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AIBU?

Share your dilemmas and get honest opinions from other Mumsnetters.

Original poster

AIBU To add £10,000 loan onto mortgage

42 replies

ChipsCheeseAndBeans · 17/04/2017 15:55

Thinking about adding a loan onto our mortgage. Current mortgage is £450 a month with 27 years to go. Loan repayments are £395 a month with two years to go. Fixed term on mortgage coming to an end next month. If I get a new fixed deal for two years payments will be £300 a month. If I add loan amount to mortgage payments will be £335 a month.

I know that I will end up paying a lot more in the long run by adding the loan to mortgage - 27 years rather than 2 but that extra almost £400 a month would be really handy at the moment as we are trying for baby no 2.

OP posts:
sparechange · 17/04/2017 15:58

There are 2 types of people in the world - those who understand compound interest, and those who pay it...

No, don't add it onto the mortgage. It's a very bad idea in the long run

You'd also be a lot better off in the long term if you bring the term of your mortgage down and up your monthly payments...

ClarkWGriswold · 17/04/2017 16:01

I could be wrong but I don't think it's as simple as adding an existing debt on to your mortgage. I know DH's brother tried to do this recently and was turned down by the mortgage lender.

Snap8TheCat · 17/04/2017 16:04

Why would you turn an unsecured loan in to a secured loan and pay all that extra interest? If you can't afford a baby until the loan is paid off then it might have to wait.

LightastheBreeze · 17/04/2017 16:05

Don't you gave to go through the whole affordability thing if you remortgage and add more borrowing to it and even if your payments are less the bank sometimes won't let you do it anyway.

SillySongsWithLarry · 17/04/2017 16:07

I did it when I was buying the ExH out of the house. I kept the house and took on all the unsecured debt. I remortgaged to clear the whole lot. Yes it costs more but it was a clean slate. In your situation I'm not sure I would. 2 years v 27 years is a huge difference.

EineKleine · 17/04/2017 16:08

But not adding it means you'd probably clear it by the time the baby turns one. 2 years vs 27! That 35 a month sounds like nothing now but when you are funding activities, school trips, lunch money, saving up for days out in hols etc you'll be ever so glad if you take short term pain to have the extra cash flow in your pocket later.

£35 a month is school dinner money for a month, or an entry ticket to Legoland.

Huskylover1 · 17/04/2017 16:09

You certainly can add the loan on to the mortgage. I know cos I've done it. I would add it, but rather than paying £335, I would pay the £450 that you are paying now. That will still mean you are £395 better off each month, but throwing an extra £115 per month to the mortgage will drastically reduce the term.

Use the calculator here, so see exactly how much:

www.moneysavingexpert.com/mortgages/mortgage-overpayment-calculator

Instasista · 17/04/2017 16:10

Your loan must have a very high interest rate (or you're paying it off rapidly?) to be £385 a month. Refinancing def worth a look

Thinkingblonde · 17/04/2017 16:12

You have to reapply for a new mortgage, you can't just ask the lender to add the loan to your existing mortgage.

Original poster
ChipsCheeseAndBeans · 17/04/2017 16:13

By doing what huskylover says I could pay my mortgage off in 19 years rather than 27

OP posts:
KP86 · 17/04/2017 16:14

What husky said. Keep your current level of repayments for as long as you can afford and that will wipe years off your term.

Original poster
ChipsCheeseAndBeans · 17/04/2017 16:16

I know deep down I should be sensible and keep paying loan and mortgage separate but than £395 at the moment would be so nice.

OP posts:
KP86 · 17/04/2017 16:19

I don't think adding to the mortgage is the worst idea if you overpay.

Original poster
ChipsCheeseAndBeans · 17/04/2017 16:19

Instasista - loan rate is actually quite low but was over a short period of time.

OP posts:
Huskylover1 · 17/04/2017 16:24

Make sure though, that by adding the £10k on to the mortgage, that doesn't push you in to another LTV bracket. Because that would mean the interest rate being higher.

Original poster
ChipsCheeseAndBeans · 17/04/2017 16:26

Husky - will be in 75-85 Ltv either way. When we took out mortgage it was 95 LTV.

OP posts:
Papafran · 17/04/2017 16:31

I would
mortgage interest is far lower than the loan interest you are currently paying
you have to remortgage anyway and as long as you have sufficient equity, many lenders allow this.

Your house may have increased in value since last mortgage, so you may be entitled to an even better rate or a shorter term.

You can overpay, so you are not taking 27 years to pay 10k.

No brainer to me, I am afraid.

