Mortgage affordability & debt

Lesleyb_3 · 28 May 2015 at 9:15PM

Hi I'm hoping someone can help me here as I'm becoming really worried.

Ok here it is. We are due to remortgage in October and I'm very worried that we will fall foul of the new mortgage affordability rules. Our combined annual income is approx. £44k, we have almost £20k in credit card debts all on 0% deals and £10k car loan debts.

I recently contacted our lender (Virgin Money) to ask if we either have some additional lending to deal with credit card debts or to extend the term of our mortgage (15years left) to 20 years in order to free up some my to get rid our our debts quicker. We were refused on both counts.

We currently have no problems paying back our debts and meeting all our other monthly commitments, but had hoped to have a little more disposable income to reduce debts quicker.

Is there anything we can do to make ourselves more friendly to the affordability rules. I had thought if we consolidated out credit cards debts to one loan and closed all credit cards this may be a start, but I'm worried about applying for more debt and it adversely affecting our credit rating if we are declined.

Can anyone offer any advice, it would be gratefully received.

Thanks in advance.
LB

Thrugelmir · 28 May 2015 at 9:25PM

Lesleyb wrote: »

but had hoped to have a little more disposable income to reduce debts quicker.

If you are currently have your credit card debts on 0%. Then the onus is on you to find savings to pay down the debt quicker.

Lensers are in general adverse to debt consolidation. As if provides the solution but not the answer. By consolidating the debt onto the mortgage you are simply extending repayment of the debt. While not addressing the cause of why the debt has accumulated. The additional concern for the lender is that should they agree to consolidation you will simply allow the situation to arise again.

Lesleyb_3 · 28 May 2015 at 9:42PM

Thanks, Thruglemir. Yes you're right, we have stopped spending and are reducing our debts and hope never to be in debt again. However, I'm really worried about not being able to secure a new mortgage deal.

DandelionPatrol · 28 May 2015 at 10:19PM

Lesleyb wrote: »

Is there anything we can do to make ourselves more friendly to the affordability rules. I had thought if we consolidated out credit cards debts to one loan and closed all credit cards this may be a start, but I'm worried about applying for more debt and it adversely affecting our credit rating if we are declined.

You are £30,000 in debt now. On income of £44,000, your debt is nearly 9 months gross. As a rule of thumb, probably 6 months gross unsecured is the maximum any quality lender will want to see and ideally less.

If you 'consolidate' your debt will still be nearly 9 months gross. You can cut it differently in many ways but only cutting it down will make you more attractive as borrowers..

Mortgage affordability & debt

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