Releasing home equity to pay-off debt?

Chamone_2

My situation is as follows:

• I bought my current house in 2004 for £109K, with a £11K deposit
• My mortgage was taken out in 2004 for £98K
• I currently owe around £90K on the property, and it was recently valued at £138K (by my calculations that leaves me with around 65% LTV)

I'd like to ask the forum for a little advice as there are a few things that have been weighing on my mind recently.

1. My girlfriend moved in with me 4 years ago and we'd now like to get a place of our own (with her name on the mortgage)
2. Due to her income being considerably lower than mine, since moving in she has only contributed to bills/groceries, and I continued to cover the mortgage payments on my own. However, her financial situation is about to change so she can soon afford to contribute.
3. I have around £10K in credit card debt that I'd like to wipe out before applying for a new mortgage. At my current repayment rates this will take a good 2-3 years.

Now, as much as I love my girlfriend and would like to buy a home together (along with the "what's mine is yours" concept), I'm aware that things will never quite be 'even' as the equity in this property I've built-up (including my hard-earned £11K deposit) will automatically carry over to the next house.

I'd like the next property to be an 'even' investment so that we both feel that we own an equal stake in the house. Releasing the equity could reset the balance so that we can start contributing together. As an added bonus I will be able to pay off my outstanding debts.

However, I'm also aware that releasing equity to pay off debts will increase my LTV and is essentially a 25 year loan. I'm not sure whether this may also reduce our chances of securing a mortgage on a more-expensive property.



Any advice on how to proceed, or what my options are, would be extremely welcome!

fatbelly

Chamone wrote: »

[*]I have around £10K in credit card debt that I'd like to wipe out before applying for a new mortgage. At my current repayment rates this will take a good 2-3 years.

Are they at 0%? If not, try balance transfer deals - this is the quickest way to 'wipe out' the debt.

http://www.stoozing.com/0fees.php

Remortgaging/taking out secured loans does the opposite - you pay more because you pay over a longer period.

Also breaches the golden rule - never convert unsecured debt to secured.

Chamone_2

Thanks for the advice - especially the golden rule.

They're definitely not 0% - the majority is on a card at a whopping 20% and the remainder is earning 20.9%! I'm getting slammed on interest.

I don't know which is worst for my situation though - applying for the mortgage with £10K of credit card debt (which I presume they will immediately take off my disposable income when calculating how much I can borrow), or losing my LTV.