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  • FIRST POST
    • Nick_00
    • By Nick_00 15th May 17, 11:30 AM
    • 6Posts
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    Nick_00
    ++ Re-Mortgage Advice ++
    • #1
    • 15th May 17, 11:30 AM
    ++ Re-Mortgage Advice ++ 15th May 17 at 11:30 AM
    Hello Everyone,


    This is my first time on any kind of forum let alone a financial guidance one, however I am hoping there is some balanced opinions to my current situation.


    In Brief . . .


    I have an interest only mortgage with £143k outstanding. House is valued at £180k.
    Total debt to date £25k (includes credit cards and one store card).
    I would like to re-mortgage to a interest + repayment and borrow £25k to wipe out the debt.
    I have 'never' missed a payment, I have no CCJ's or defaults but credit score is around 340 due to relatively high credit.
    I have looked at some lenders and based on a fixed interest rate I can afford a £800 monthly repayment.
    Is it worth trying to re-mortgage based on my current financial situation ?


    Thank you for your help in advance.
Page 1
    • kingstreet
    • By kingstreet 15th May 17, 12:11 PM
    • 32,392 Posts
    • 17,394 Thanks
    kingstreet
    • #2
    • 15th May 17, 12:11 PM
    • #2
    • 15th May 17, 12:11 PM
    You are unlikely to be able to obtain a mortgage for 90%+ for debt consolidation.
    I am a mortgage broker. 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. Please do not send PMs asking for one-to-one-advice, or representation.
    • mrginge
    • By mrginge 15th May 17, 12:13 PM
    • 4,312 Posts
    • 7,729 Thanks
    mrginge
    • #3
    • 15th May 17, 12:13 PM
    • #3
    • 15th May 17, 12:13 PM
    What are the current rates on the mortgage and CC debt?
    • Nick_00
    • By Nick_00 15th May 17, 1:53 PM
    • 6 Posts
    • 0 Thanks
    Nick_00
    • #4
    • 15th May 17, 1:53 PM
    • #4
    • 15th May 17, 1:53 PM
    Thank you for your reply Mr Ginge,


    Interest only mortgage as per Bank of England + 2%
    Card 1 = APR frozen at 16.9%
    Card 2 = APR at 16%
    Card 3 = APR at 21%
    Store Card = APR at 16%
    • xyz123
    • By xyz123 15th May 17, 9:44 PM
    • 1,505 Posts
    • 368 Thanks
    xyz123
    • #5
    • 15th May 17, 9:44 PM
    • #5
    • 15th May 17, 9:44 PM
    What about your employment? Permanent, temporary, secured? What is the income?
    Last edited by xyz123; 16-05-2017 at 6:58 AM.
    • Nick_00
    • By Nick_00 17th May 17, 2:21 PM
    • 6 Posts
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    Nick_00
    • #6
    • 17th May 17, 2:21 PM
    • #6
    • 17th May 17, 2:21 PM
    Thank you for the reply xyz,


    Permanent
    Gross £56k
    • fewcloudy
    • By fewcloudy 17th May 17, 2:47 PM
    • 173 Posts
    • 84 Thanks
    fewcloudy
    • #7
    • 17th May 17, 2:47 PM
    • #7
    • 17th May 17, 2:47 PM
    Thank you for your reply Mr Ginge,


    Interest only mortgage as per Bank of England + 2%
    Card 1 = APR frozen at 16.9%
    Card 2 = APR at 16%
    Card 3 = APR at 21%
    Store Card = APR at 16%
    Originally posted by Nick_00

    Can any of these cards (amounts?) be balance transferred onto a new 0% interest rate card? Or will credit history prevent anything like that?
    Loads of info. on stuff like that under Cards and Loans at top left of home page.


    fc
    Feb 2008, 20year tracker with Sprogget and Sylvester, 0.5% + base for 2 years, then 0.99% + base for life of mortgage. Kudos to my mortgage broker...
    • saajan_12
    • By saajan_12 17th May 17, 3:49 PM
    • 1,010 Posts
    • 678 Thanks
    saajan_12
    • #8
    • 17th May 17, 3:49 PM
    • #8
    • 17th May 17, 3:49 PM
    So you're looking to remortgage £168k on a £180k property, giving a 93% LTV. This would attract the highest interest rates and be subject to the strictest affordability criteria. The top mortgage on the MSE comparison tool is a 2.79% interest rate and carries a £1,200 fee. You would pay £780 monthly.

