Move some debt to mortgage or leave as it is?

[Berriesandcucumbers1]

I'm asset rich (not exactly rich but almost all my money is in my house). Single income, my debt is just under £11k at the moment outside of my mortgage which is roughly £41k. House value somewhere between £220-£240k so I have a large chunk of equity and I'm due to pay it off in about 9 years. My debt was over £20k at one point due to some large things needing sorting on the house, not wants but needs.
My 0% interest on my credit cards is coming to an end later this year, my loan is 3.5%. my minimum payments are over £400 per month
Paying the debt back at this rate will take me about 2 years to clear
I'm debating whether to move the £11k debt onto the mortgage so I would have no credit card or loan debt and that would reduce my monthly payments down to around £120 a month
I currently try to save around £400 a month for my emergency fund but that's just been wiped out again by an emergency and I'm starting from scratch again. I'm careful on my budget, so not any expenses I can reduce now.
I know nobody likes to move unsecured debt to secured. But I'm seriously considering this to allow myself a bit more wiggle room to allow myself to build an emergency fund a bit quicker. If I add the £280 reduced minimum payment to my £400 a month savings I could save a 1 month emergency fund in around 4 months, I could have a 3 month emergency fund in around a year and I would feel a lot more financially secure
Once I'd got a good emergency fund, I could then try to clear down the mortgage debt quicker

It really does sound like your credit cards are causing you bigger problems than your loan. How long do you have left of your 0% fixed periods?

Are you paying the minimum each month or are you paying back a fixed amount each month? If you fix the monthly payment at the minimum you needed to pay for the maximum amount you had on the card you can dramatically reduce the amount of it will take you to repay the debt.

Take a card with £4000 on with a minimum payment of 3.75% (£150) if you keep the payment at 3.75% of the total it would take you 9 years to pay it back. If you keep the payment at £150 it will take 2 years!

The other advantage of this approach is you have already accounted for the payment in your budget so you are less likely to use that money for other purposes.

Nope. It is a terrible idea. Moving unsecured debt to secured is never advised.

It is literally, sometimes advised.

Moving unsecured debt to a mortgage is generally a good idea when it significantly lowers your interest rate and improves monthly cash flow, specifically for managing large amounts of high-interest debt like credit cards. This strategy, known as debt consolidation, replaces multiple, high-rate payments with a single, lower-interest payment over a longer period, reducing immediate financial pressure.
When It’s a Good Idea (Pros):

• Lower Interest Rates: Mortgage rates are almost always lower than credit card or personal loan rates.
• Improved Cash Flow: Lower monthly payments help if you are struggling to make ends meet.
• Easier Management: One, lower, fixed, or variable monthly payment is easier to manage.
• Potential Credit Score Boost: Lowering credit utilization can improve your credit rating over time.

When It’s a Bad Idea (Cons & Risks):

• Longer Term = More Interest: While monthly payments are lower, stretching debt over 15-25 years often means paying much more interest in total.
• Risking Your Home: Unsecured debt (e.g., credit cards) becomes secured against your home, risking repossession if you default.
• Fees and Costs: Remortgaging may incur fees, such as early repayment charges (ERCs) on your current mortgage.
• Negative Equity Risk: If your property value drops, you could end up in negative equity.

You say your employer pension contribution is 10% but you aren’t currently paying to get that? How much do you have to contribute to get them to pay 10%? In my opinion you have to find a way to get that from your employer, otherwise you are literally leaving a 10% pay rise on the table.

Moving unsecured debt to your mortgage generally isn’t a good idea.

The problem with the loan is that there is no flexibility in it I think the payment is just over £200 a month I think there's about a year and a half until that would be cleared. The first credit card is around £150 a month 0% runs out around 7/8 months time and the other credit card is just over £50 0% for another 10/11 months (the minimum payment on this one is a lower percentage but also a lower limit so I couldn't shift the debt off the first card to this one when the time comes).
So I'm trying to think ahead about whether I'll move the credit card debt to another 0% card, when the current rates are nearing and end, it'll generally cost around 3% to balance transfer for most cards. Or whether I move it to a secondary mortgage, I am also now considering whether to also add an emergency fund amount to the mortgage so id have my emergency fund there ready and could immediately commence overpayments on the second mortgage and start my pension

