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  • FIRST POST
    • charlie 2015
    • By charlie 2015 5th Mar 17, 7:06 PM
    • 14Posts
    • 1Thanks
    charlie 2015
    Remortgaging - Debt Consolidation
    • #1
    • 5th Mar 17, 7:06 PM
    Remortgaging - Debt Consolidation 5th Mar 17 at 7:06 PM
    Hi there,

    I am a frequent lurker of these forums but this is my first post as I am in need of some advice if at all possible.

    We purchased our house around 2 years ago from a relative at a good price (£115,000). We took out an unsecured loan and a couple of interest free credit cards to make some much needed improvements to our home.

    What we are now looking to do is consolidate the credit card debt when we come to re-mortgage. There are a couple of reasons for us not wanting to keep balance transferring them to other 0% interest cards so that option is to be ruled out.

    I understand we won't know until we apply but do you guys think we are likely to be accepted due to our financial circumstances?

    CC1: Balance £7600, monthly payment of £89
    CC2: Balance of £5500, monthly payment of £110
    Loan: Balance of £28000, monthly payment £344
    Mortgage: Balance of £111,000, monthly payment £550
    Value of house: Between £135,000 and £142,000
    Joint income: £3200 per month

    All payments up to date, no defaults on our credit reports.

    I have done a bit of research and with a more preferable interest rate, it appears we should be able to pay off the credit card debt and pay less per month on the mortgage. It is worth noting that our mortgage is a pretty poor interest rate of 4.29%.

    Any help would be most appreciated.

    Thank you
Page 1
    • ACG
    • By ACG 5th Mar 17, 7:13 PM
    • 14,299 Posts
    • 7,085 Thanks
    ACG
    • #2
    • 5th Mar 17, 7:13 PM
    • #2
    • 5th Mar 17, 7:13 PM
    There is not enough equity in your home to wrap all of those debts into a mortgage, there is enough to wrap possibly the 2 credit cards into it and possibly some of the loan.
    I am a Mortgage Adviser
    You should note that this site doesn't check my status as a mortgage adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
    • charlie 2015
    • By charlie 2015 5th Mar 17, 7:26 PM
    • 14 Posts
    • 1 Thanks
    charlie 2015
    • #3
    • 5th Mar 17, 7:26 PM
    • #3
    • 5th Mar 17, 7:26 PM
    Hi, sorry I may not have explained properly. The idea is to pay of the credit cards, not the loan.
    • glosoli
    • By glosoli 5th Mar 17, 8:09 PM
    • 262 Posts
    • 127 Thanks
    glosoli
    • #4
    • 5th Mar 17, 8:09 PM
    • #4
    • 5th Mar 17, 8:09 PM
    When do the interest free periods expire on the credit cards?

    I think one of your problems may be even if you look to consolidate the credit cards, there won't be many options at almost 90% ltv.
    • Thrugelmir
    • By Thrugelmir 5th Mar 17, 9:50 PM
    • 52,486 Posts
    • 44,757 Thanks
    Thrugelmir
    • #5
    • 5th Mar 17, 9:50 PM
    • #5
    • 5th Mar 17, 9:50 PM
    It is worth noting that our mortgage is a pretty poor interest rate of 4.29%.
    Originally posted by charlie 2015
    If you purchased the property for £115k and still owe £111k two years later. That's hardly surprising.

    Lenders may well question the fact that you've borrowed over £40k to add relatively little value to the property.
    “A man is rich who lives upon what he has. A man is poor who lives upon what is coming. A prudent man lives within his income, and saves against ‘a rainy day’.”
    • charlie 2015
    • By charlie 2015 6th Mar 17, 5:32 AM
    • 14 Posts
    • 1 Thanks
    charlie 2015
    • #6
    • 6th Mar 17, 5:32 AM
    • #6
    • 6th Mar 17, 5:32 AM
    Hi, I appreciate what you are saying. We plan to stay in our home for sometime and whilst we may not see the money spent in regards to value , the jobs needed to be done. Before the jobs were completed the property was valued at £127,000. We have had the kitchen, bathrooms, boiler and windows/doors done swell as some cosmetic work. I am just guessing the value based on what is in the area. Before the kitchen, windows and boiler we had a value of £140,000 from an estate agent.
    • charlie 2015
    • By charlie 2015 6th Mar 17, 3:54 PM
    • 14 Posts
    • 1 Thanks
    charlie 2015
    • #7
    • 6th Mar 17, 3:54 PM
    • #7
    • 6th Mar 17, 3:54 PM
    Any further advice?
    • charlie 2015
    • By charlie 2015 13th Mar 17, 4:53 PM
    • 14 Posts
    • 1 Thanks
    charlie 2015
    • #8
    • 13th Mar 17, 4:53 PM
    • #8
    • 13th Mar 17, 4:53 PM
    Just wanting some more advice if this will be possible. As above I am only looking to pay off the credit cards.

