What next - totally thrown off course

Middy123

Hi all

Quick background.

We own our house outright following a critical illness payout (at which time the FA at HSBC advised us to pay the mortgage off - which we did).

We have recently decided to do some debt consolidation and a mortgage for home improvements (improve don't move and all that) and applied to HSBC (whom we have banked with for 25 years) for a £60k mortgage on a property valued at £171k over 10 years. We were advised we didn't need a mortgage but a 'Home Owner Loan' so we filled in all the paperwork, got a decision in principle that they would ultimately lend us £97k.

They have phoned today to say they are not agreeing the 'loan' as we don't fit their profile for lending at the current moment. We would be paying off all credit cards and the only other loan outstanding would be the cars each month - we are both working and as I say, the DIP came out to us borrowing £97k

So, 3.5 years ago we had a mortgage with them for more and we were ok then - but now we have £171k in equity we're not worth a punt for £60k??? Am I missing something here?

Obviously, we're 3 weeks into the process so credit checks will be showing - and presumably showing as turned down - so where do we go next??? Loathe to go to the Ocean Finances of this world but at a loss that if our own bank of 25 years won't lend then who will??? The reason we want to consolidate is so we have more spare cash per month.

Thanks in advance for any words of wisdom.

Middy

Mrs_Bumble

Consolidating means attaching unsecured debt to your property and therefore there are obvious risks of losing your home if you default etc, also you will essentially be spreading the costs over more years and therefore will ultimately pay more interest, so is it worth it?

HSBC are being picky, did they give any other reason why you don't meet their profile?

I suggest getting a copy of your credit files to see what is showing and that way you can get advice on where there may be a problem.

Middy123

Hi Mrs Bumble

Thanks for the prompt reply.

We figure that given we are effectively 'sat' on £171k of equity it would be best to put it all into one monthly payment, cut the cards up (believe me, we would) and cut out all the mounting interest that we can see adding up each month.

I'm positively addicted to checking the credit reports and have the latest one printed off just today - and we are both showing as mid 900's with just 2 late payments on my husbands CC a few months ago.

When the bank phoned my husband he was at work so it was difficult to discuss it fully so we're going to phone them back to discuss it fully. He couldn't get across to the caller that the cc outgoings each month wouldn't be on the statement as they would be cleared. She kept saying "how do we know you're going to clear the debts?" - to which my husband said would there be a way of holding back the money set aside for clearing these and the bank clear them on our behalf but she couldn't grasp that. OK, if the answer is no then we'll move on, but we are just totally confused as to why, when we appear to be a good bet that we've been turned down.

Thanks for the reply :beer:

Mrs_Bumble

Don't take it personally! Lenders are a law unto themselves and make the rules up as they go along! HSBC because they don't publish a specific criteria make it much harder to judge! Take your credit file copies to an independent mortgage broker and let them have a look and I am sure they will be able to place it with a lender.

TheMiner

So, 3.5 years ago we had a mortgage with them for more and we were ok then - but now we have £171k in equity we're not worth a punt for £60k??? Am I missing something here?

I'm not an expert here, merely looking in as an outsider, but 3.5 years ago, you were both healthy, now one of you has a critical illness (which I assume hasn't been given the final all-clear yet??). I can see why they think you are a risk

Rockporkchop

What interest rate was this "Home Owner Loan" you wanted? They are usually at a much higher interest rate than any mortgage, and probably not too far away from some of your credit card rates.

You should never turn unsecured debt like credit cards into secured debt. Can't you just use every penny you would have spent on your mortgage and debt repayments just paying off as much as you can from your debts. By all means try to get your debts lower by transferring them around, trying to get better rates etc but never secure them on your house.

opinions4u

You should never turn unsecured debt like credit cards into secured debt.

Never say never.

Switching the same amount, same term to a lower rate and the discipline not to build up unsecured debt again seems like an exception to your rule.

luckyfool

The idea that it would need to be a "Homeowner Loan" or Secured Loan is a nonsense, if you have not got a first mortgage then you cannot actually have a secured loan.

Without knowing what your incomes are and credit history etc then its difficult to tell what options are best for you. You should try speaking to a broker.

luckyfool

It is likely to be either credit score related, or possibly a change in criteria regarding capital raising or capital raising for debt consolidation specifically.

Some lenders have recently changed criteria to limit capital raising for debt consolidation to £30k or a certain percentage whichever is lower . . . there is even one lender that will not allow debt consolidation at all.

Rockporkchop

opinions4u wrote: »

Never say never.

Switching the same amount, same term to a lower rate and the discipline not to build up unsecured debt again seems like an exception to your rule.

I couldn't agree with you less.

luckyfool

Rockporkchop wrote: »

I couldn't agree with you less.

So someone paying 30% on a credit card should never consolidate it into a mortgage and pay lets say 4-5%?

Wow, thats some sensible and sweeping financial advice.