Pay off mortgage or credit cards first?

jennywren1_2

jamesd wrote: »

kaz2904, two things that you might give more weight to:

1. The mortgage is a secured debt, the credit cards aren't. Paying down secured debts before unsecured, if the interest rates are comparable, is the best move because it decreases the chance of losing your home.
2. A mortgage is debt. You pay off whichever lowers your total debt fastest and that'll be the mortgage in jennywren1's case. When it comes to remortgage time the mortgage can just be taken out for a bit more to repay the credit cards if they are at a higher rate than the mortgage (remember that the mortgage was reduced in preference to the cards initially in this scenario, reducing the total amount of debt).

jennywren1, 4.5 years from now the current credit crunch is likely to be sorted out. And 4.5 years of pay increases even just in line with inflation will make it easier to pay more off debt. Even at just 3% inflation and pay increases you'd end up with 12.5% more income to add to repaying debt. Or alternatively, the debts fall in value by the corresponding amount, 20k of credit card debt being reduced to just 16k in today's money courtesy of inflation.

That's a really helpful perspective, thanks

Trying_to_be_good

jamesd wrote: »

kaz2904, two things that you might give more weight to:

1. The mortgage is a secured debt, the credit cards aren't. Paying down secured debts before unsecured, if the interest rates are comparable, is the best move because it decreases the chance of losing your home.
2. A mortgage is debt. You pay off whichever lowers your total debt fastest and that'll be the mortgage in jennywren1's case. When it comes to remortgage time the mortgage can just be taken out for a bit more to repay the credit cards if they are at a higher rate than the mortgage (remember that the mortgage was reduced in preference to the cards initially in this scenario, reducing the total amount of debt).

jennywren1, 4.5 years from now the current credit crunch is likely to be sorted out. And 4.5 years of pay increases even just in line with inflation will make it easier to pay more off debt. Even at just 3% inflation and pay increases you'd end up with 12.5% more income to add to repaying debt. Or alternatively, the debts fall in value by the corresponding amount, 20k of credit card debt being reduced to just 16k in today's money courtesy of inflation.

Jamesd and Kaz2094

I like both your logical approaches to this, and think it's a choice which to pay - psychologically I think I'd prefer to be free of the credit card debt first and then be able to concentrate on the mortgage, but that's just me.

A slight word of caution - I work in the public sector and ourt pay rises are being pegged to 2.5%, but Retail Price Inflation is over 4% and the effective rate of inflation for me is somewhere approaching 7% (petrol and other fuel prices, council tax etc) so the amount of money I'm bringing in is FALLING against my outgoings, leaving me with less money to throw at debt (my mortgage).

The strict budgeting (with some treats allowed) has been the way forward to me, still allowing me to overpay on my mortgage.