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    • kelvin.willis
    • By kelvin.willis 12th Sep 17, 4:45 PM
    • 5Posts
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    kelvin.willis
    Mortgage with credit card debt
    • #1
    • 12th Sep 17, 4:45 PM
    Mortgage with credit card debt 12th Sep 17 at 4:45 PM
    I have posted on the debt free site, but thought my query may be best placed here.

    I have currently accrued approx £16,000 of debts on credit cards.

    I have approx £45k - £55k of equity in my property.

    I am thinking of selling this house and purchasing one for approx £22k less, therefore giving me money to settle the credit cards and use the remainder for the purchase and selling (calculations show this is doable).

    My question is, is this a good idea, and what impact will having these debts have on any mortgage application? I am with halifax and know that for others they have put a clause in that the debts must be paid off once the house sale has gone through - is this still the case?

    Online calculators with the debts would not allow me to purchase a property even at a lesser value, but is more than enough without the debts (which there would be zero if i downsized).

    Any advice greatly appreciated.
Page 1
    • ThePants999
    • By ThePants999 12th Sep 17, 11:45 PM
    • 863 Posts
    • 1,012 Thanks
    ThePants999
    • #2
    • 12th Sep 17, 11:45 PM
    • #2
    • 12th Sep 17, 11:45 PM
    Why would you move house just to release equity? Can't you just borrow more on your existing mortgage?

    Moving home to free up £22K sounds an extraordinarily bad idea to me - by the time you've paid stamp duty, estate agent's commission, conveyancing fees and disbursements, removals costs and whatever needs doing in the new house, you've eaten a huge chunk of it. Even before you've accounted for the ludicrous amount of your time that it takes!
    • 5557223
    • By 5557223 13th Sep 17, 11:23 PM
    • 28 Posts
    • 7 Thanks
    5557223
    • #3
    • 13th Sep 17, 11:23 PM
    • #3
    • 13th Sep 17, 11:23 PM
    Why would you move house just to release equity? Can't you just borrow more on your existing mortgage?

    Moving home to free up £22K sounds an extraordinarily bad idea to me - by the time you've paid stamp duty, estate agent's commission, conveyancing fees and disbursements, removals costs and whatever needs doing in the new house, you've eaten a huge chunk of it. Even before you've accounted for the ludicrous amount of your time that it takes!
    Originally posted by ThePants999
    Exactly that
    +1
    • glosoli
    • By glosoli 13th Sep 17, 11:38 PM
    • 673 Posts
    • 387 Thanks
    glosoli
    • #4
    • 13th Sep 17, 11:38 PM
    • #4
    • 13th Sep 17, 11:38 PM
    It may be possible that there isn't sufficient equity in his property to release some for debt consolidation. In terms of the impact on the application, so long as there isn't any adverse credit history, then it shouldn't have an impact.
    • csgohan4
    • By csgohan4 14th Sep 17, 7:38 AM
    • 3,960 Posts
    • 2,470 Thanks
    csgohan4
    • #5
    • 14th Sep 17, 7:38 AM
    • #5
    • 14th Sep 17, 7:38 AM
    might want to hit the debt free wannabee forums to really hit that debt down
    "It is prudent when shopping for something important, not to limit yourself to Pound land"
    • andrewmp
    • By andrewmp 14th Sep 17, 8:16 AM
    • 1,545 Posts
    • 792 Thanks
    andrewmp
    • #6
    • 14th Sep 17, 8:16 AM
    • #6
    • 14th Sep 17, 8:16 AM
    Why would you move house just to release equity? Can't you just borrow more on your existing mortgage?

