A few questions about re-mortgaging

scotslad1983

Hi all,

My fixed rate for my first two years of my mortgage has come to an end, and I am currently on the RBS SVR rate of 4% for £75099 remaining on a £150k property in Edinburgh.

I am looking to consolidate my credit cards on to my mortgage now, to take advantage of the low interest rates at the moment, approx £13k, to take the total debt to approx £88k - within the 60% LTV.

First question is, do I need to have my home valued again, due to the potential reduction in value recently, or only in a certain percentage of cases?

I am considering fixing to a five year rate for my security - after the five years I would hope to be on a higher salary than my £24k at the moment.

When I re-mortgage, will £88k get deposited into my bank account, and then I settle my mortgage with RBS, and my credit cards separately, or does my new mortgage provider simply contact the other parties?

All help would be greatly appreciated so I know what to expect!

Many thanks in anticipation

Mrs_Bumble

If you look for a deal with RBS then you might get away without paying a valuation fee but in the current market they probably will want to.

If you remortgage away from RBS then you will need a solicitor, the solicitor will receive the remortgage funds and will pay off the existing mortgage and depending on the terms of the new mortgage offer may pay off the existing credit cards or if he isn't required to under the terms of the offer the remaining funds will be forwarded to you for you to settle the credit cards yourself.

belfastgirl23

I don't know a lot about these things but I know the advice on the DFW (debt free wannabe) board is to never consolidate unsecured debt into secured debt. Maybe you're doing this knowingly and you've investigated everything else and this is right for you. But just in case you haven't spent any time on that board, I'd advise that you take a good look at it before you make any decisions and maybe ask for opinions over there.

Good luck

scotslad1983

Mrs_Bumble wrote: »

If you remortgage away from RBS then you will need a solicitor, the solicitor will receive the remortgage funds and will pay off the existing mortgage and depending on the terms of the new mortgage offer may pay off the existing credit cards or if he isn't required to under the terms of the offer the remaining funds will be forwarded to you for you to settle the credit cards yourself.

Many thanks Mrs Bumble, I know this will vary, but what do solicitors usually charge for this? I gather it would be a reasonably straight-forward procedure so I'm hoping £50-£200?

Mrs_Bumble

I can only comment on prices in England and £200-250 is average.
If you remain with RBS then those fees are avoided.

In addition to the post above, it is not usually recommended to consolidate unsecured debt into secured debt, this is because you will be decreasing the equity in your house, making you more vulnerable. The unsecured debt is then secured over a longer period of time and the interest that is repaid over the term can be more than if you had made attempts to repay the unsecured debt.

So you should really look long and hard at whether it is feasible to repay the unsecured debt with a drawn up budget/plan etc and bear in mind the implications of securing them.

scotslad1983

If I stick with RBS - can I reduce the term of the mortgage with not much mucking about?

Mrs_Bumble

I can't see why not, when you speak to them ask if they would charge you to reduce the term and what the monthly cost would be.

scotslad1983

Thanks again.. I may take RBS up on this.. their fixed rate is reasonably competitive at 4.89%, and a low arrangement fee, and with the added bonus of no solicitor's fees - it may be worth me taking this rather than waiting on other rates MAYBE falling.

scotslad1983

scotslad1983 wrote: »

If I stick with RBS - can I reduce the term of the mortgage with not much mucking about?

Just to clear up for anybody else looking for advice.. I took out this re-mortgage with RBS. There was a fee for altering the term of the mortgage, but it was a drop in the ocean at £35, so if it helps your financial position, I'd definitely recommend it.

My £35 fee was waived regardless on this occasion due to my additional borrowing.

Gorgeous_George

Converting unsecured debt to secured debt is seldom a good idea. Of course, the financial numbers make sense and I understand the thinking behind such a decision.

I would suggest that anybody considering such a move should be absolutely certain of the numbers. How much credit card interest will be saved versus the cost of MEWing (fes plus interest - and interest rates may rise). Add on a sum for the risk factor i.e., there is a risk that you might rack up new credit card debt. For most MEWers I think the likelihood is high and the impact quite devastating (there may be no E to MEW next time).

On the plus side, the letters stop, your disposable income increases and you have a nice warm feeling because you have paid off your debt (even though you haven't).

GG