    Currently, you have a 2.25% interest rate so paying £270 monthly. Can you afford the extra £1200 upfront + £510 monthly? If you can, I’d throw all this at the credit cards. For simplicity assuming 17% interest across the cards and lets say you pay the 12x£510 at the end of the year rather than monthly (which is a conservative approx.), you’d pay off the balance in 6 years. This will shorten substantially if you have more funds you can use to pay it off early. Also if you can balance transfer to a 0% interest card for a couple of years, that will massively increase how much of your funds go to the initial capital instead of interest. Once you’ve paid off the unsecured debt, you can start overpaying the mortgage (many allow 10% per year)

    If you go the remortgage route, you’ll increase your interest rate for the current £143k balance (as you’re unlikely to get as low as 2.25% on a high LTV mortgage) and be tied into higher monthly payments. Interest only gives the flexibility of overpaying when you can, with a low risk of default if you have difficulty paying.
    • Nick_00
    • By Nick_00 17th May 17, 8:59 PM
    • 6 Posts
    • 0 Thanks
    Nick_00
    • #9
    • 17th May 17, 8:59 PM
    • #9
    • 17th May 17, 8:59 PM
    Many thanks Saajan...


    If I understand you correctly, clear the credit cards with the money I would be paying for re-mortgage ? Keep the interest only mortgage for now ?


    You're right I am paying £263 (interest only) but I could afford the £780 pm. It's the credit cards and store card that are killing me each month totalling £600 pm.


    My thought process was to increase the long term debt over 25years i.e. £168k at a lowish interest rate, that would clear the £25k debt and free up £600 each month...That's the theory anyway.


    Help and advice genuinely appreciated.
    • xyz123
    • By xyz123 18th May 17, 4:54 AM
    • 1,505 Posts
    • 368 Thanks
    xyz123
    With that much income and interest only mortgage you should really be able to reduce credit card debt fairly quickly. I would suggest you reduce that debt substantially in next 3-5 months and re look at situations. If you need advice on debt, post on debt free wannabe board here including a full monthly statement of affairs (templates available in that forum). Good luck
    • mrginge
    • By mrginge 18th May 17, 6:32 AM
    • 4,312 Posts
    • 7,729 Thanks
    mrginge
    Agree with xyz123. 56k income and a tiny mortgage, yet £600 CC bill is killing you?

    What are you spending your remaining 2.5k a month on?
    • getmore4less
    • By getmore4less 18th May 17, 7:09 AM
    • 30,842 Posts
    • 18,447 Thanks
    getmore4less
    Summary with notes.

    Hello Everyone,

    I have an interest only mortgage with £143k outstanding. House is valued at £180k.

    LTV 80%

    Interest only mortgage as per Bank of England + 2%
    paying £263 (interest only) but I could afford the £780 pm

    £143k @ 2.25% = £268pm repayment over 25y is 624pm

    Total debt to date £25k can afford a £800 monthly repayment.

    Card 1 = APR frozen at 16.9%
    Card 2 = APR at 16%
    Card 3 = APR at 21%
    Store Card = APR at 16%

    Permanent
    Gross £56k ( NET around £3,300pm)

    It's the credit cards and store card that are killing me each month totalling £600 pm.
    Originally posted by Nick_00
    There are two things to consider here,

    1. Why the debt in the first place.

    you need to understand how this happened and the steps needed to not need more debt.

    consolidating and not fixing the underlying problems just means more debt and a bigger mortgage.


    2. the plan

    to formulate a plan you need a proper analysis of your finances

    Now the consolidating route looks attractive one simple payment but the numbers for that could result in a non optimum solution especially if NO 1 is not fully sorted.

    Two issues with consolidating(use Nationwide for a guess of rates).

    More money, higher LTV=higher rate and will have to go repayment.