    Our combined income is 49k per year, around £2200 outgoings per month which includes £300-£400 paying off the credit cards.

    For the amount we would need to pay off the debt, on an interest rate of around 1.5% it would reduce our mortgage by £100 per month. This would mean we would be £400-500 better off per month.

    Is what I am thinking making sense?
    • glosoli
    • By glosoli 13th Mar 17, 5:08 PM
    • 262 Posts
    • 127 Thanks
    glosoli
    • #9
    • 13th Mar 17, 5:08 PM
    • #9
    • 13th Mar 17, 5:08 PM
    The issue you are having is that there won't be enough equity to clear off any / all of your debts.

    The first thing you should do is contact a mortgage broker, who knows the debt consolidation criteria of lenders. The majority that I am aware of allow an absolute maximum of 80%, but there may be some that do up to 90%.

    If we assume optimistically that the value of the house is £142,000, and if we assume you are allowed to debt consolidate up to 90%, then this would be would be £127,800, which would be additional borrowing of £16,800, which means that even in the best case scenario, you would be left with credit card debt of £24,300, which would not go too far in meeting your objective of decreasing outgoings by £400-£500 per month. Personally, if I was you, I would:

    1) Check with existing lender their policy with debt consolidation, and obtaining a lower rate of interest for your existing borrowing,

    2) If it is not possible to do this with your existing lender, find out the early repayment charge of your existing agreement (assuming there is one, it would reduce your further borrowing amount even further), and approach a mortgage broker who can advise on debt consolidation criteria of lenders to see if this is feesable with anyone

    3) If it is not feesable, see if it would be financially worth while for you to re-mortgage onto a lower rate of interest anyway / and see if there is potentially scope to increase the term of the mortgage to reduce payments further, and use these savings to overpay onto your unsecured debts, concentrating on the highest rate of interest first and begin working through them.
    Last edited by glosoli; 13-03-2017 at 5:12 PM.
    • charlie 2015
    • By charlie 2015 13th Mar 17, 5:12 PM
    • 14 Posts
    • 1 Thanks
    charlie 2015
    Thank you for your response.

    As I said above, I only want to consolidate the credit cards which comes to around an additional £13k
    • glosoli
    • By glosoli 13th Mar 17, 5:15 PM
    • 262 Posts
    • 127 Thanks
    glosoli
    Sorry - yes I see that now. In any case, you would still have the same difficulties because it is a high loan to value, therefore it may still be worth following my previous post. Have you actually spoken to your existing lender or a mortgage broker about it yet?
    • jackieblack
    • By jackieblack 13th Mar 17, 5:26 PM
    • 6,849 Posts
    • 8,735 Thanks
    jackieblack
    You would be better off tightening your belts a bit and getting the credit cards paid off.
    You state you have a joint income of £3200 pm and outgoings of £2200 including £3-400 paying the credit cards. This leaves you £1000 surplus a month and total cc debt of £13200.
    Instead of prolonging and increasing the amount of interest you'll pay over years and years (totally wasted money), you could get those paid off completely in about a year, if you bite the bullet, focus and make it a priority, leaving you much better off every month and without the burden of credit card debt hanging over you.
    Also, without needing to consolidate the debt you will be in a better position to get an improved rate when you remortgage. Win win!
    Short term pain for long term gain.
    Last edited by jackieblack; 13-03-2017 at 5:29 PM.
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    • charlie 2015
    • By charlie 2015 13th Mar 17, 5:34 PM
    • 14 Posts
    • 1 Thanks
    charlie 2015
    That is what we were planning to do until my Mrs fell pregnant. I would be much happier to have it paid off before the new one arrives. Also when we come to remortgage we won't have a dependant at that time so want to make the most of having better "affordability".
    • sammyjammy
    • By sammyjammy 13th Mar 17, 7:36 PM
    • 4,082 Posts
    • 4,426 Thanks
    sammyjammy
    Any further advice?
    Originally posted by charlie 2015
    Don't do it. Seriously, you say your wife is pregnant and you know that will impact affordability, there is a reason for that......
    "You've been reading SOS when it's just your clock reading 5:05 "
    • getmore4less
    • By getmore4less 14th Mar 17, 3:45 AM
    • 27,801 Posts
    • 16,645 Thanks
    getmore4less
    you keep talking about paying of the credit cards you are not you are transfering the debt.


    you won't be getting 1.5% if you load up the mortgage might if you can get under 80%LTV

    Look for a good rate on the mortgage and throw everything at the CC if you don't want to carry over 0% for much longer.

    you already have the mortgage on a 30year term so not much you can do with that other than get a better rate. 1.5% £383pm


    what rate is that loan?
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