Anyone please - what's my best option

Ninnins

Hi, this is my first posting, so I hope I'm in the right place!
Thanks to this brilliant, brilliant site, :money: in the space of a week I have managed to overhaul my finances. By re-organising my debts (paying off smaller ones and rejigging others) I have begun the journey towards not only being debt-free but also rediscovering how fun it can be to live simply and not overspend simply in search of making myself feel better after an arduous day at work or other disappointments! It's truly liberating ...:T

Anyway, can anybody offer a sensible suggestion to my dilemma?


I have recently consolidated two credit cards onto one, interest-free until April 2009. The sum on my card is currently £6300 and I am paying the minimum of £130 a month.

I have a huge mortage of £216,000 (thanks to putting two kids through university, as a sole parent) on a fixed-rate interest only package that expires in December 08. The redemption fee is 6,000.

I will be looking at new mortgage deals at some point in the summer.

However, in the interim, should I channel my resources into paying the credit card off asap, or should I overpay the mortgage, to try to bring that down before I re-mortgage?

In terms of budgeting, I have seriously cut the household and food bills - my two grown-up sons are still at home, and not able to contribute anything at present on a regular basis, although they do help out where they can. Oh, and I am running a home for three adults on one salary! (£2,600 per month take-home, household expenses - £2,400).

Any advice? And please don't say get them to help, it's financialy not viable for them at present!

adaze

Which has the lower rate? Pay off the highest rate first, if your card is higher than your mortgage you should switch to a 0% or low life of balance card.

Ninnins

Thanks adaze - still not sure. Mortgage is more expensive debt, but am I better to just pay the card off, as it's interest-free I am cutting into the debt. What would look better when I remortgage?

Henwen

Hi Ninnins
I've just been through the same dilemma. I would say concentrate on the mortgage as lenders are tightening up how much and who they will lend to. In December, there may be fewer good mortgage deals around and many of them may have large fees. I would keep the options open.

Some mortgages let you "save" with them ie pay spare cash which they hold in a pot till you say "pay off some of my mortgage" or "can I not have a break from mortgage payments". The interest rate on these "savings" is the mortgage rate so it's really good as there is no tax to pay. With £200 spare a month you should not be at risk of triggering the repayment penalty but some lenders charge the penalty if you overpay more than 10%. Check your terms though.

Hope this helps

Ninnins

Wow, thanks Henwen, that really helps, and has cinched it for me - confirms my gut instinct to focus on the mortgage, thanks for your perspective and info. It's a funny thing, but even though common sense tells us to look after the roof over our heads first, the nagging guilt of credit cards chips away!