Not sure if this is the right place, but I am musing over a course of action and appreciate some thoughts from a different perspective.
We have a mortgage with Virgin One and owe roughly 80,000 on a facility of 100,000. Currently our interest rate is 4%
We have no other debts apart from a loan and our car finance. I have been toying with the idea of paying off both these debts by using the facility available to us, in other words adding them to the mortgage and then concentrate on clearing the mortgage as soon as possible.
Our loan is with a balance of around £6k and an interest rate of 12.1%APR over 54 months remaining.
Our car has approximately £6.5k left on finance over the next 4 years. Interest is 3.56% during the term but 6.9% overall as there is a final payment at the end of the term or you can hand the car back or buy a new one with a garunteed P/EX price. It is unlikely we will buy another new car as the experience of this one and the one before have been 'not good', but that has nothing to do with finance.
Adding roughly £12.5k to our outstanding balance would obviously put us 'behind plan' on our mortgage repayments, but it is using the One Account as designed.
My thinking is although putting us backwards on the mortgage it clears two big debts and the car becomes our asset. The money spent servicing the two debts every month would remain in the account and thus reduce our mortgage balance by that figure, so in essence our finances are not improved in the short term, but over the next five years should see a saving of the interest payments on both debts, or more accurately a lowering of the interest from 12.1% on one and 6.9% on the other to the mortgaged rate of 4%, assuming no increase in the next five years.
I realise this is an 'eggs-in-one-basket' idea, but was trying to work out the cheapest way of paying all three of these debts off as quickly as possible.
Any thoughts? Missed something? Worth doing? Pitfalls?
We have a mortgage with Virgin One and owe roughly 80,000 on a facility of 100,000. Currently our interest rate is 4%
We have no other debts apart from a loan and our car finance. I have been toying with the idea of paying off both these debts by using the facility available to us, in other words adding them to the mortgage and then concentrate on clearing the mortgage as soon as possible.
Our loan is with a balance of around £6k and an interest rate of 12.1%APR over 54 months remaining.
Our car has approximately £6.5k left on finance over the next 4 years. Interest is 3.56% during the term but 6.9% overall as there is a final payment at the end of the term or you can hand the car back or buy a new one with a garunteed P/EX price. It is unlikely we will buy another new car as the experience of this one and the one before have been 'not good', but that has nothing to do with finance.
Adding roughly £12.5k to our outstanding balance would obviously put us 'behind plan' on our mortgage repayments, but it is using the One Account as designed.
My thinking is although putting us backwards on the mortgage it clears two big debts and the car becomes our asset. The money spent servicing the two debts every month would remain in the account and thus reduce our mortgage balance by that figure, so in essence our finances are not improved in the short term, but over the next five years should see a saving of the interest payments on both debts, or more accurately a lowering of the interest from 12.1% on one and 6.9% on the other to the mortgaged rate of 4%, assuming no increase in the next five years.
I realise this is an 'eggs-in-one-basket' idea, but was trying to work out the cheapest way of paying all three of these debts off as quickly as possible.
Any thoughts? Missed something? Worth doing? Pitfalls?