Advice needed please?

nicks

Hi - I have a 20k (£198 pm) mortgage at the moment on a house valued at 160k. I am looking to increase this to 28k, which would give me an extra 8k to clear off our car loan (£197 pm). The car loan is for another 48 months & our mortgage is 15 years left to run.

The mortgage is in MY name only (once bitten....) & the max I can borrow is 28k (£214 pm), but we (me 'n' hubby) both pay it.

Would this benefit us by clearing the car loan & adding it to our mortgage?

Thanks

Nicks

homer_j_3

It depends...

What would you do with the money that you were paying to your car loan?

Securing a debt against your property is not usually the best idea as it increases the risk or repossession should you fail to make repayments.

Putting a loan that is 4 years into one that becomes 15yrs will mean you are paying an awful lot more back.

However, if you were to use that £197 to your mortgage, you may save an awful lot of interest as you will be making massive overpayments on your larger debt and thus saving interest on this.

If you intend to use the additional monthly payment to your mortgage, I would call your lender and firstly ask them if this kind of overpayment is feasible and then secondly if the answer is yes, what term your mortgage would reduce to if you made this overpayment.

If you can only make say 10% over payments then ask them what that would reduce your term by also. This should give you an idea of whether its a good idea or not.

If you are just doing it to free some money up per month and you are feeling the pinch, add it but add it with the knowledge of the risks. You have a good low LTV and it would be daft for you to be struggling if you have the equity. Just don't fall into the trap of freeing the income up and then taking further debt out with this income.

nicks

Thanks - Good advice, will certainly way up the pros & cons you have mentioned. Perhaps it's not as good an idea as I thought....

Nicks

homer_j_3

Just to add

You may also want to consider what interest rate your mortgage is V what interest rate your loan is.