Which is the best debt to reduce prior to re-mortgage?

Captain_Beaky_2

I'm helping my brother out with his monies and his fixed interest mortgage period will expire in March 2009, so I am already considering possible re-mortgages. Now it may be the case that his credit rating and level of debt is sufficiently poor that he isn't able to re-mortgage, but we'll see about that... I'm wondering about another issue:

He has an enormous credit card debt that they have agreed to fix at 0% and let him pay a nominal amount off each month. He also has a secured loan on his house that is costing him over 10% APR. Now we all know that you should pay off the highest rates of interest first, but the credit card have made an interesting offer... if he pays off 40% of the balance, they will write off the remaining debt. All of a sudden, this means the equivalent APR for the credit card is way over 20% (paying the monthly payments at 0% and paying off all of the debt, compared to paying off only 40% of the debt now). The catch is, they will record it as a default on his credit record.

So the question is...
Given a cash sum of about £8000, is it better to wipe out £22,000 of credit card debt and have a black mark, or is it better to reduce a secured loan by £8000 and not have a black mark? Which option is better from the point of view of arranging a new mortgage in March next year?

Thanks

Wutang_2

Are you asking whether it is a good idea to register a new default on top of (already) bad credit??

"Which option is better from the point of view of arranging a new mortgage in March next year?"....have a guess

Captain_Beaky_2

Yes! Register a default, but have £24,000 less debt, or don't register a default and have only £8,000 less debt!?

CLAPTON

bizarre, how does someone who can't pay the minimum CC payments happen to have £8,000?

Wutang_2

what a bizarre concept....looking to remortgage soon and hoping the new default will help things out!!! read the papers - read this site - what are you on??

Rabiddog_2

I would wipe out the CC debt.. on the basis that its good value (66% discount)
on the other hand
Can he comfortably keep up repayments on the secured loan and the mortgage?
Any new mortgage given will take into account existing debts, so 22000 less is better than £8000 less.
I don think your question about the APR's is relevant.....