    Moving home to free up £22K sounds an extraordinarily bad idea to me - by the time you've paid stamp duty, estate agent's commission, conveyancing fees and disbursements, removals costs and whatever needs doing in the new house, you've eaten a huge chunk of it. Even before you've accounted for the ludicrous amount of your time that it takes!
    Originally posted by ThePants999
    Quite often there's no stamp duty to pay.
    • kelvin.willis
    • By kelvin.willis 25th Sep 17, 4:46 PM
    • 5 Posts
    • 1 Thanks
    kelvin.willis
    • #7
    • 25th Sep 17, 4:46 PM
    • #7
    • 25th Sep 17, 4:46 PM
    There would be no stamp duty to pay on the property i intend purchasing.

    My query really relates to whether the debt would have an impact on getting a mortgage, or would the lender take into account that once the house had sold then the debt would be cleared?

    It may seem drastic but I want a clean slate and am fortunate that where I want to move to is cheaper than where i currently live.

    Also, if i was to leave my current lender there would be an exit fee of approx 2k, so is it best to stay with them or go with another lender who I know would accept the debt would be paid off? I'm currently with the halifax.

    If I didnt sell and stayed in the property, what would happen when my current deal ends? Do they reassess my finances when applying for a new deal, and what impact would the credit card debt have (didnt have it when i first got the mortgage)?
    • Thrugelmir
    • By Thrugelmir 25th Sep 17, 6:10 PM
    • 55,870 Posts
    • 49,241 Thanks
    Thrugelmir
    • #8
    • 25th Sep 17, 6:10 PM
    • #8
    • 25th Sep 17, 6:10 PM
    As you are in a fixed term product with an ERC your current lender is your best option. Lenders have a responsibility \ duty of care towards their borrowers. As you are proactively seeking to address your own financial difficulties. Then there is no reason that they won't assist you. Providing that you meet the criteria for the new mortgage (debt aside). I assume also that you'll also be reducing your mortgage in the process. Which is a major plus from the lenders perspective.

    If you wish to proceed with such a move. My suggestion would be is that you go fully armed with all the information required. Set out on paper the equity, debts, costs of moving etc. You'll find that being transparent and open from the outset will enable a good relationship to build. They are not going to judge you on past events. Don't be afraid to take the opportunity to start afresh. You'll feel a lot better for it once the matter is over.

    .
    "Wide diversification is only required when investors do not understand what they are doing." - Warren Buffett
    • Jenniefour
    • By Jenniefour 25th Sep 17, 6:15 PM
    • 1,217 Posts
    • 1,244 Thanks
    Jenniefour
    • #9
    • 25th Sep 17, 6:15 PM
    • #9
    • 25th Sep 17, 6:15 PM
    I see on your other post that you probably want to move anyway, and you would still need a mortgage. So first stop has to be a mortgage brokers office to see what is/isn't doable, and get an idea on whether you would be able to get a big enough mortgage to move anyway, with present day affordability criteria.

    Why not go back and post an SOA on debt board - let them take a look and make suggestions. That can only help, regardless of whether moving is do-able or not. Even if it's to confirm you are already doing everything reasonably possible.
    • kelvin.willis
    • By kelvin.willis 26th Sep 17, 11:34 AM
    • 5 Posts
    • 1 Thanks
    kelvin.willis
    As you are in a fixed term product with an ERC your current lender is your best option. Lenders have a responsibility \ duty of care towards their borrowers. As you are proactively seeking to address your own financial difficulties. Then there is no reason that they won't assist you. Providing that you meet the criteria for the new mortgage (debt aside). I assume also that you'll also be reducing your mortgage in the process. Which is a major plus from the lenders perspective.

    If you wish to proceed with such a move. My suggestion would be is that you go fully armed with all the information required. Set out on paper the equity, debts, costs of moving etc. You'll find that being transparent and open from the outset will enable a good relationship to build. They are not going to judge you on past events. Don't be afraid to take the opportunity to start afresh. You'll feel a lot better for it once the matter is over.

    .
    Originally posted by Thrugelmir

    Thank you for the advice, I am going to approach my current lender to see what the options are. I was just worried about the debt being taken into account as it wouldnt allow me to borrow anything! The mortgage amount would be much lower, probably by around £15k.

    I do just want rid of the debt so this seems the way forward.
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