Should I top-up mortgage to clear a CU loan?

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Alkers86

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Hi there,

We are in the process of switching mortgage and I'm weighing up the options for whether we should top-up the mortgage amount to clear a credit union loan.

Is there a general consensus as to when this is a good idea or not?

Mortgage circa 30 years remaining, €290,000, circa €1,200 per month.
CU loan is circa €12k, €240 per month for five years. This was for home energy upgrades, had to take a credit union loan to avail of particular SEAI / REIL scheme.

Both repayments are affordable, will be getting some cashback from the switch and looks like we can add the CU loan to the mortgage and still end up with a reduced monthly payment.

Thanks
 
It only makes sense if you overpay the mortgage, so that you're repaying the CU loan to the original term.
If not you're just repaying a 5 year loan over 30 years, so it'll cost you more.

I note in your post you are talking about repayments, and not interest rates.
 
RedOnion said:
It only makes sense if you overpay the mortgage, so that you're repaying the CU loan to the original term.
If not you're just repaying a 5 year loan over 30 years, so it'll cost you more.

I note in your post you are talking about repayments, and not interest rates.
Click to expand...
Current mortgage rate is 3% but we haven't decided who to switch to yet that's why I left it out.
The CU loan is at 7.11% APR
 
Yes it makes sense if you are paying double the rate to CU but as mentioned above you should continue to pay the lower portion over the original term so basically what are the repayments on 12k over 5 yrs at the new rate you will have and overpay by that amount if you are in a financial position to do so, then it makes total sense!
 
If you borrow €12k at 7% instead of at 3% , it will cost you about €500 in the first year, and roughly €1,500 over 5 years.

If you are also getting 2% cash back, the saving increases by €240.

And it's probably no harm clearing the credit union loan as they will lend to you again if you need it.

Brendan
 
Thanks all, so it seems that this only makes sense if we overpay the new mortgage amount by the original loan repayments (or close to it).
 
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