    £143+25)/£180 LTV 93% now that is more than Nationwide will give you suspect it may be for quite a few lenders or higher rates, eg the rate for new mortgage without consolidation would be well over 3% and a 25y payment in excess of £850pm

    another option may be to review the mortgage, is the base+2% a tracker what are the best rates your lender has for 80% LTV(allthough even a really good rate like 1.84%(3yfix) only reduces the I/O payment to £220pm) and you would lose the base+2%

    there may be something that can be squeezed with the mortgage but not a lot.

    The real issue seems to be the spending, assume you have fixed the problems then with the mortgage at £263 and debts £600 that leaves £2,400 to live off.

    This is one for the debtfreewanabee board
    http://forums.moneysavingexpert.com/forumdisplay.php?f=76
    and a SOA
    http://www.stoozing.com/calculator/soa.php

    you need to find out where your money is going.


    doing a very rough calculation as the details are missing
    interest debt free date using £600pm payment
    £25k @ 20% = £416 6y 0m
    £25k @ 17% = £355 5y 4m
    now if you can get the rates down with some 0% cards
    £25k @ 10% = £209pm 4y 4m

    So with a £600pm payment you will be eating into the debt and be debt free relatively quickly.

    if the debt is not going down suggest you are spending any capital payments you make so back to the SOA and finding out where the money is going..


    With careful analysis of the SOA and a migration to lower rates a 3/4/5year plan would need.

    £25k @ 20% £930/£761/£663pm
    £25K @ 17% £892/£722/£622pm
    £25k @ 10% £807/£634/£532pm
    £25k @ 5% £750/£576/£472pm


    I would say that the
    3y plan looks over ambitious,
    4y doable with a belt tightening and some rate reductions
    5y very achievable.


    That's the debt sorted but once that is done then the mortgage needs tackling, what is left on the full term now?
    Last edited by getmore4less; 18-05-2017 at 7:14 AM.
    • getmore4less
    • By getmore4less 18th May 17, 7:27 AM
    • 30,842 Posts
    • 18,447 Thanks
    getmore4less
    Many thanks Saajan...


    If I understand you correctly, clear the credit cards with the money I would be paying for re-mortgage ? Keep the interest only mortgage for now ?


    You're right I am paying £263 (interest only) but I could afford the £780 pm. It's the credit cards and store card that are killing me each month totalling £600 pm.


    My thought process was to increase the long term debt over 25years i.e. £168k at a lowish interest rate, that would clear the £25k debt and free up £600 each month...That's the theory anyway.


    Help and advice genuinely appreciated.
    Originally posted by Nick_00
    looks like you based that on the £168k @ 2.8% over 25 years

    I think with LTV 95% you would struggle to get that rate.

    It won't free up £600pm because you will have to go repayment on the lot.

    Also on that payment it would take 5 years to get back to £143k 80% LTV.

    I think a 5year plan without consolidating will give you more flexibility and if you can hit the rates on the cards might even end up cheaper.
    • getmore4less
    • By getmore4less 18th May 17, 7:46 AM
    • 30,842 Posts
    • 18,447 Thanks
    getmore4less
    picking up on this bit

    doing a very rough calculation as the details are missing
    interest debt free date using £600pm payment
    £25k @ 20% = £416 6y 0m
    £25k @ 17% = £355 5y 4m
    now if you can get the rates down with some 0% cards
    £25k @ 10% = £209pm 4y 4m

    So with a £600pm payment you will be eating into the debt and be debt free relatively quickly
    You said the £600pm on the CC is the problem but could afford £800 total thats (£800-£263)= £537

    only £63 less is there nowhere to cut?

    if we do the numbers above on your I can afford £537pm your debt free target is
    £25k @ 20% 7y 7m
    £25k @ 17% 6y 5m
    £25k @ 10% 5y 0m
    • Nick_00
    • By Nick_00 18th May 17, 6:45 PM
    • 6 Posts
    • 0 Thanks
    Nick_00
    WOW !! Great advice, thank you.


    Maybe I haven't been clear on the income part, I have other outgoings such as Car on finance £300pm, Child Support £300pm, cost of living bills etc . . .


    Basically I'm left with about £400, so the £600 on CC's would be great to clear.


