Yet another question about adding secured loan onto mortgage

Fradley_2

Hi Guys/Ladies

1st poster after much browsing and I need your help/comments/advices

Went into my bank this morning was offered to add my secured loan onto my mortgage and was given the talk about how much cheaper it was going to be for me and a reduction on my monthly expenses.

Thanks to the website I am much wiser now to understand that the bank would not have offered such a bargain if they weren’t going to make much more in the long run. Anyway my situation;

Mortgage left to pay = £56,299 @ 6.49%, 20 years remaining, monthly payment R&I = £420 - I have exactly two years left on a 5 year tracker.

Secured loan to pay = 8,480 @ 7.2%, exactly 5 years left, repayment = £163 p/m. This is also a tracker - so goes up on down based on BOE

So my total monthly expense for mortgage & Loan = £583 - this will raise or fall depending on BOE interest rate

I have carried out a quick calculation;

Total mortgage will be £64,779 over 20 years - £482 p/m R&I @6.49 for 2 years (when my 5 year tracker ends) - This means a relative savings of £101 per month for the next 2 years (£2,424)

Please note that I can overpay my mortgage up to max 10% at the end of each year.

Am missing anything here? Should I go for this? Also there is an early payment penalty on my loan of two months payment (£163 X 2) which will also be added on the loan.

Please tell me what is the best option not only in the short run but also in the long run.

MortgageMamma

my feeling on this is you should keep the secured loan seperate

the rate on the secured loan is good, you only have five years left and if you can afford the monthly payments then it should be ok,

If you add it to the mortgage you will be paying a lower amount of interest but over a MUCH longer term and will therefore pay more interest in the long run, and you would also have early repayment charges on the loan to pay

If you are going to overpay your mortgage then this MAY just be viable but you would have to be quite disciplined to do this.

Fradley_2

Thanks MortgageMama

Just as much as I thought!

I can easily afford to keep both payments separate for the foreseeable future. I have never overpaid my mortgage in the past but assuming I was disciplined enough to make the overpayment, do you think is worth doing?

At the end of my tracker in 2 years time - I intend to take up a bigger mortgage (max £150K) to buy a bigger property for my expanding family. I will then have a £50K (estimated equity of £30K + £20k savings) deposit towards the new mortgage

This is how I work out my options - please give me your thoughts on this

Option one - Adding loan to mortgage

· At the end of the 5 year tracker in 2010, mortgage balance should be approximately £64,779
· Less £2,424 (£101 p/m) savings for combining mortgage with loan = new mortgage balance will be £62,355.
· So will need to borrow £37,645 on top (£100k) to buy a 150K property

Option two - holding loan and mortgage separately

· At the end of the 5 year tracker in 2010, mortgage balance should be approximately £53,539
· Whilst loan balance is approximately £5,888 – 3 years left to pay the balance
· So will need to borrow £46,461 on top (£100k) to buy a 150K property


At the end of the 5 year tracker, I will have 18 years remaining. Now for example a £100k repayment mortgage at 6% for 18 years will mean a £758 p/m

Unless I am missing something here, option one seems a lot cheaper than option two

• Option one means that I need to borrow an extra £37,645 @ £285 extra payment on top of my £62,355 outstanding balance @ £472 pm – total repayment is £472 + £285 = £757
• Option two means that I need to borrow an extra £46,461 @ £352 extra payment on top of my £53,539 outstanding balance @ £405 pm – total repayment is £405 + £352 = £757

· Also I still have to fork out at extra £163 per month for the next three years on the secured loan

Summary

Although option one will cost me the same as option two for the duration of the 18 year mortgage I don’t have to pay the £5,888 outstanding loan balance if I was to stick with option two. At the end of the 2 years I would have made an interest of more than £132 if I was to stick the £101 intio sa 5.5% ISA.

Any thoughts

Thanks

Fradley_2

Just bumping this to my fellow MSE esp to the other fourtysomething who already viewed this thread.

Get ya caculators out, open your microsoft excel documents and put these figures in

LOL HAHA:rotfl: Thanks