To think this is a no brainer?

[theoneiam1]

We have a mortgage up for renewal. We’ve only had the mortgage 2 years, so our first end of fixed term.
We currently pay £886 a month 4% and have 28yrs left.
We also have a loan and credit card costing £450 a month.

To add additional borrowing to our mortgage to consolidate the loan and credit card, we have been quoted a new mortgage deal at 2% over 28years bringing our monthly payment to £775 which includes the consolidation money.

This seems brilliant to me as saved us around £500 a month.
Of course we would then cut up credit card and save the extra money each month.

Am I missing something as this seems to me a very good move for us but I want to be sure!

Have you worked out what the total cost of paying back the loan and credit card would be if you rolled it into your mortgage? Paying that debt off over 28 years may well end up costing you way more in interest, even at 2%, than paying it off at a higher rate over a much shorter period.

I’d work out what the new mortgage at 2% would be without adding the debts and then work out what extra you can add to paying off the debts each month from your savings there.

What @jeezoh said, work out the 2 different totals. You’ll be shocked. Why not take the new mortgage at 2%, use leftover to pay off debts and if you can manage it up the repayments on mortgage to reduce term from 28 years down to 22 or something - bank should be able to give you figures for these. Eg paying back £825 a month at 2% would result in a term of X. Cutting the term will save you big ££

Like a PP said you're taking a very long time to pay back the credit card. Work out the total cost you'd have to pay back before jumping at this new deal. Also is the interest rate fixed at 2%. Rates are currently very low but may increase over time, if they went up to 3 or 4% again you'd be paying a lot more.

Take the new mortgage at 2% and use the savings to THROW money at the credit card debt, clear it and then cut up the card.

How old are you? Are you confident you can continue paying at that rate for almost 30 years?

Thank you all for your replies.
I'm thinking of doing this for the next 2 year fixed period.
So I'll save at least £300 a month so just under £8k in 2 years, so tHen when it comes to remortgaging again in 2 years, I'll have no loans or CCs so can pay a higher monthly payment, plus over pay what I've saved and hopefully take some years off.

If I take out just a 2% mortgage my payments will still be about £750 meaning I'd only have an extra £100 to pay off the CC quicker. And the loan still has 3 years on it 😩

Thanks for all your help all

OP there are three things to be careful with here.

(1) you are converting unsecured debt to secured debt. If you can't pay your mortgage the bank can take your house. At the moment they can't do that for the credit card debt or loan
(2) you're missing the point on PPs' advice to look at costs. The lower payments are because you're now paying these debts off over around 25 years rather than (I'm guessing) about five years for the loan. Yes the interest rate is lower but you're paying it for much longer.
(3) A very high proportion of people who consolidate debt in this way go on to run the debt up again. You need to make sure you're not one of them! This means looking at where the credit card and loan debt has come from in the first place and how you can change behaviours. Are you still using the credit card for example?

Ah, just seen the loan is 3 years not 5

The debt we have incurred is from doing up the house we moved into. So now it is all done, we have no reason to use the credit card or get out another loan.
So I see the next 2 years fixed rate as an opportunity to get ourselves straight and debt free (bar the mortgage)

I will have another chance to look at the mortgage in 2 years so then I can pay a higher amount per month and hopefully look better to underwriters as we have no Cc or loans

But you're only getting yourself debt free because you've consolidated!

You asked if it was a no brainer. It's not. Look at if you can move cc debt to an interest free card and whether you can over pay the loan without penalty first.

Good points everyone.
Thank you, I'll look into it a bit more 👍🏻