# loan versus mortgage top-up?



## turnip (10 Jul 2008)

Hi there, I'm looking for advice on loans versus top-up mortgage and any other advice...

Age: 28

 Spouse’s/Partner's age: n/a

 Annual gross income from employment or profession: 40000
 Annual gross income of spouse: 

 Type of employment: Full time 

 In general are you spending more than you earn or are you saving? 
 Spend more than I earn

 Rough estimate of value of home

House worth approx 210,000 which is being rented out. Mortgage is for 168,000 over 25 years - tracker, currently at  4.75% with 164,000 and 24yrs 2mths remaining - repayments are currently 957/month which I supplement by approx 200 as the rent does not fully cover the mortgage repayments. 

My rent is 500/month.


 Other borrowings – 

AIB loan - 3000 over 2 yrs at 8% - 2400 remaining
Ulster Bank Credit Card 1900
Halifax Credit Card 2500
Overdraft 2700



 Do you pay off your full credit card balance each month? no
 If not, what is the balance on your credit card? 

 Credit Card X 2 = 1x1900 1x2500 

 Savings and investments:

House worth 210,000

 Do you have a pension scheme? no

 Do you own any investment or other property? yes, as above

 Ages of children: n/a

 Life insurance: yes


*What specific question do you have or what issues are of concern to you?*


I've gotten myself into a fair amount of debt, I put a deposit on a house 2 years ago and the sale finally went through last year. There was a bit of work to be done to the house before it was rentable which meant that I had to pay the mortgage on my own for about 3 months and since then things seem to have gotten a bit out of hand. I'm not particularly good at budgeting in general but now I would like to get it sorted. I would like to consolidate my debt so that I am not paying ridicules money on interest and the following are my options

total short-term debt: €9500 approx
unavoidable expenditure in next 1.5 months over and above daily: €2000 

option 1
ulster bank loan for €10,000 at 9.3% for 3 years, cost of loan approx €1400 but I but this will not cover the 2000 that I have to spend in the next month and a half - can pay back at any time but only as a lump sum, monthly repayments just over €300 approx

option 2 
ulster bank loan for €12000 at 7.7% for 3 years, cost of loan €1550 approx, can pay back at any time but only as a lump sum, monthly repayments just over €300 approx

option 3
get a minimum €25000 top up on my mortgage and give back 13500 immediately, I've checked this out and as far as I can tell there is no reason why I can't do this. It will increase my mortgage monthly payments by just under €300 for the €25000 but this will reduce when I give the money back or else i can reduce my term (24years left) also repayments are less than loan repayments... is this really an option?? or is there something I'm missing?!

sorry it's so long winded, thanks a mil for any advice!


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## anon473 (11 Jul 2008)

The top up on the mortgage is an option and sometimes a good one. The top up is a secured loan (on your house) and over a long term (the 24 years of your mortgage), The monthly repayments will be much smaller but the overall cost (if you pay it over 24 years) will be MUCH higher. Use http://www.jeacle.ie/mortgage/ to calculate just how much extra interest you are talking about. If you can pay it back quicker then you can reduce your interest payments but you need financial discipline (and a mortgage provider who will allow it)
I've just re-read your post and have read it differently now. When you say that you have checked out that you can give 13500 back immediately, does this mean that you have asked someone at the bank or that you have looked through the T&Cs. I say this because there is probably a reason why they dont want to give out a top up of less than 25000. There may be a charge associated with paying it back (In the old days I was allowed to pay off 10% of our mortgage top-up every year without penalty) - Again run the numbers on Jeacle's calculator.

Also, you need to make absolutely sure that you are not living beyond your means. Too often, people take out debt consolidation loans and then just rack up more debt - again financial discipline is needed. There are several threads on this site about keeping your costs down, using spending diaries, etc

anon473


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## turnip (12 Jul 2008)

thanks for that, i've talked to someone in the bank but i'll check the t&c to make sure. i've started a spending diary and a budget so i'm going to to how i get on with that too..


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