PLEASE LOOK ...remortgaging to pay off debts... good idea or bad?

raq

thebaddeleys wrote:

Hi,

We have a repayment mortgage of £158000 at the moment and our house is worth £185000. We have £25000 of debt in various different loans all with an average of 7% apr. At the moment if my husband doesn;t earn any commision at work we end up being £400 short every month which is eating into our overdraft that is nearly at its limit. so we need to do something fast as we are going further and further into debt every month. should we remortgage and release the equity in our home to pay off the £25000 as is we add it onto the mortgage it will only cost us £142 a month whereas at the moment it costs us £600 plus which we can't afford. I don;t currently work as i;m at home with our one year old son. We do get all the tax credits etc that we are entitled to. should we move house to pay off debts and use the equity that way or remortgage, are there any other options? we need your help and fast! thanks.


House hold bills

Mortgage- 975.4
Mortgage Life cover- 24.38
House insurance- 30.35
TV licence- 10.59
Child maintenance- 270
Council Tax- 119
Talk Talk- 20
Tiscali- 15
Gas / Electric- 43
United Utilities- 39.68

Extra items

HFC (Dinning Table) 0%- 23.17
David Llyod gym- 55
Sky- 36
Blackhorse (TV) 0%- 43.77
Sofa (Blackhorse)- 50
Car (blackhorse)- 205

Tesco car insurance- 42


Loans

Abbey Loan (9.6%)- 163.13
Tesco loan (7.3%)- 252.09

O2- 60

Food- 200
Gold HSBC card- 35


Totals Outgoing-2627
Total income- 2891.24

the figures above may be slighty out as they are off an old post i've done before but from my numbers above them you get the idea!

please help us with any advice many many thanks x

Everyone in different boats on this site, but I must admit if you took out the loan on the property you won't have any equity at all. So my answer would be stay well away.

raq

seven-day-weekend wrote:

We consolidated our debt onto the mortgage of our investment property , BUT.....

...we sold the property six months later and ended up debt-free, AND

...we never used the credit cards again, in fact we cancelled them and only kept one. This is only ever used to buy things like flights or from EBay and the balance is paid off in full each month. The last two months we have spent nothing at all on it.

There is no way we would have used the (substantial) equity from our main home. The only reason we consolidated onto a mortgage at all was that we were selling the property, so it was short-term, and it wasn't our home anyway.

Some friends of mine did the same as a previous poster mentioned, kept putting debt onto the mortgage, they now have no equity left in their home that was almost paid for at one time and they still owe £1000s apart from that.

Don't do it!

My initial suggestion is that you sell your car and buy a banger to last you for a few years. This alone will save you £200 a month. Cancel the gym and Sky too. There will be others along shortly who will know more than me, but those are my suggestions.

We've just had aloan agreed and my husband cut up the cards a couple of weeks ago. NO chance of ever going back to how I was feeling. Hiding statements from him , the phone calls and making out it was someone else, shouting at the children for no reason at all , then breaking down and crying all the time. The time finally came one friday when I was gonna walk out the door. Husband called me back and just hugged me, he said he thought it was something else that was the matter and we would work through it together. He got really scared because he thought I had post natal depression. Since then I have had a smile on my face due to the fact how lovely he was about it. One good thing he has just had a huge payrise so this will be going on the loan and then we only have 3 years left on it. ( took it out for £10k ),.


So I know I would never have another card..

System

Without looking at your SOA - Bad Idea!

lynzpower

I certainly would not secure. you say your house is worth X amount, the issue for me is "whose told you that". the only person who can truly tell you what the house is WORTH is the person who buys it off you.

estate agents, asking prices in local papers and the like will all be higher than what yur house is worth.

There are lots of things you can cut back on there, and I believe that you getting a part time job will definatley help.

When do the car/ sofa/ tv loans end? What are the APRS on these?

HokeyCokey_3

Hi Thebaddeleys,

Whilst I agree it's not a good idea, if your mortgage APR is considerably less than your loan, then it's an option. However you really must cut those cards up and learn how to live within your means.

Stop your gym membership and SKY now! These are luxuries, you do not NEED. Go for a run or cycle, and get freeview.

Give your whole finances a makeover...look for the cheapest deals for everything. Then maybe start considering ways you may be able to generate some extra income. Have you considered working from home, working in the evening or at weekends?

You can sort this out if you really put your mind to it, but adding it to your mortgage must not be seen as the easy option...you still have to make changes.

Just to add, when your husband receives some commission, put it into savings and pay an extra bit of your mortgage off!

Good luck

Cokey x

sandralovescats

The best thing to do would be to sell your house, use the equity to pay off your debts then you can buy something smaller and cheaper that you can afford to pay for.

System

Oh yes, I forgot about the 'Secured' bit - very scary, dont do it.

Maximillion

Hi,
I have had a similar situation. we remortgaged to cope with the debt but within a year were in the same position again. Eventually we sold up, ditched a car, reduced the outgoings and now finally have the flexibility to shift the debt about. making it cheaper and eventually it will be possible to pay off.

Whichever way you look at your debt you need to get it cheaper and there are a lot of articles on this site to guide you.

In my opinion remortgaging might work for you short term. It is of course a very expensive option over the long term but if you need to survive on a monthly basis (know how that feels!) it will buy you a reprieve.

However the moral of my story is that debt is just a symptom of the real problem of living outwith our means - it's not an easy habit to break and takes real recognition and commitment to beat. I wish you luck and better success than I had.

BettiePage

firstcrowcounter wrote:

Hi,
It is of course a very expensive option over the long term

If only more people realised that.....


As others have stated, don't do it. If you run up more debt (as it is not 'paying off your debt' merely moving it) then you run the risk of losing your house, unsecured debt you don't. Also, what happens when house prices fall? Negative equity anyone....?

Cypher

I would look at cutting non essential spending as mentioned above.

Consolidating your debts into a larger mortgage could end up putting your home at risk, also the underlying problem is your spending more than your earning If you do consolidate you debts without sorting out the spending you run the risk of being in the same position again, but the next time it will be with an even bigger mortgage.

I wasn't in the same situation as you, but my wage was reduced substantially though changing jobs. Sky (well Cable) had to go I now have freeview. Mobile Phone I changed to pay as you go, in fact I more or less stopped using it. I now rarely drive unless I have to (Petrol Saving). I stopped going out, bought cheaper food at the supermarket and cut out the takeaways. If I had Gym membership that would definitely have gone as well. I also tried to get overtime at work and even considered getting a part time job in the evenings (I managed to avoid that one). I then put myself on a pretty tight budget and set about paying off my debts. I paid the minimum payments on everything and threw everything I could at my smallest debt. I also moved money around so I got it on the cheapest APR's I could get. When the smallest debt was paid, I quickly got rid of the next smallest, the repayments now including the smallest debts previous payments so this one quickly got paid off as well. I carried on like this and it started to snowball until I was paying decent amounts off on the bigger debts.

I've now flipped it on its head, and this year (2007) I will no longer pay things like car insurance, house insurance etc by monthly payments. I have now managed to save up so I can pay them in full when they are due. This again saves me even more money as I won't incur the credit charges.

One final thing I did was to save up a small emergency fund. I started small at first £100-£200. This allowed me to cut up all my credit cards (bar 1 for real emergencies) but I've never used it since, other than very small online purchases that get paid off in full each month.

The main think is getting the spending under control. You really do have to become disciplined