I suppose very roughly

Scenario 1-
Mortgage - £41000
Loan and credit card - £11000 - repayments £400 - paid off in 28 months time
Emergency fund - £0 - try to build up by £400 a month and hope nothing expensive happens before I can build 3 month emergency fund which would take around 2 years if no emergency crops up
Pension - £0 - start paying into pension in 2 years time

Scenario 2
Mortgage - £60000 (new additional payment £200, monthly overpayment additional £400 - overpayment set up as standing order and only paused in the event the emergency fund needs replenishment if there was an emergency)
Loan and credit cards - £0
Emergency fund - £8000
Pension started now - would build to around £14500 roughly by end of 2 years of mine and employers contributions

I would go with option 2 but with a modification. I would give myself longer than 9 years to pay off my house and use the funds that become available through that decision to allow me to build more long term savings (investments in pension and isa ) now.

you said in your original post that one of your concerns is having all your networth in property. I agree this is an issue and a cause of concern. While you have a good ltv ratio your property is not valued at a level where you could foreseeable downsize significantly in future to access that capital. You will always need somewhere to live and money to live off.

pay your home off over a slightly longer period and use the time now to build up your savings. Not just an emergency fund (which stays in cash) but pension and isa investments that grow beyond inflation and will enable you to have a decent quality of life when you no longer work. If you take this approach the anxiety you feel right now around costs going up/ emergency costs go away as you balance your net worth into more reasonable pots of liquid and illiquid assets.

im 45. 7 years away from paying my mortgage off. My net worth loosely fits into 3 buckets- 1/3 each. House, pension and non pension savings and investments incl emergency fund. I could pay off my mortgage tomorrow but I don’t because I have a great interest rate and I’d like as much as possible to preserve that balance as it gives me peace of mind. Please don’t ignore pension it’s critical and in the nicest way possible you’re 10+ years behind. We don’t starve Peter to feed Paul and you should be prioritising a way to be paying your future self now.

while paying off your mortgage in your 40s is wonderful, with a good interest rate you can often make more money long term if you invest rather than overpay.

If I remortgage completely I would lose my very low interest rate, in theory I could reduce the additional mortgage payment to £0 after 3 years and then start investing the £600 a month I was paying against the additional mortgage from age 37

Whatever you do, get into the pension as soon as possible. General guidance is the percentage of salary you should be putting in at least half your age when you started. If you haven't paid into any pension before then at 34, you should be looking to do 17% per year, including employer contributions. Even if you do 5% of salary and the employer does 10, you are nearly there. No point in losing out on all the years of investment growth potential because you want to pay a mortgage off faster.

Ok, so the debt that is having the biggest impact on living costs is the combination of the loan and the credit card with £150 monthly payments.

How about a half way house? To keep some of the benefits of consolidation but minimise the downsides of moving 0% insecure debt to secured debt you will be paying interest on

£10k on a second mortgage paying off the loan, credit card with £150 monthly repayments. Plus giving you ~£2k emergency fund. If you current take home pay is £2800 and you are paying £400 servicing debt and saving £400 this should cover 1 months expenses and would cover most emergencies. This would reduce the repayments of these two debts from £350 to £110 and would release the money to start paying into your pension.

That would just leave the ~£4k on the card that has 10 months left with minimum repayments of £50. If you put most of your £400 savings into this card it could be paid off before the 0% period comes to an end.

In 10 months time you could be debt free, have an emergency fund, be paying into your pension and have ~£500 a month for savings/overpaying your mortgage. By the end of year 2 you could have saved £7k which would either paid most of the second mortgage off or give you a comfortable £9k savings pot.

Turns out my employers contribution is actually far higher than I thought.... 20%. So yer I really need to restructure my finances to get in to the pension. Going to sit down and work out some various options later I think

Although it would feel great to be mortgage free at age 41, it isn't necessarily the best thing for your long term wealth if it means you're not paying into your pension.

Presumably your employer would contribute if you did- it's 3% minimum. As a pp said, you're refusing part of your salary by not taking it.

Also, you expect about 7% growth per year in the stock market over the long term (you have 30 years) so increasing your mortgage term to allow you to make pension contributions means that you gain a few % points of growth, as well as your employer's contributions and the tax benefits. So long as you're disciplined enough to put the difference in your pension!

Oh, I hadn't read your latest update! Definitely get into the pension scheme!

