Re-mortgaging to pay off debts...?

MisterEz

Hi All -

I currently have a mortgage of £92000 on a flat that is worth around £165000, which is currently costing me £260 per month with Alliance & Leicester.
Over the years I've been a bit stupid with credit cards, and also have an outstanding car loan, meaning I've a total separate debt of £24000. The minimum payments on these total about £470 per month.

I've been looking at re-mortgaging my flat to £120000, and using the money to pay off all my debts and also do up the flat (decorating, etc). I've looked around, and have been looking at at fixed rate 3.19% mortgage with the Co-Operative bank, which would cost me about £450 per month for the first 2 years... so, by doing this I'd be much better off each month by about £280 - so affording the larger mortgage wont be a problem at all, I'll actually be better off.

My question is this - if I apply for a mortgage, obviously I'd have to declare the £24k debts that I have. Is this likely to be counted against me, baring in mind that I'll be paying it all off when the new mortgage comes through? Is this an acceptable thing to use a re-mortgage for...?

Would appreciate any advice

Thanks.

sammyjammy

What are you basing the valuation on?

What is your income?

gizmo111

You will not be paying off your debts just transferring them and paying for them over a lot longer period. So that car you have now will still be on the mortgage balance in 25 years time. Thionk very carefully about and do some number crunching and see how you can reduce your unsecured debt before you consider making it secured.

MisterEz

Hi sammyjammy, thanks for your reply...

The valuation's admittedly a best guess, but based on what other flats in my block have sold for & what other similar flats in the area are currently priced at. If anything I've undervalued it, but the value can be as low as £160k for me to still be with the 75% LTV requirement of the mortgage I'm looking at.

My salary - I currently earn a basic of £30000, with an additional £1500 - £2000 in bonuses each year.

I've also checked my credit score with Equifax - they give me a score of 485 out of 500, which they deem to be 'excellent'.

Thanks...

MisterEz

Thanks Gizmo111 - still very much in the consideration stage, but the remortgage is the option I'm favouring at the moment... I understand I'll be effectively paying off the debt over a longer period, but this seems like a more affordable way for me to do so at the moment.

getmore4less

MisterEz wrote: »

Thanks Gizmo111 - still very much in the consideration stage, but the remortgage is the option I'm favouring at the moment... I understand I'll be effectively paying off the debt over a longer period, but this seems like a more affordable way for me to do so at the moment.

But it allready affordable, £2k pm income debt £730 pm plenty left to live off and overpay the debt.

Why free up money?
What are you going to do with it spend it on more stuff?
Why not pay for the stuff you allready bought and then save for more stuff?

Better to overpay the debts and get rid of them sooner

If you do remortgage o reduce the cost oft he debt overpay

Look up snowballing it might be a better option than the remortgage.
http://www.makesenseofcards.com/snowcalc.html

whats are the rates on your debts

do a SOA
http://www.makesenseofcards.com/soacalc.html

try debtfreewannabe
http://forums.moneysavingexpert.com/forumdisplay.html?f=76

JimmyTheWig

Potential problems with the plan...

1. You are changing unsecured debt into secured debt. If you can't pay your mortgage you lose your home.

2. You are changing short-term debts into long-term debts. Although the interest rate on the mortgage will be lower than you are currently paying on your debts, because you will be paying off the mortgage over many years this will probably end up costing you more.

3. Can you be sure that you won't rack up more debts and end up in the same position again?

4. I presume that to get this new mortgage you will have to pay a fee - is that going to be adding to your debts?

5. I presume that a 3.19% fixed rate isn't fixed for very long. Rates are set to rise. What will you do when the fixed rate ends (in two years, maybe?) and the best rate you can get is 6% or more?


But generally a mortgage is the best way to borrow £24k, so if you think you can be disciplined then it might be worth it.
Personally I would suggest you go for a 5+ year fix. It will cost you more in the short term, but may well save your house from reposession in the medium term!

BargainGalore

Is that interest only mortgage of 92000 @ £260 a month

Just wondered I pay 2.4% on 58k mortgage @ £300 a month

getmore4less

BargainGalore wrote: »

Is that interest only mortgage of 92000 @ £260 a month

Just wondered I pay 2.4% on 58k mortgage @ £300 a month

Good point

£120k @3.19 over 20y is £677pm not £450