The Sheppards work full time, but love travelling. They like exotic holidays, but also enjoy simpler camping trips with Mr Sheppard's daughter, who is five.

The Sheppards work full time, but love travelling. They like exotic holidays, but also enjoy simpler camping trips with Mr Sheppard's daughter, who is five. The couple wantto have more money left in the bank at the end of the month, so they can travel without having to save for a full year.

The couple also want to pay off their debts and, once they have done this, move to a larger property in the £120,000 to £140,000 price range. The Sheppards want to know whether they should add their debts to the mortgage now, to cut monthly outgoings, or pay the loans back over the three years they have left to run. But they realise that if they add the debts to their mortgage now, it will limit the budget for their next home. What is their best course of action?

We put their case to Drew Wotherspoon at Charcol, Daniel Claydon at Claydon Associates and Lisanne Mealing at MDM Associates.

JULIE, 29, AND TONY, 35, SHEPPARD

Salaries: Julie £24,000; Tony £14,000.

Debt: £13,000 of £15,000 borrowed from Halifax. £6,000 loan from Yorkshire Bank.

Property: Repayment mortgage of £31,000, with 15 years left, with Egg.

Savings: £500, Britannia (4.75%), for Tony's daughter

Pension: BT and NHS pension schemes.

Monthly outgoings: Mortgage £270, bills £150, food £280, home phones £60, food £280, petrol £20, other £600.

SAVINGS

Mr Claydon says the first priority for the couple should be to start to save. They should try to put some money into an easy-access account, such as a mini cash Isa, so they have money for emergencies, holidays or towards a house move.

Mr Wotherspoon says that although the Sheppards have been able to build up equity in their house, this will not help them in any short-term financial emergencies. They should save a reserve of about £6,000. They could save this over 21 months by setting aside £280 a month. Ms Mealing points out that they could shelter all this from tax by using their cash Isa allowances.

Mr Sheppard should make sure that any savings for his daughter are in her name, so that they are not taxed.

DEBTS

Whether it makes sense for the Sheppards to move their debt to their mortgage depends on whether their loans have large redemption penalties. The couple's loans are their largest financial commitment, costing them more each month than the mortgage. Mr Wotherspoon works out that personal loan repayments and interest cost the Sheppards £567 a month. They could make savings by switching the debt to a mortgage.

If they keep to their existing arrangements, and perhaps delay moving, they will have tighter cash flow now but need a smaller mortgage in three years' time - and so be better off in the long term. The crux of the matter, the panellists agree, is the cost of redeeming the personal loans. If there are no penalties, or these are small, it will almost certainly make sense to move the debts to a mortgage. Ms Mealing calculates that if the couple add their loans to their existing mortgage, they would have a loan of about £50,000. The cost of that would be be about £330 a month over 20 years or £292 over 25 years.

Mr Claydon suggests the couple could consolidate their loans into one, with a low-cost lender such as Northern Rock, now offering unsecured loans at 5.8 per cent. Over five years, this would cut their loan repayments to £410 a month. The best course depends on the level of any redemption penalties.

MORTGAGE AND PROPERTY

When it comes to moving house, the Sheppards are in a better position than they might think, not least because they have built up a good amount of equity in their existing home. Mr Claydon suggests the couple could look at switching from Egg to another lender. A flexible mortgage, allowing overpayments, might be one option.

If they want to move, they have headroom to allow them to buy the property they want, whether they leave their personal loans as they are or add them to the mortgage. Ms Mealing says that the couple could have a mortgage of £96,000, based on 2.5 times their salary. Even if they added their existing debts to the mortgage, they could still raise enough money to buy a home costing £136,000.

Mr Wotherspoon says that even if the Sheppards consolidate their other debts on to a mortgage, they would have equity of £40,000. This, assuming they want to spend £140,000 on a new property, means they have a deposit of more than 25 per cent. This gives access to the best deals on the market.

Advisers' views are given for information only.

* For a free financial check-up in the Wealth Check column, write to The Independent, 191 Marsh Wall, London E14 9RS, or e-mail cash@independent.co.uk.