Northern Rock Unsecured Loan

john_mac83

Apologies in advance if this topic has been covered elsewhere btu there seems to be a lot of NR posts and im a bit lost having only signed up today.

I took out a 74K mortgage with NR and a 8K unsecured loan in feb 2006 on a 5year fixed rate mortgage at 5.75%. The property is now valued at 90K.

Now although I have nearly 3years left on my fixed rate deal I was wondering if it would be advisable for me to start putting money away into an ISA so that when the fixed rate ends I could pay off the unsecured loan?

Would this make it easier for me to remortgage when the time comes?
I know 3years is a long time and I have no idea what the NR situation will be then but any advice would be great as I dont want to find myself stuck on higher interest rates or having to take my loan elsewhere and paying more

thanks

homer_j_3

If your ISA pays more than 5.75 then pay it in there - if not overpay your mortgage, it is completely flexible.

john_mac83

as the unsecured loan is spread out over the 30yr term of the mortgage (well 28 now), can my overpayments be used to just pay that off or will they also pay a percentage of the mortgage off?
Would i have to speak to someone at NR to arrange this?

homer_j_3

As far as I am aware, it comes off the total balance so this should come off the unsecured bit first automatically.

By all means speak to them and see for certain, if it does not then ask if it can but as its all treated as 1 loan whilst both mortgage and loan are together, it should come off the unsecred bit first as that is the bit added on last.

john_mac83

Thanks very much. i just want to try and get myself in the best position so that i have options should things with NR not get any better.

MarkyMarkD

It's academic which bit it comes off, as long as there are no overpayment penalties on either bit.

Given your LTV compared to your property value, you won't have a problem remortgaging at the end of the incentive term anyway.

john_mac83

So will it not matter that I have an unsecured loan when it comes to switching to another company as long as I havent missed any payments?

MarkyMarkD

Of course it would matter, if you didn't intend to pay it off from the remortgage. But as the total of your mortgage and unsecured loan is under 90% of the value of your property, you would logically redeem both and replace both with your new mortgage.

In which case, your good payment history on both would stand you in good stead.

There is no point keeping the unsecured loan going separately, if that's what you mean, as a penal rate would then apply, and it would also affect affordability on the new mortgage.

john_mac83

Thanks for the advice MarkyMarkD. Totally clueless about all this mortgage stuff lol

I didnt realise when remortgaging it could cover the NR mortgage and unsecured loan but now that you've said it it does make sense.

thanks once again, been a big help

Dan_Collins_2

Make sure it comes off of the unsecured, if you leave NR but cant take all of the unsecured with you it will go up by around 8%.

john_mac83

Thanks as I was thinking that. Got our wedding to in May so once thats done will have 2and a half years to pay off the 8k unsecured loan which shouldnt be a problem, fingers crossed.

Will contact NR on monday just to check that this is possible. Ive read over the agreement with the loan and it does seem as though it wont be a problem.

Thankgod I got a 5yr fixed rate otherwise would have been in a lot of trouble.