Advice Please

wendy30

My husband and myself were recently gifted our house by my father in law. It is now in mine and OH names. We have a personal loan with a redemtion figure of £22k at the moment with HSBC. It has 6 and a half years to go, with repayments of £271 per month. We took out the loan in 2002, for house renovations, as we didn't own our home (and couldn't go for the mortgage) this was the only option at the time. The bank advised us to go back to them once we had the house in our name and see if we could change to a mortgage as it would be cheaper.

This has now happened and we went to the bank, the advisor said it would be better to stick with the the loan as we only have 6 and a half years left, and have always paid the repayments, and in the long run it would be cheaper than going for a mortgage over 25 years.

What is the least amount of years a mortgage can run, and what would you do with the personal loan? Is it possible to change to a cheaper loan at this moment. Bearing in mind I don't work as I look after our son, and the credit crunch, is it worth looking at anything or sitting tight where we are at the moment?

I hope this makes sense?

Thanks

Trying_to_be_good

I don't know the minimum length of a mortgage, but when I remortgaged I chose 8.5 years. Also, if you get a deal that allows unlimited overpayments, it doesn't matter what the official term is, you can pay it off as quickly as you like.

As for whether it will be cheaper, can you post info on your current interest rate on the loan, your husband's salary and the value of the house (though I don't think the amount of equity will be an issue with such a relatively low loan amount).

I don't know how old you are, or your father-in-law, but should he pass away within seven years of gifting you the house, there may be inheritance tax issues as the value of the house will form part of his estate.

dwsjarcmcd

Effectively you can have any term you want but the effective minimum is 5 years, but even if you took a 10 year term, provided you make sure you can overpay, without charge, so you can pay the loan over as short a period of time as possible.

One final thing, you are swopping unsecured debt for secured debt, meaning your home can be repossessed if things go wrong

wendy30

Hi,

Thanks for that. The house was valued at £150,000 in April 2006. The APR is 8.9%, and our monthly income is approx £900. We have no store cards and only one card for emergencies, as I cut them all up when I went on maternity

Thanks

sammyjammy

Wendy is £900 a month right, do you not get tax credits, child benefit and maternity pay?

taxi73

As far as I'm aware most motgages wouldn't allow a mortgage of only £22k...then theres all the fees on top.I would personally leave it as it is as an unsecured loan.

dwsjarcmcd

taxi73 wrote: »

As far as I'm aware most motgages wouldn't allow a mortgage of only £22k...then theres all the fees on top.I would personally leave it as it is as an unsecured loan.

Not the case, a SVR mortgage (worst case scenario) would not have a minimum, no fees, and allow overpayments. It would also be around 1.5% cheaper

Gorgeous_George

Your redemption figure is the total of your repayments for the full term.

They should be able to offer a better number as a redemption figure (excluding future interest).

There is no point in redeeming at £22K.

Did you borrow £24K over 12 years at 8.9%? If so, the redemption figure should be approximately £16,270.

GG