What would you do? Debt repayment

[notafinancialwizard]

I've recently taken on the mortgage (post divorce.) It's vast and interest only Bad news. I'm currently paying off a credit card and a student loan.

When I took on the mortgage, they offered to add debts to it too and I said no. I said no becuase that was the way my ex dealt with his compulsive spending and debt. Always on the mortgage. Hence the reason it's the size it is.

But I am wondering if I made a mistake and let my emotions rule what should be a financial decision. Currently servicing the debts costs over £300 a month and it will be gone in about 24months. But maybe it would be better to use the mortgage and then use some of the money currently going on debts to pay off some of the capital.

What would you do?

Any ideas?

The problem with doing that, though, is that you're turning unsecured debt (ccard, student loan) into secured debt (put on to your mortgage).

I wouldn't do it. Particularly as they are going to be gone in 24 months anyway.

Pay off the loan with the highest interest first and move loans from high interest lenders to lower ones where possible BUT bear in mind that moving unsecured debt to your mortgage makes it secured (ie it gives the lender a claim over the property). If there is any danger you can't service the debt then that's dangerous. Also, it may now be too late to renegotiate your mortgage without fees.

If you've got enough equity in the property to increase the mortgage, convert it to a capital repayment instead of interest only and have enough in your budget to cover all your outgoings and a little left-over for unforeseen expenses you might just do it. Alternatively you could convert the credit card balances to 0% cards and use the £300/month you have to pay them off as quickly as possible. Then start paying capital off the mortgage.

What you have to avoid is remortgaging, staying on interest only and then finding you have to put other expenses on credit cards building up the balances again. Have you considered selling up and downsizing?

I know. 24 months is not that far away. And God knows, the mortgage is big enough. But I want to start making some headway, however small on the mortgage. Maybe I'm just overthinking and having second thoughts.

The credit card is 0%. And the student loan is salary related so if the worst happened, I wouldn't have to keep paying that one off. I can't afford full repayment on the mortgage for about two years when I will no longer need childcare. I was thinking more of using the extra £300 to ease the monthly grind and pay about £100 - £150 off the capital.

Have considered selling up and moving to a cheaper area. Keep deciding against it. Again, I don't know if I'm making decisions for emotional reasons.

You could probably work it out as a sum. Amount of interest saved if you do one thing compared with another. But then again, you sound as if it's all a bit emotional rather than financial. Not doing what your ex did might be very healthy for you even if it involves you in paying more in interest.

Sorry. Not very helpful, I know.

In a couple of years your debts will be paid off, and you will have extra cash as you won't be paying childcare. 1 of the debts is interest free (but would be paying interest on it if you transfer it to the mortgage) and 1 is a student loan. Have I got this correct?

Personally, no doubts about it, I'd stay on interest only and not add anything to the mortgage. Once your debts are repaid and childcare costs drop, start paying the extra cash onto the mortgage and get the capital paid off!