    I do get it about paying off the debt first, but I worried I'm not paying anything off the capital of the mortgage, I have 15yrs left . . .


    Everyone's advice is greatly appreciated!
    • xyz123
    • By xyz123 18th May 17, 8:07 PM
    • 1,505 Posts
    • 368 Thanks
    xyz123
    WOW !! Great advice, thank you.


    Maybe I haven't been clear on the income part, I have other outgoings such as Car on finance £300pm, Child Support £300pm, cost of living bills etc . . .


    Basically I'm left with about £400, so the £600 on CC's would be great to clear.


    I do get it about paying off the debt first, but I worried I'm not paying anything off the capital of the mortgage, I have 15yrs left . . .


    Everyone's advice is greatly appreciated!
    Originally posted by Nick_00
    As suggested please consider doing a fill SOA and post on debt free board.

    As said before 56k equals around 3300 in net income per month . Even considering car finance, child support, interest only mortgage you have around £2000 left. Of course cost of living depends on your living standards and its your choice what you prioritise. but it is clear that the underlying problems is debt management.
    • mrginge
    • By mrginge 18th May 17, 11:01 PM
    • 4,312 Posts
    • 7,729 Thanks
    mrginge
    Excellent work by GM4L
    • getmore4less
    • By getmore4less 19th May 17, 10:24 AM
    • 30,842 Posts
    • 18,447 Thanks
    getmore4less
    WOW !! Great advice, thank you.


    Maybe I haven't been clear on the income part, I have other outgoings such as Car on finance £300pm, Child Support £300pm, cost of living bills etc . . .


    Basically I'm left with about £400, so the £600 on CC's would be great to clear.


    I do get it about paying off the debt first, but I worried I'm not paying anything off the capital of the mortgage, I have 15yrs left . . .


    Everyone's advice is greatly appreciated!
    Originally posted by Nick_00
    That will need sorting but unless you find a lot more spare cash you cannot do both at the same time.

    debt is debt you just have it in multiple places change it to one place does not change the total and the numbers suggest that the net position in 5 years will be no different which ever way you do it.

    One for the brokers,
    you have decent income to support the mortgage but the debt and other commitments in their current form may make extending the term a problem as most lenders will want you on repayment.

    to achieve that you will have less to throw at the debts so any interest rate juggling will be for longer and renewal of 0% etc might get harder.

    a period of focus on the debts should make the refinance of the mortgage easier and better rates than if you up your LTV,, it may be that in a year or two the debt will be lower the LTV will be better and you will have control over you finances to allow a review.

    total payment £800pm once debt free and throw the full £800 at the mortgage to clear your your £145k
    rate, term needed
    2.25% 18y 6m
    2.50% 19y 0m
    3.00% 20y 2m
    ........ Longer.

    This just leads us back to the real problem you need to cut your commitments if you want to speed up clearing all your debts including the mortgage.

    PS: car on finance is more debt


    if you can find an extra £50pm(£850 total) you will be debt free sooner and the mortgage numbers look much better
    rate, term needed
    2.25% 17y 2m
    2.50% 17y 7m
    3.00% 18y 7m
    ........ Longer.
    • Nick_00
    • By Nick_00 20th May 17, 6:18 AM
    • 6 Posts
    • 0 Thanks
    Nick_00
    Many thanks GM4L,

    I will throw as much as humanly possible at the short term debt, then when cleared, I will look at re-mortgaging...

    I was just worried about not paying the capital off the mortgage...But you're right I can't do both at the same time...

    Thank you again.
    • getmore4less
    • By getmore4less 20th May 17, 6:42 AM
    • 30,842 Posts
    • 18,447 Thanks
    getmore4less
    read up on snowballing.

    The key to your Mortgage free date will be
    find more spare cash(spend less).
    get better rate on the debts.
    snowball

    I think you would benefit by posting the SOA on the debtfreewanabe boards because like others I suspect there is quite a lot you could do to make you money go further and create a plan to get lower rates on your existing debts,

    you don't want to be applying for new cards without a plan.

    it is likely that
    Card 3 = APR at 21%

    Will be the one to go for first but hat will need an analysis of all your existing debts and commitments......
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