Top up or go interest only?

J

jackieO

Registered User
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Hi everyone,

Here is my dilemma - would bve grateful for any advice.
  • I have a mortgage with €165k outstanding - property valued at €230k. Tracker rate 3.25% APR. 25 years left.
  • Also €18k car/home improvement loan with APR of 7.9%. Repay €492/month.
  • I also have debts of €10k on credit card - due to ex bf who was authorised user (lesson learned) and we have since broken up not least to his taking me to the cleaners - 16.9% APR. Repay as much as I can every month but usually no more than a few hundred.
Between my mortgage and loan, I am paying 1300/month.

I have been given 2 options by my bank:

1. Top up to €190k - either over 20/25 years. That would clear €18k loan, pay off €7k of my cc debt (leaving mye with €3k) Repayments would be €1,073/month but worried about the fact that I would be eating away at remaining equity.

2. Go interest only for 2 years, reducing my mortgage to €452 month. I would then use the difference & some more belt-tightening to do the following:

Pay €1000/month from credit card - would be cleared in 10 months.
Then, start eating away at the loan which would be down to about 14k after 10 months, pay €1k a month into that, which would take about 14 months.

Plan would be to be debt free in 24 months (apart from mortgage) which would stay at €165k.

Not sure what best option is. My tax-home pay after tax will be €3,400 (after pension levy kicks in). Next increment due in October but will be minimal affect.

I'm worried that the €1k a month for the credit card plus my loan repayments will be too much, even with the interest only mortgage but I HAVE to get debt free in 24 months if I go interest only.......

Is the top up a better idea & throw extra money into the mortgage? Or by reducing term to 20 years, is that saving me money?

VERY confused.
 
Thought so. Give them a ring. They will probably drop the rate if you ask them. I rang the other week looking to get rid of my payment protection policy and they offered me 3% drop on the spot without me even asking for it. You may be able to bargain them down further. A small amount to be saved, but saving nonetheless.
 
Would I be right in assuming that the bank want you to refinance from your favourable tracker mortgage to a less favourable variable type? If that's the case, I would tell them where to go and do your best on the unsecured debt.
 
Raskolnikov said:
Would I be right in assuming that the bank want you to refinance from your favourable tracker mortgage to a less favourable variable type? If that's the case, I would tell them where to go and do your best on the unsecured debt.
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No - they said I could stay on tracker rate - but that was a few weeks ago now.
 
Raskolnikov said:
Would I be right in assuming that the bank want you to refinance from your favourable tracker mortgage to a less favourable variable type? If that's the case, I would tell them where to go and do your best on the unsecured debt.
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I agree 100%Raskolnikov. Make sure if you go ahead to check out the loan offer letter and that the tracker remains. I would shop around on your credit card rate. 0% can be obtained out there. Do a google search on same and try and reduce asap
 
jackieO said:
No - they said I could stay on tracker rate - but that was a few weeks ago now.
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Interesting. If that's the case, I would go for the top-up option. To me, an interest-only mortgage simply doesn't make sense on a Principal Private Residence.

Just make sure that you've learned your lesson, and that you won't use the goodwill of the bank to rack up more unsecured debt.
 
jackieO said:
Even as a temporary way of getting back 'in the black'
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You can only go interest-only for so long (in your case, two years). When that period expires, you will have to revert back over to principal repayments anyway. With the way property prices are, it's possible your house may not increase in value at all in the intervening two years.
 
Raskolnikov said:
You can only go interest-only for so long (in your case, two years). When that period expires, you will have to revert back over to principal repayments anyway. With the way property prices are, it's possible your house may not increase in value at all in the intervening two years.
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I'd expect if anything it would fall but I'm wondering if I am better off after 2 years still owing the €165k I owe now or having topped-up??
 
I'm on 9% with MBNA. Continuously ringing them and asking for them to reduce the rate has paid off.
 
Whatever you do, make sure you don't agree to anything that loses you your tracker mortgage.

With another .5% cut most likely on the way this week, the best thing would be to take out the top-up but pay it off more quickly:

If you stay with your CC Company,you'll end up paying about 2K more than if you take out a top-up - no reason why you can't pay the top-up off over two years - as long as you don't get a fixed rate on the top-up.
 
jquinn said:
Whatever you do, make sure you don't agree to anything that loses you your tracker mortgage.

With another .5% cut most likely on the way this week, the best thing would be to take out the top-up but pay it off more quickly:

If you stay with your CC Company,you'll end up paying about 2K more than if you take out a top-up - no reason why you can't pay the top-up off over two years - as long as you don't get a fixed rate on the top-up.
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Drat - just checked with bank & the tracker they were prepared to give me is "no longer available" and they'd move me onto the SVR - currently 3.45%.

I think that going interest only might be the better option & work really hard to clear other debts in 2 years (or less)? I don't want to lose my tracker mortgage......but if I go interest only, I stay on tracker rate.
 
I neglected to mention earlier about making use of 0% balance transfers on the credit card. Check the best buys section for these. I'm sure you could go interest free by moving to various institutions who do this and keep 0% interest for the whole 2 years.
 
Do you have a letter of offer on the tracker rate offered by the bank a few weeks ago?
 
Trackers are very valuable, stay on it at all costs.

Can you rent a room or two out? You can earn up to €850 a month with the rent a room scheme. I think some general belt tightening and a switch to interest only for a year or so should sort you out
 
legallady said:
Trackers are very valuable, stay on it at all costs.
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I know, but if I top up I'm gonna lose it. That's definite now.

legallady said:
Can you rent a room or two out?
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Not an option I'm afraid....already 2 of us there (me & my son)

My biggest concern is that even if I do go interest only for 2 years, I still won't have enough time to clear my debts. If I do the top-up, at least I know I am debt-free (apart from new mortgage) and I can put extra money into the new mortgage to bring it down faster.
 
I have decided to do interest-only - I don't think it's a good time to be taking on more debt.

So, another question, does anyone know what I need to do re. mortgage life insurance? I have a policy with Hibernian - do I just call them & ask them to 'freeze it' at current amount?

Thanks.
 
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