I had a loan of 5k which was used to buy furniture when I bought my house. My initial term was 30 years at 2.9%. When I remortgaged, I added the loan to the capital amount, but got a better deal with lower interest, lower monthly payment and a 25 year term (so taking 3 years off). I can overpay up to 10% so will clear the loan this year, whereas before I was struggling.

Bearbehind · 17/04/2017 16:33

Adding it to the mortgage and then overpaying isn't necessarily the worst idea in the world but it's also not guaranteed to be possible.

Lenders are much more cautious about lending for debt consolidation purposes than they used to be.

Obviously whether it's possible will depend on your circumstances but don't assume it is possible until you've checked.

sparechange · 17/04/2017 16:35

I would mortgage interest is far lower than the loan interest you are currently paying

Errr not when you are paying 27 years to pay it off with compound interest!! Insane (and just plain wrong) advice - the total cost of paying off a loan over 27 years at 2% is going to be much more than taking 2 years to pay it off at 10%
If you can't understand that, you shouldn't have access to any credit

Financial education in this country is absolutely woeful

nannynick · 17/04/2017 16:38

Lets play this scenario out a bit... you add £10,000 to the mortgage, thus clearing your loan. You keep the mortgage payment the same as it is now, with the aim of paying off the mortgage quicker than the current length of the mortgage.

What happens when you next need some money, where does it come from? Will you use a credit card, take out a loan, remortgage again?

Debt is a symptom, you need to tackle the cause. You need to look deeply at your finances and make a determined plan to remain debt free and to work towards paying off the mortgage over the next 10-15 years... before the children have left home! You can factor in to your plan having time off work to have another child and to factor in the costs of having growing children.

If you are going to move this loan to the mortgage so you can start again by having no debt other than the mortgage, plus you will do a monthly cash flow plan, put money aside for emergencies, put money aside for retirement, put money aside for the ever growing needs of your children, then maybe it is a sensible decision... but only a decision that you and your partner can make.

Alternatively you pay back the loan as fast as possible by getting really determined about repaying debt and then saving for the future, so that by the time child no.2 comes along you don't have the loan any more.

Fruitcorner123 · 17/04/2017 16:38

What husky lover said. You say the money would be handy now and you can shorten the term of your mortgage and in the future if you have more money when kids are older overpay to make up for some of the extra interest. What sparechange said was patronising and unhelpful. You clearly do understand compound interest otherwise you wouldn't have asked the question!

Italiangreyhound · 17/04/2017 16:39

I would really suggest that adding money onto your mortgage is a bad idea.

If you are able to earn a bit of extra money now, extra part time job or something, then do that, or save some money, and put all that saved money into the best interest account you can find.

Switch brands to basics for things where there is little difference. This takes a while to work out. And may be different for different people. EG for me tomato based things need to be Heinze! No I don't work for them! I cannot go cheap on ketchup or tomato soup! But chocolate, biscuits, bread, fruit etc, I go for basics ones where I can. They sometimes costs half the regular ones.

More ideas here....

www.thesimpledollar.com/little-steps-100-great-tips-for-saving-money-for-those-just-getting-started/

Here are my favourites....

  1. Stop collecting, and start selling
  1. Master the 30-day rule.

  1. Don’t spend big money entertaining your children.

  2. Eat less meat.

You can find the full facts and more on the site.

And budget, budget, budget. It's not easy, I am a spender my hubby a saver. But long run you don't know what the future holds, job security, kids etc so save for that rainy day rather than tying yourself up in debt.

onwardsandbeyond · 17/04/2017 16:40

is adding it to the mortgage and overpaying heavily an option if you struggling to afford the loan?

in principle I agree with PPs - it is madness but if finances are tight, I can see the lure.

Original poster
ChipsCheeseAndBeans · 17/04/2017 16:43

I know what the sensible thing to do is and it may be my only option anyway. As others have said lenders may not allow me to consolidate my debt and I have managed to pay both so far and can still overpay my mortgage when I remortgage to get the term down.just need to forget how nice an extra £400 a month will be until two years time.

OP posts:
WhatWouldTheDoctorDo · 17/04/2017 16:48

We did something similar years ago before the downturn and really regret it now. It might not affect your LTV ratio now, but it could next time around, taking you longer to access better rates. Mortgage rates are low just now, but they might now always be. Also if you buy something bigger/more expensive in future it could make a difference to your LTV then.

In your shoes I would keep paying the loan but also overpay the mortgage to match your current payments. You can always stop overpaying if you have another child.

But if you did add the amount to the mortgage (and have you checked for early repayment fees for loan) I would use as much of the money you're saving on monthly payments to overpay like mad.