Doing the sums tonight. Got the mortgage in principle for the £19000. So need to do a proper run through my budget, but yes the pension needs sorting
But very much still trying to be mortgage free by 43 still and contribute. I could have swore I saw 10% employer contributions but when I checked I was surprised it was 20% so I'm hoping I might be able to catch my pension fund back up from the years I was unable to contribute. From a quick google I should be able to get close to 2 years salary by 40 if i start paying in now

Can you swop to another interest free cc. You will pay a 3% fee to move the balance but assuming you get one for 3 year interest free (I got one last month with that) then the money you are saving should be able to get at least 3.5% savings for 3 years which will be more. Once you have built up emergency fund then throw more at the cc to clear before the end of the period.

@catipuss just wanted to say thank you for your suggestion, it was the third option I really hadn't thought about
I've made a decision
I will borrow £19000 on a mortgage
Use £11k on my debt, £8k to emergency savings
I need to pay £206 on the new mortgage per month, I can clear it in 3 years if I over pay by £354 per month but I can pause if need to use the £354 to top up the emergency fund if I need to use it for something
I can also then pay into the pension and top up my savings by around £100 a month

I will feel a much more financially secure and as long as I pay the additional mortgage off in 3 years and it'll cost around £1200 in interest but my savings interest will offset some of that

It is always more expensive to move debt onto the mortgage. If you must do it perhaps look at an offset. But I wouldn't do it if it's avoidable, look first for a 0% credit deal again.

OK, this is foolish. Very foolish (financially). You are missing out on employer contributions to your pension, on the tax relief you get on your own contributions, and on years of compound growth.

Join your employer's pension scheme TOMORROW . This is far, far more important than getting yourself debt free.

If you need to spread your debts over more years (which is what it sounds like) then yes, see if you can increase your mortgage (if the mortgage lender will let you) by enough to clear your debts and give you a cash "emergency fund" of, say, 3 months salary.

Check the update, I'm planning on getting an extra mortgage for £19000 to run the same length as the current mortgage, so will still have paid off house in 9 years, £11K to clear the debt and then £8k to give me an instant 3 month emergency fund. Then joining the pension as the decrease in monthly minimum payments will give me the flexibility to join the pension and then hopefully overpay the new mortgage, hopefully paying off within 3 years

Sorry, I thought I had - missed the second page 😊

What you are planning sounds good.

Personally I wouldn't overpay the mortgage, just let it run its course - it's only 9 years and you're still very young (in mortgage terms). Mortgages are cheap compared with other types of debt, so what's the beneft in stretching yourself to pay it off? And if you do pay it off completely it's much harder to get a new mortgage starting from scratch than it is to increase an existing mortgage.

I would just like the security of having it paid off ASAP to be honest. Would you just save the amount I would be using to overpay the mortgage?

Personally, I would go ahead with what you suggest. Put the debt on the mortgage and pay that off in 2-3 years.

Stop overpaying your mortgage. There's no rush to pay it off - even though it might end in 9 years, you've got 30 working years ahead of you! So just try to relax a little about that debt.

In fact, in your position I'd be putting off clearing the mortgage in favour of maxing out pension contributions, then yuo can retire early without a mortgage anyway.

Your works pension is a no-brainer. Not only do you get 10% employer contribution, you also get your tax refunded, so an instant 25% uplift in your savings. So if you pay in £80, the government gives you £20 to make it £100. If it's salary sacrificed, it's another £11 on top of that as you save your NI payments too. So for every £80 you put in, you actually get £111.

Then your employer will put in another 10% of £111, so another £11.10.

Therefore £80 buys you £122.10 in your pension. Which will compound at around 7%+ growth per year after inflation.

Good luck!

Yes, I would. £8K isn't a very big cushion tbh - it could disappear pretty quick (eg if you had to replace/repair the roof, or had a flood / burst pipe).

Also, I would put as much as you can into pension. You've gotta think you could easily live to 100; you could be retired for longer than your working life - so you need to build up a decent fund while you can.

The problem with paying off your mortgage is that it ties up your capital - so if you need (or want) money you can't get at it. Personally I think the "security" is partly illusory - it's not much comfort having the house paid off if you can't pay Council Tax / utilities / other bills.

All good advice here @Berriesandcucumbers1

Except I think it's even better than @Jopo12 has calculated. You said your employer would contribute 20% of your salary? (that's HUGE!)

At a minimum they would match your contribution (up to the 20%), so every £80 you contribute would attract £20 from the government, a further £11 in reduced NIC, and a further £80 from your employer - so it's worth £191 I think?

Wow!