In Debt with mortgage and confused...

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anna123

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Hi - first time asking for some advice. I have debt of approx 17 with CU(dep of a house) this was agreed for 36 months. It was for 20 and I have paid 3 already. I have 2 cc's,one of 2.5 and one for 4.5 - both cut up.

I have just bought a house with a mortgage of 260, the value has risen to 360 since I got it.

i pay a lot out each month on the cu and the cc - I was wondering if remortgaging was the best way to clear the debt.. I would slightly increase my mortgage payments with the money I would have free'd up.

Any help would be great. Thanks
 
Re: Advice

When restructuring your mortgage you are paying interest long term. Your loan is over a short term.

Some lenders may let you restructure your short term debts for a specific term adding on to the mortgage. Your CU may let you increase your current borrowings to allow you to pay off your credit cards which should be your first priority.

Calculate the interest and your repayment capacity and make your decision based on the figures.
 
anna123 said:
Hi - first time asking for some advice. I have debt of approx 17 with CU(dep of a house) this was agreed for 36 months. It was for 20 and I have paid 3 already. I have 2 cc's,one of 2.5 and one for 4.5 - both cut up.

I have just bought a house with a mortgage of 260, the value has risen to 360 since I got it.

i pay a lot out each month on the cu and the cc - I was wondering if remortgaging was the best way to clear the debt.. I would slightly increase my mortgage payments with the money I would have free'd up.

Any help would be great. Thanks
Click to expand...

If you are up to date on your repayments then well done - I wouldn't recommend remortgaging as you'll end up with quite severe long term debts that could come back to haunt you next time interest rates take a big upswing.
 
anna123 said:
Hi - first time asking for some advice. I have debt of approx 17 with CU(dep of a house) this was agreed for 36 months. It was for 20 and I have paid 3 already. I have 2 cc's,one of 2.5 and one for 4.5 - both cut up.

I have just bought a house with a mortgage of 260, the value has risen to 360 since I got it.

i pay a lot out each month on the cu and the cc - I was wondering if remortgaging was the best way to clear the debt.. I would slightly increase my mortgage payments with the money I would have free'd up.

Any help would be great. Thanks
Click to expand...


Congrats on cutting up the credit cards!

From my perspective there seems like 2 options.

Option 1. Combine all your debt of €24000 into your mortgage by releasing equity through a remortgage. This should add around €150 a month to your mortgage payments (based on 5% at 22 years). I'd also advise to do something with the extra money you're saving - either make regular additional payments to the mortgage or else put it into a high yield regular savings account. This offsets the long term interest you're paying on what was a short term loan.

Option 2. Transfer your credit card debt to an Ulster Bank CC which gives 9 months interest free for purchases and transfers (Note: You still have to pay the mimimum repayment of 3% for each of the 9 months). Then just combine the CU debt of €17000 into your mortage via a remortgage.
I'd only use this option if you think you can save enough over 9 months to pay off the balance in full at the end of the 9 months, so if need be just use it for one of the credit card debts.
This is the messier option. It's possible that it could take over a month to receive your Ulster Bank credit card and then another week or two to get the money transferred so you could have some high interest to pay while waiting. Secondly you'd have €40 stamp duty to pay (except if you spend over €6000 on the credit card). Thirdly, would the temptation be too great to buy stuff with an interest free credit card?

First step is organise a meeting with a employee of the bank that you've your mortgage with.
I wonder what it's like to ask a bank manager for a remortgage to pay off a credit union loan which you've pretended you didn't have when applying for a mortgage in the first place!
 
Bear in mind that refinancing your short term debt over a normal mortgage isn't an ideal solution. Although the rate is better, you're paying it for an awful lot longer!

That said, it can be a solution if this is unlikely to be a recurring problem. However, if you can do it, it might be better to see if your lender can provide a split-term option, which would allow you to borrow enough to pay the current debts on a shorter term than the overall mortgage. I know First Active do this (from a flier in the door last week!), but I'm sure other providers have such products too. Alternatively, you could simply boost your mortgage payments by the total you've been paying out for the other debts - since they'll have been at higher rates, you'd be amazed how fast this can bring down your capital!

Whatever option you take, try to refinance so that you have "proper" living money left over. One of the quickest ways to go back into debt is to set up repayments schedules which leave you with no spare money and no contingency, so you're forced back into borrowing.
 
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