% annual overpayment without any penalty.

Other things to think about to improve cashflow when re-mortgaging from 2.19% to 4-5%. With a fix ending on 2nd November, you can look at both Santander and the wider market with other lenders.

- consider if its possible to stretch your term. Subject to their specific criteria, there are mainstream lenders that will consider going all the way to 80 for the term. This may help moderate the jump in monthly payment when you're moving to a much higher rate. As above, you can always make overpayments to the mortgage to save on interest and pay off the mortgage sooner.

CXG1979 said:

Hi all,
I currently have a 2.19% repayment mortgage with Santander, have had this mortgage since buying the property in 2015, remortgaging once with same provider.
I also have a £30k loan I took out over 10 years with Natwest at 16%; worst mistake of my life hands down, as has been the worst managed loan I've ever had the displeasure of doing.  

Our mortgage is split into two parts, as when we remortgaged last time, we took out some more to do home improvements.  Part 1 is £112,312 left to pay over 17 yrs 10mths, and part 2 is £18,695 over 13 years 1 mth.  

The bank loan repayment is £566 per month, and our mortgage payment is £771 per month.

Our property is currently estimated at £670,000, so we have excellent LTV in the current mortgage.

My question is, by adding the loan to the mortgage when we are due to remortgage in November, as I'm barely making a dent in the laon with my payments, as there is little in the way of years between part 2 mortgage and the loan, I wondered if I renewed the mortgage at 4-4.5%, adding the loan, would this be the best way to manage this?

I'm crap when it comes to working out all the finances when it comes to %'s and all that stuff.  I don't mind if it means I pay slightly more overall, as with this cost of living crisis, and my partner was on furlough for a year (he was in sales so had basic, no commission so barely earned anything), we had to seek out bill paying via credit cards and are having to pay those off too.  We are managing now just about, and anticipate being debt free by the end of 2024, but want to try and seek the best way to manage this loan that's crippling me.

Hopefully that's enough info to go on!

Thanks in anticipation.

CXG1979

K_S said:

@CXG1969 Whether or not it is a good idea to consolidate unsecured debt (your NatWest loan) on to your secured mortgage depends on a few factors such as -

- if you are struggling to meet monthly payments with your current income, consolidating a medium term 16% loan on to a long term mortgage at 5% might help give you the breathing space to sort out your finances and avoid having to take on even more expensive short term debt (such as spending on credit cards) because of cashflow issues.

- if you do consolidate, do keep in mind that if you only stick to minimum mortgage payments, over the lifetime of the mortgage you may end up paying more in interest on the 30k than you would if you just kept the 16% loan. Nothing stops you from using any excess funds to overpay the mortgage (and thus save on interest), most lenders will allow a 10% annual overpayment without any penalty.

Other things to think about to improve cashflow when re-mortgaging from 2.19% to 4-5%. With a fix ending on 2nd November, you can look at both Santander and the wider market with other lenders.

- consider if its possible to stretch your term. Subject to their specific criteria, there are mainstream lenders that will consider going all the way to 80 for the term. This may help moderate the jump in monthly payment when you're moving to a much higher rate. As above, you can always make overpayments to the mortgage to save on interest and pay off the mortgage sooner.

CXG1979 said:

Hi all,
I currently have a 2.19% repayment mortgage with Santander, have had this mortgage since buying the property in 2015, remortgaging once with same provider.
I also have a £30k loan I took out over 10 years with Natwest at 16%; worst mistake of my life hands down, as has been the worst managed loan I've ever had the displeasure of doing.  

Our mortgage is split into two parts, as when we remortgaged last time, we took out some more to do home improvements.  Part 1 is £112,312 left to pay over 17 yrs 10mths, and part 2 is £18,695 over 13 years 1 mth.  

The bank loan repayment is £566 per month, and our mortgage payment is £771 per month.

Our property is currently estimated at £670,000, so we have excellent LTV in the current mortgage.

My question is, by adding the loan to the mortgage when we are due to remortgage in November, as I'm barely making a dent in the laon with my payments, as there is little in the way of years between part 2 mortgage and the loan, I wondered if I renewed the mortgage at 4-4.5%, adding the loan, would this be the best way to manage this?

I'm crap when it comes to working out all the finances when it comes to %'s and all that stuff.  I don't mind if it means I pay slightly more overall, as with this cost of living crisis, and my partner was on furlough for a year (he was in sales so had basic, no commission so barely earned anything), we had to seek out bill paying via credit cards and are having to pay those off too.  We are managing now just about, and anticipate being debt free by the end of 2024, but want to try and seek the best way to manage this loan that's crippling me.

Hopefully that's enough info to go on!

Thanks in anticipation.

Thank you very much - that was pretty much my thinking - give ourselves some breathing room in order to sort out our short term debts, and once this has subsided, this then leaves us with some sufficient funds to overpay on the mortgage and bring that down subsequently.  I will look into extending the term as well when looking at the renewal with Santander and compare against some others to ensure we are getting the best deal.  Even when adding the loan I believe we are still sub 30% LTV so this is the only real good news we have about our situation. Thanks for the reply.