Would you remortgage?

[crisscrosscranky]

We bought our house in June 2016 on a five year fix- mortgage repayments are £870.

We then borrowed an additional £50k in April 2017 on a three year fix at a higher rate (90%LTV) - repayments are now approx £1150 a month. Once fix is up in April 2020 repayments will be around £1,200 with some on a variable rate and the main mortgage fixed for a further 15 months.

Additional borrowing was for improvements that have massively increased value and now our mortgage is approx 60%LTV.

In April we will have approx. £8k owing on a personal loan (new driveway and garden landscaping - currently paying £400 a month repayment) and £3k on an interest free credit card (0% period will end after the balance is paid).

We are hoping to take a once in a lifetime trip next summer to visit family overseas- it will cost between £7-9k.

We are considering remortgaging in April 2020 and paying a penalty charge for breaking the fix early but condensing the charge, loan (not the credit card!) and borrowing an additional £10k into the remortgage taking us to approx 66%LTV and repayments of approx £950 a month that we could then overpay.

I think it's a good idea as it will give us more spare cash for overpayment which will mitigate the penalty charge over time and allow us to plan our trip without worrying about how to pay for it. DH says we're just moving debt to a more expensive repayment plan and we should wait until June 2021 to remortgage.

Views?

In the nicest possible way I personally don't think you are in a position to be spending 7-9k in a once in a lifetime trip.

I think you are already quite vulnerable should interest rates rise.

Sorry.

Your DH is right. Find another way to pay for the holiday as this one is not cost effective

You can’t afford the holiday, I would not remortgage.

You’re not including the % Cc, so what debt are you paying less interest in than your mortgage rate?

I think you should scrap the idea of the holiday until you’ve cleared some of your debts tbh in the nicest possible way but I’m super risk averse!

Sorry but if you can't afford to pay for the trip abroad outright then defer it. You seem to live off refinance and credit. If the house prices drop then your mortgage ltv will go down. Save some money, listen to your OH.

Are you ever going to break the cycle of debt, remortgage, debt, remortgage. I would re mortgage this one last time, clear the debt without borrowing any extra and then save. Learn to live within your means.

You are being very risky should you be out of work or become ill. You need to overpay your mortgage and spend less enabling you to have savings. You are just living on credit and repaying when you should have saved up for the driveway/garden and you can still save up for the holiday.

This will not end well, if you don't learn to save and not use credit all the time.

Agree with all above. You're spreading yourself very thinly with all the credit. If the interest rates rise, you're fucked.

Pretty sure interest rates will rise, given the mess that is Brexit...

I personally would NOT spend all that money going abroad, but would save up for it, and save some spare for emergencies. Then go.

Mortgage lenders would happily loan you money to develop your property but I highly doubt they would ever consider lend money on a property for s holiday. The firm I used to work for were v insistent about seeing evidence of how the money would be used (plans, quotes etc,) also, the longest term we would consolidate debt over is 10 years.

A lot of people seem to think they can always borrow against their property but it really isn't that simple.

I think it might be worthwhile taking a step back and looking at your income and outgoings, and consider how you could save up or earn extra money to pay for the holiday.

Thanks for all the replies.

We do have cash savings equivalent to three months salary so could clear the loan outright if we wanted to but it is a low interest rate so we'd rather keep some cash reserves.

Interestingly I though that the likelihood of interest rates rising was another point in favour of remortgaging now so that we could secure a lower rate on a fixed rate before that happens. I think perhaps I need to go to a school of financial management🤦🏻‍♀️

I have cash savings equivalent to six months salary, but the way you're living makes me feel panicky.

I think securing a low interest rate now is an excellent plan.
We have just fixed for 10 years on a rental property which will then see it paid off.

Not had a holiday in two years despite being mortgage free on our own house because in the current financial market borrowing for holidays would be crazy.

How much is the interest rate now OP?

I don’t think it’s a crazy idea. I do wonder though if you have good credit rating, could you pay most on a credit card instead and pay it back each month? Asssuming you have some disposable income, it shouldn’t take you both long to save what is really 4K each over a year?

I don’t think securing a low rate now is a crazy idea if you can get it a fair bit lower than you’re currently paying but doing it so you can go on holiday is a crazy idea to me.

How much is the penalty? There's a calculator on the moneysavingexpert website that works out whether it is worth paying a penalty to access a lower rate. Do your sums carefully.

If your jobs are secure and you have good sick pay arrangements, I'd consider using the savings to pay for the holiday and then making sure I built them up again as quickly as possible (perhaps signifcantly scale back on other holidays, trips and big days out etc over the next year or two to rebalance the books).

But you do seem to borrow a lot of money, so that's one thing to try and get out of the habit of. Also be aware that a long term low interest product like a mortgage could cost more than a short term high interest product - always work out how much interest you are being charged. By securing debt on your property, you're also increasing the risk of losing your home if it all went very wrong - job loss, ill health etc and you couldn't keep up with your mortgage payments.

I think you are being sensible and doing all the correct things to increase LTV.

Is it a big celebration? Hence the planned trip. We have been away quite a few times this year, I am all about experiences!!! I think live a little, mortgage is a long term debt, need some perks in life. Some may think tomorrow will keep on coming and save for a rainy day... I did a finance degree and work in finance... it's all about balance.

Smart to fix mortgage for as long as possible due to uncertainties.

Interested to hear what you have decided on... massive celebration for us next year... also planning trip of a life time including children....

I can think of nothing worse than paying for a holiday over the next 25 years or whatever.

I know someone like this, now mid fifties, crap pension, 23 year mortgage on interest only (not UK) but hey... they financed a great holiday to Australia a decade ago.