Browse Forums Home Finance 1 Apr 25, 2009 1:54 pm Ok currently paying $450 a month extra on our mortgage..largely due to drop in interest rates.. but have outstanding credit debt of $2000 and car debt owing around $8000. Would that extra $450 be better served going to pay off the credit and car or should I leave it on the mortgage? Or put half onto the car payments? Obviously the car, credit interest rates are much higher but the mortgage is over a long term so bigger savings can be had making extra payments now. I'm confused, not very good with calculations and finance and neither is dh. The other way of looking at is of course I would LOVE to get the car paid off, this would then free up a further $240 a month to put toward mortgage.... Credit debt is not a huge issue for us, we can get it down just by taking chunks out of dh's pay when he earns a bit of extra here and there. Other issue is I've had a quote from my insurer for refinancing the car with 2% lower interest rate but factor in the early exit fee of $600 or so from the other finance company is it worth it? Re: What would you do? 2Apr 25, 2009 5:54 pm Im not sure about the car re-financing deal but my understanding is that one should always pay off the debt with the highest interest first, when that's done, move onto next highest and so on - which usually means pay all other debts before mortgage as that will have the lowest interest rate. Wont take too many months of an extra $450 a month to knock off $2000 completely and then pay extra $450 month plus the original payment amount of the card onto the car: realistic to have all other debts cleared in just over a year (ie extra 450 plus original payment amounts)and then pay extra on the mortgage. Alternatively see if you can consolidate car and card loans into your mortage and pay extra $450/month plus original payment amounts for other debts all onto the mortgage. This would work better as you are paying full amount of repayments at home loan interest rate, as long as you are disciplined about sticking to it and not creating any more debt in the meantime (like spending up on credit card again when balance is nullified ) That's how I would do it. Re: What would you do? 3Apr 25, 2009 5:58 pm Because the debts are relatively small there wouldn't be much of a benefit to consolidate them into your home loan unless you were refinancing your home loan anyway. If I were you I would: 1. Call your home loan lender and ask them to reduce your repayments to the minimum. 2. Put all of your available money towards the credit card. 3. Once that is paid off then call your car loan lender and ask them to increase your repayments to a size you feel comfortable with. Re: What would you do? 4Apr 25, 2009 8:09 pm jb_money Because the debts are relatively small there wouldn't be much of a benefit to consolidate them into your home loan unless you were refinancing your home loan anyway. If I were you I would: 1. Call your home loan lender and ask them to reduce your repayments to the minimum. 2. Put all of your available money towards the credit card. 3. Once that is paid off then call your car loan lender and ask them to increase your repayments to a size you feel comfortable with. I'm not a money expert, but I would do this also and like Helyn said, pay the debt with the highest interest first 'A bottle of wine contains more philosophy than all the books in the world.' Louis Pasteur Vegie garden: viewtopic.php?f=19&t=27637&start=0 My Backyard Adventure Re: What would you do? 5Apr 28, 2009 9:15 pm Well since you all seem to confirm that this is indeed a good thing to do I think I might have to! It would be good to have the car paid of in 13-14 months. And now dh has switched jobs, he is being paid weekly I may just have to start paying the mortgage weekly too. Good savings to be had right? Re: What would you do? 6Apr 28, 2009 9:24 pm I agree that refinancing your home may not be worth it (in interest savings) because of the amount of money (ie. $10,000) you need to raise to pay further debts off. BUT, you need to be aware that these little "side debts" (ie. not mortgage) can go on for years, because you never really get rid of them. You may find when you finally pay the car off, you buy another etc etc. If you have been paying $450pm over and above, ring your bank (mortgagee) and ask how much you are in advance and then consider paying that amount (say $2,000) straight off your credit debt immediately. THEN if you can't get any more for the car, def just pay min mort payment and really work hard at just paying off car loan. If that seems like too long a task, ask the bank about extending the mortgage to pay the car off (subject to val of course) and then ask them if it would be worthwhile for you, because we don't know their fees etc... Good luck, Annie A thankful person is a happy person. [/color]My hobby design blog: http://aviewondesign.blogspot.com/ Re: What would you do? 7Apr 28, 2009 9:30 pm Annietom I agree that refinancing your home may not be worth it (in interest savings) because of the amount of money (ie. $10,000) you need to raise to pay further debts off. BUT, you need to be aware that these little "side debts" (ie. not mortgage) can go on for years, because you never really get rid of them. You may find when you finally pay the car off, you buy another etc etc. If you have been paying $450pm over and above, ring your bank (mortgagee) and ask how much you are in advance and then consider paying that amount (say $2,000) straight off your credit debt immediately. THEN if you can't get any more for the car, def just pay min mort payment and really work hard at just paying off car loan. If that seems like too long a task, ask the bank about extending the mortgage to pay the car off (subject to val of course) and then ask them if it would be worthwhile for you, because we don't know their fees etc... Good luck, Annie Hmm few good points there to consider too, thanks Annie. never thought of redrawing off the mortgage. Bought in Nov 21 at the height of the market (classic). Good area, atrocious floor plan. BUT has land out to the left-hand side that we can extend out on (see second… 0 8784 Thanks mate. Yeah good points! Leaning towards Option 3 to get a bit extra space in the cabinets but not going too crazy high (and expensive). Would require a mini… 13 39755 Hi It came to my attention after the handover that - The facade cladding on the face and the side are not straight. -The face tapers down by 50mm from left to right and… 0 2472 |