Moratorium or Interest Only Period query

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0scar

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Hi,

I'm considering applying for a 3-month moratorium on our mortgage or a period of interest-only payments; have been on a three-day week for the last few months but thankfully going back to full time in February. During this time (over christmas too of course...) we have seriously eaten into our approved 2k overdraft & over the limit on 2 occasions; on paper we have enough coming in to cover our mortgage/credit card/credit union repayments, insurance payments, utilities etc, but want to try & get back to a regular standing in our bank account.

Having spoken to our mortgage provider & explained this, they didn't seem to have any difficulties with a moratorium in theory, and have sent out the forms. When speaking to them I didn't ask about an interest-only period - no idea how these work - but before I do I'd like to get views on which would be more sensible, given that I'm not very financially sensible (obviously). We're on a fixed rate & the balance of the mortgage is well below the relative value of the house.

Thanks.
 
Hi Oscar,

Firstly, I would think you need to deal with the credit card and overdraft. If you can get rid of the credit card debt or transfer it into a term loan you would be a whole lot better off.

Regarding the moritorium you should go for the interest only if you can afford it. If you take the moritorium you will be rolling up interest that will be added to your capital and increasing your overall debt.

At least if its interest only you wont be adding to the debt.

Patrick
 
pj111 said:
Hi Oscar,

Firstly, I would think you need to deal with the credit card and overdraft. If you can get rid of the credit card debt or transfer it into a term loan you would be a whole lot better off.

Regarding the moritorium you should go for the interest only if you can afford it. If you take the moritorium you will be rolling up interest that will be added to your capital and increasing your overall debt.

At least if its interest only you wont be adding to the debt.

Patrick
Click to expand...
I agree 100% with pj on this sound advice nice one pj
 
Thanks for your advice Patrick, I know the credit card is the most expensive debt & is what we should deal with first. I have plans to trying selling our smaller car to try & clear it, but of course that's not a given. I'd thought of applying to increase our CU loan to get rid of it, depressing though it is to have to borrow more to service another debt - which effectively the moratorium is too of course. I'll talk to the bank about interest only, and look at the likelihood of budgeting our way out of it, despite things being tight.
 
Oscar, you might benefit from doing a budget as a means 2 get out of debt and to stay out of it. Daily/weekly/monthly recording of where you money goes will help you to get a handle on it. You say that" on paper you have enough coming in". Which implies that you don't have full control over your finances and you are unsure of where the money is going. Budgetting is a just a good habit not as hard as it might sound. Personally I make a "game" out of living within a specified budget. ie after working out what goes on all routine expenses using a planner, I budget a set amount and then try to beat the target. I also make a habit of saving. Likewise, I shop in Lidl/Aldi or pick up on specials. I read AAM for best deals on everything from electricity to insurances, TV.phones etc. Asking your question on AAM is a good first step to good financial control . Check out budget planner from AAM. Here is the link: http://www.askaboutmoney.com/showthread.php?t=145557

If you are familiar with excel you can add a sheet & record daily expenditures on the budget planner. Alternatively use old fashioned paper, or keep receipts and do it at the end of the day. Also as you are getting a moratorium, it might be worth working out exactly how you will use the "saved" repayments to offset debt. You might also consider switching your credit card to zero interest, if that is possible. Check out "best buys" section on AAM banking section, or other websites like bonkers.ie
 
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Oscar as you've mentioned there is enough money coming in than you're going to have to tackle who you are using your overdraft. You ought to do the money makeover thread on here so you can see where you are going wrong. If there is enough coming in then you should not go interest only. That should only be used if one absolutely has to.
 
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