Mortgage Consolidation

M

mrliffey

Guest
Think of consolidating my existing Credit union and car loan loans into my existing Mortgage. Currently paying €960 on 200k(189k remaining)mortgage 260 on car loan and 135 on credit union. Not sure whether it's a good idea to consolidate all 3 ?
Any advice or opinions would be great.
 
The temptation to consolidate is always based on the reduction in monthly loan outlays.

Don't know how long is left on your mortgage but I suspect (from the balance on it) that it will still be with you long after your car is rusting on a scrap-heap. If that's so, consolidating your car loan means you'll pay interest on the purchase of an item after you'll have paid out again to replace it.

The same logic applies to the credit union loan. If it was for something fleeting like a holiday (or even something of only medium-term benefit like decorating your house) then probably best not to. If it was to fund the purchase of the house in the first place (the deposit, for example) there's no reason why you shouldn't.

However, all of the above concerns are addressed if you can organise a remortgage with a shorter repayment term for the consolidation borrowing (I remember once organising the purchase of a car on a five year term with IIB at the same rate of interest as my mortgage). The only thing to look out for here is that the fees (valuation, legal and "arrangement") aren't greater than the interest saved by moving to mortgage rate on these extra borrowings.

If the provider won't do that for you, you could consolidate for the full term of your mortgage and make additional payments which would effectively clear the shorter term financing element of your mortgage over an appropriate period. This does require discipline.
 
Thanks Oysterman.
I basiclly have the guts of 23yrs left on my Mortgage. I could get an extra 20K to pay off credit union, credit card and 5 years old car. 210K over 20 years is working out about €150/month cheaper than all my loans combined.
We have the income to cover the loan amount, but I'm not sure how this works. Will they give me a new mortgage over 20 years or will they try and sell my a top up loan at a higher interest rate?
 
It depends on who your mortgage is with - some lenders do top up at homeloan rates and at no cost (and over a shorter term than the main mortgage); some will charge a higher rate and some will require you to pay legal fees and outlays for a top up so you might as well take the opportunity to switch the whole lot to a cheaper lender.

Kind regards,

Sarah

www.rea.ie
 
mrliffey,

While the €150/month looks like a saving, beware.

If you consolidate the €20k over the remaining 23 years of your mortgage, you'll end up paying (assuming 3.25% interest rate) a total of €8,424 interest on the €20k (or real interest of €7,141, assuming 2% inflation).

But not consolidating it and paying it off over the next 5 years at a much higher rate with the current lenders of, say, 9% means you'll only pay €4,910 interest (€4,695 real interest).

So staying at the much higher rate can save you money unless you organise to keep the term short on a remortgage.
 
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