Really need advice on best option on long term borrowing

T

trublue

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I really really need some advice on long term borrowing; we have bought a house and are planning to get married. The house worked out a really good price far better then we expected, so the mortgage repayments will work out the same as our rentJ

We now need to borrow to furnish it (we couldn’t have included this in the mortgage unfortunately as far as we know as is affordable housing) and we are also thinking of borrowing to pay for the wedding, I have an SSIA account (to expire on April) but would like to continue saving this if at all possible my fiancé also has some saving but again we would like to keep this if possible.

We are looking at 40k to 45K max as are considering consolidating an existing debt i.e car loan but have no idea the best way to go about borrowing this,


All advice welcome

Thanks
 
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It makes little financial sense to be earning 3%-4% on savings while paying out 8%-9% on borrowings. You will be better off financially if you use your savings to clear your loans. You can always start again and build up your savings, and you'll be paying out less interest in the long run.

I would express a note of caution - Borrowing for the car AND the wedding AND the furnishings seems a bit OTT. Can you slow down the furnishing and go a room at a time, as you have the cash available?
 
RainyDay,

Thank you for your reply, you are right on the savings side of things I suppose we got the idea it was better to hang on to some savings from the credit unions teaching to save alongside the borrowing? Scary not to have some cash available should anything happen. My SSIA doesn’t expire until April and that’s about 4K, and my partners saving are around the 3,000 which we are using for fee’s for the house and the like.

The car loan is already being paid off we were thinking of consolidating existing debt with any new borrowings as though it might be better to pay off one amount of interest as such ?. The car loan is 3500 and the other debt is 4,000. We are earning a joint net income of 4,300 approx a month after good bit buying share options about 300 a month and our mortgage will be €800 a month. The house is 3 bed roomed and we only plan on doing the kitchen one bedroom and basic living area and maybe the bathroom floor, so the bear amount of work if possible we were thinking 10 to 15K should do this max. We prob should forget the wedding for a while but even a bargain wedding will cost nearly 20K….madness
 
The standard credit union approach of saving while borrowing does more good for the credit union itself, rather than the credit union members. Because of the big gap between the rates paid on savings and the rates charged on borrowings, the credit union make money in this situation, and the member loses out, in pure financial terms.

I guess that the CU guys will tell you that you keep the savings habit, but this is a bit wishy-washy to me. You can focus on repaying your debts first, then start saving.

You mention about paying for stock options each month - Can you expand on this? Are you sure it really makes sense for you to be participating in an investment like this while carrying debt? You'd want to be pretty confident that the return on your stock investment will outweigh the interest rate being charged on your debt.

To get back to the original question of consolidating debt, you may save on interest if you can get a top-up mortgage at lower rates than the personal loans you are currently carrying. But unless you are very disciplined at making accellerated repayments, you're going to end up paying interest charges over the full term of your mortgage for short-term purchases (e.g. your car). It is not a good idea to be still paying for your car long after the car itself is on the scrap heap.
 
Thank you RainyDay,

On the stock option, my partner has this and does get a great return as he can buy the shares well under their market value, so well worth it; he generally sells them every 6 to 8 months and has gained good return.

I also see your point on the credit union.

On the consolidating debt we won’t be able to get a top up on the mortgage as it is an affordable house so mortgage sorted thru council.

so u advise to put both our savings into current debt collectively debt 11K approx our savings total about 7K including shares and cancel the 300 plus that is currently buying shares, and take out a new loan for house and wedding ?
 
trublue said:
so u advise to put both our savings into current debt collectively debt 11K approx our savings total about 7K including shares and cancel the 300 plus that is currently buying shares, and take out a new loan for house and wedding ?
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The advice was to make sure the investment of €300p/m on shares was making economic sence. You say it makes a good return, is it beating the guaranteed returns (savings on interest) you'd make if you paid that €300p/m into the debt? If you factor in some risk (shares can and do drop) does it still make sence to buy these?

If you feel the answer is yes to these then do continue with the share purchases. It depends how much below market the shares are being offered, (personal and market) confidence in the company, the economic environment in which the company operates (e.g. high risk tech shares) etc.

Nobody can say whether these shares should be bought or cancelled (with the information we have available at least), it comes down to your attitude towards them and the risks associated.

The debt is always going to return 8/9% (whatever your loan % is) when you pay it off, shares guarantee nothing [I'd also guess that while the shares are offered below market value you must also wait for them to vest meaning a shift in the market between the purchase price and the sale price is more probable, do consider this as well if it is the case].
 
To update, this post has received a lot of views but very little feedback on our need for advice on actual long term borrowing options!

Any how the update is as follows AIB who we bank with have yet to get back to us, and Bank of Ireland have offered 30K over 7 years, repayments work out with payment protection as 528

(please bear in mind we do plan on lodging my ssia lump sun of 3K when it matures and also lodging in to the loan cash received for the wedding,)
 
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