Should i clear credit union loan?

S

Sharky

Registered User
Messages
33
In order to get my mortgage I took a loan out with the Credit Union.

This has meant that over the last two years I have monthly mortgage and credit union repayments (both are pretty similar amounts)

The mortgage is over 30 years (28 left) and the CU is over 5 years (3 left).

The house has increased in value by €100K and I still owe the CU €20K

Would it be wise to re-mortgage or release equity on the house to clear off the CU?

Any advice greatly appreciated!!!
 
Depends really on how comfortable you are with your current net disposable income.

Assuming your current CU loan repayments are 633pm

EG: 20k on an average 6.5% for the CU and 3 years left

2 possible options

remortgage and split the loan and put 20k over 5 years. (and Xk over 30 years or what ever term your mortgage is currently on)

Assuming 4.5% rate your repayments (on the CU side) would be reduced to 373pm.

But you'd pay slightly more interest over the full 5 years as opposed to leaving the CU loan run on the 3 years left.

EG around 300/400 euro.

Or for example remortgage the CU loan over 30 years which would reduce your repayments down to 126pm (at assumed rate of 4.5%)

But over the full life time of the 30 years you would end up paying double the amount of the original 20k loan in interest.
 
As mentioned above, reducing the rate on the CU loan (by including it in the mortgage) will only make financial benefits if it isn't added to the entire term of the mortgage.

Depending on the structure of your mortgage (if fixed rate fees may apply for accelerated payments - if tracker/variable it should be ok) and your own ability to make increased payments to reduce the 20k over a shorter term (e.g. the 3 years remaining on the current CU loan) you should end up saving.

You can crunch the numbers on one of the many mortgage calcs out there (Jeacle calc one of the most popular on AAM).
 
You must log in or register to reply here.
Back
Top