Remortgage to clear debt?

A

advise me

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Hi There,

Need to raise 50K to clear debt in credit union (40K) and CC (15K). Home worth 635K. Mortgage outstanding 300K with EBS. Redeeming these loans would free up about €900 per month.

Is remortgage with another institution the best option?

Any advise welcome I am aware that this has been covered previously.
 
advise me said:
Need to raise 50K to clear debt in credit union (40K) and CC (15K).
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Er, 40 + 15 = 55 not 50!
Redeeming these loans would free up about €900 per month.
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But don't forget that if you consolidate higher cost but otherwise shorter term loans onto your mortgage and pay them off over the remaining mortgage term then you may pay more interest in the long run. If possible such a top-up should be scheduled for repayment over a similar term to the original loans (e.g. a matter of years rather than decades) either explicitly with the lender or effectively through unilateral accelerated mortgage repayments on your part.

If you do go with a mortgage top-up consolidation approach then you really need to treat it as a once off emergency measure to regain control of your finances and address the spending/budgeting issues that lead to you running up such debts in the first place so that it doesn't happen again.
 
You have two options - taking a top up loan with the EBS or remortgaging (assuming your income fits the lending criteria). The EBS are known for charging higher rates on additional finance when it is not related to the house (i.e. debt consolidation as opposed to home improvements) however you may be able to bargain them down to homeloan/tracker rates. You should also check what, if any, legal fees would be involved.

Alternatively you could switch to one of the lenders offering fees free remortgages (IIB or Ulster) or Bank of Scotland or NIB who will pay towards the legal fees. Bear in mind that even on the fees free packages you will have 0.1% stamp duty if the new loan is over €254,000. (i.e. €350 on a remortgage of €350,000).

Sarah

www.rea.ie
 
Unless you can change your lifestyle to be able to spend less/save more, this could end up being a mistake - ie you could end up with a larger mortgage AND credit cards and loans within a few years. This has happened to a lot of people in the US who have used house equity to pay off other loans. Cut up the card(s)!!!
 
Um.....how have you all deduced that the OP is living beyond his means? He (or she) posted a query about the possibility of remortgaging not asking for a lecture on his/her lifestyle.

Sarah

www.rea.ie
 
Sarah W said:
Um.....how have you all deduced that the OP is living beyond his means? He (or she) posted a query about the possibility of remortgaging not asking for a lecture on his/her lifestyle.

Sarah

www.rea.ie
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Having 15k on a credit card and it being a burden to pay it off suggests that the OP is an impulse buyer. The OP should cut it up and try to pay it off ASAP. If she/he only paid minumum amount, it could take upto 25/30 years to clear this debt. Get a new credit card (for the 6 month interest free balance transfer) and cut up the old one.
 
Thanks for defending me Sarah W. I'm not actually an impulse buyer, having watched this site for some time - why do you folks always assume stupidity on the part of the OP.
 
advise me said:
Thanks for defending me Sarah W. I'm not actually an impulse buyer, having watched this site for some time - why do you folks always assume stupidity on the part of the OP.
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How did you amase 15,000 of debt on your credit card?
 
With respect,

Thats a) not the issue and b)none of your business.
 
You're right, I assumed that, and my apologies it was incorrect - it's just that any similar case I've heard of in the past has involved people spending over their means (including family members so it's close to home). Was meant as friendly advice, not to offend!
 
advise me said:
With respect,

Thats a) not the issue and b)none of your business.
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I'm not trying to pry into your private life. I am just trying to assertain how you got 15k on your credit card. Having 15k to clear would ring alarm bells, having 7.5k would ring alarm bells. With that much debt on your credit card, it may suggest you have problems with your spending pattern. Cutting up the credit card would be a positive first step.
 
To be fair it could have been from anything - if you ended up in hospital in the US it'd take you no time to put up €15k. Ok, no more from me on this!
 
The advantage of a remortgage is that you are paying a lower rate of interest. The disadvantage is that your house is now becoming security for these debts. Also what might have been a five year debt spread over 25 years can negative the savings made. Its a matter of personal choice but its a big step and there can be quite a few costs involved so for example if you are paying off a loan that was taken out to buy a car you need to think about whether you want to pay that off over 25 years long after the car is scrap. If you are thinking of remortgaging maybe you should look at repaying the €50 over a shorter period than the rest of the mortgage.

With all due respect I think the reason for questioning how the initial debt was run up, is that, if it was lifestyle debt then perhaps this needs to be looked at so that the remortgage isn't just a short-term solution and the credit card creeps up again after the remortgage. No offence is meant.
 
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