Confused...€30000 interest-free loan

[abulense]

Age: 30
Spouse’s/Partner's age: 27

Annual gross income from employment or profession: €32000
Annual gross income spouse: n/a

Type of employment: permanent full time

Expenditure pattern: not spending more than we earn but not making any significant savings either. We seem to be breaking even.

Rough estimate of value of home: €290000
Mortgage on home: €150000 (€760 per month)
Mortgage provider: permanent TSB
Type of mortgage: variable rate - currently at 5.35%

Other borrowings – personal loan of €5000 with credit union - paying back €150 per month

Do you pay off your full credit card balance each month? no
If not, what is the balance on your credit card? €1000

Savings and investments: Savings of €7000 in spouse's credit union. €2500 lock in my CU account. €2500 in current account

Do you have a pension scheme? no

Do you own any investment or other property? no

Ages of children: Two children - 6 years and 9 months

Life insurance: half mortgage cover


What specific question do you have or what issues are of concern to you?
We have an outstanding interest-free loan of €30000 which needs to be paid back this year. Spouse is currently not working but will be in a position to work part-time soon which should bring in approx. €200 per week. We need to borrow €40000 to repay the €30000 and upgrade car etc.
Do we:
1. Release equity to the value of €40000?
2. Borrow half from the credit union and the balance in releasing equity?
3. None of the above?!

And, in general, would you advise:
1. Changing mortgage provider for better mortgage rate?
2. Clearing €5000 credit union loan with savings we have?

Any advice would be hugely appreciated.
Thanks

 

[ClubMan]

You seem to have posted before you were finished. Some initial comments...

Other borrowings – personal loan of €5000 with credit union - paying back €150 per month

Do you pay off your full credit card balance each month? no
If not, what is the balance on your credit card? €1000

...

We have an outstanding interest-free loan of €30000 which needs to be paid back this year.

You mean you have non mortgage debts of €5K (personal loan) + €1K (CC) + €30K?

Do you pay off your full credit card balance each month? no
If not, what is the balance on your credit card? €1000

Savings and investments: Savings of €7000 in spouse's credit union. €2500 lock in my CU account. €2500 in current account

Why don't you clear the CC and reduce some of your debts with your savings?

We need to borrow €40000 to repay the €30000 and upgrade car etc.

Do you really need to upgrade the car? Do you really need to spend €10K?

 

[abulense]

Sorry, hit the return button before finishing!
Thanks for the comments Clubman.
Yes, our non-mortgage debts are CU €5000, CC €1000 and €30000 interest-free.
We could probably manage with €4-5K for the car. We need an extra 2doors with the arrival of baby...

 

[ClubMan]

1. Release equity to the value of €40000?

If you can repay the topup over a similar period to an equivalent personal (including CU) loan rather than over the lifetime of your mortgage (i.e. a few years rather than a few decades) then this might be an option alright especially seeing that your loan to value on the mortgage/property is relatively low and your repayments don't seem onerous.

2. Borrow half from the credit union and the balance in releasing equity?

The CU may be a flexible lender but they may not be the most competitive especially when the cost of (usually) having to keep money in shares/deposits while borrowing is factored in and any discount on the maximum 12%+ rate is accounted for.

And, in general, would you advise:
1. Changing mortgage provider for better mortgage rate?

Of course - if there are savings to be made by switching lenders or mortgage package (or even shopping around for mortgage protection life assurance, house insurance etc.) then you should at least investigate and maybe even act.

2. Clearing €5000 credit union loan with savings we have?

Clear your most expensive debts first. Your CC balance is probably a case in point. Then move onto the next most expensive.