can I remortgage with defaults?

magybagy

I have 8 defaults starting from 5 years ago when a change of career cut my income in half. I've been (successfully) repaying these debts through a Local Authority Money Advice payment plan since. Although most defaults date from 2007 two didn't become active until 2009 and 2010 so will remain live until aug 2016- so frustrating. I am however now in a significantly improved improved situation; a permanent professional post with income of £35,000 and no other financial commitments or personal responsibilities - other than the £10,000 to pay off debt plan.
I have £45,000 outstanding on my mortgage with the property worth approximately £76,000. I want to remortgage to clear my debts but am unsure if any lender would consider me. I have no defaults related to my mortgage - no payments ever missed. I have tried my own bank Llloyds unsuccessfully. Defaults were credit cards and unsecured loans. Anybody out there been in the same postion, or who can offer advice please.
Much appreciated.

MRG

Your loan to value is 60% so there are lenders that will look at this as it is good security for them (ie secured on your property) You are less of a risk than say someone in the same situation but wanting a 90% loan.

Edit: If you remortgage adding the debt your Loan to Value would still be 72% so it is still good security for a lender.

magybagy

Cheers MRG for your quick response. Will contact my local mortgage advisor. Am slightly more hopeful

magybagy

Anybody out there with personal experiences of this or similar situations?

MRG

You have nothing to lose by trying, either a broker or another bank will do a decision in principle for you with the extra included, this will credit score you but won't cost anything to find out.

Obviously I am biased to brokers but if you find a good one they will know the right lenders to try rather than going for one willy nilly

RenovationMan

Why would you want to turn unsecured debt into secured debt by putting it onto your mortgage? Surely the best thing to do is use your increased and more reliable income to pay down the debts as quickly as possible?

By all means put more expensive credit onto cheaper credit (i.e. balance transfer credit cards onto 0% credit cards) if it makes financial sense, but never move debt onto a mortgage, it nearly always ends in tears.

MRG

RenovationMan wrote: »

Why would you want to turn unsecured debt into secured debt by putting it onto your mortgage? Surely the best thing to do is use your increased and more reliable income to pay down the debts as quickly as possible?

By all means put more expensive credit onto cheaper credit (i.e. balance transfer credit cards onto 0% credit cards) if it makes financial sense, but never move debt onto a mortgage, it nearly always ends in tears.

This is true although I have seen people successfully make their monthly payments alot less making it more manageable.

Im not saying its either is the better option, im just saying it can be done.

magybagy

Hi renovation man - I understand your point of view. I should have clarified however that my full remaining debt is £14,000 but that I have been offered a reduced total of £10,000 for full and final payment. I have been paying every spare penny towards my debt (£700 a month). My mortgage is £550 a month. My plan would be to take on a much shorter mortgage than my current one. Does this make sense to you?

RenovationMan

magybagy wrote: »

Hi renovation man - I understand your point of view. I should have clarified however that my full remaining debt is £14,000 but that I have been offered a reduced total of £10,000 for full and final payment. I have been paying every spare penny towards my debt (£700 a month). My mortgage is £550 a month. My plan would be to take on a much shorter mortgage than my current one. Does this make sense to you?

I can see why you would want to shift that debt. If there is absolutely no way of putting the £10k onto a 0% credit card or an unsecured loan then I guess that it makes sense to put it onto your mortgage in order to save £4k, but remember that if you hit any more bumps in the road, such as a job loss, instead of paying that £14k debt at a token amount each month you'll be running the risk of losing your home. Two smaller debts with 2 different creditors is safer than a single larger debt with one creditor, especially if that debt is secured on your home.

With a LTV of 40% and a payment plan already in place for the £14k debt you are well placed for a 'worst case scenario'. With a LTV of 27% and with that perhaps reducing even more if house prices fall further, you're in a poor position. I guess it' all about risk and whether you feel it's worth taking for £4k.

I'd check out all other avenues before looking at adding this to your mortgage and if you do add it then make sure you don't rest until you've paid down that debt as quick as you can.

Good luck though, I'm glad things are looking up for you.

foreversummer

I would say considering the circumstances it would be advantageous to add the £10000 to your mortgage as long as you as you don't rest on your laurels. You need to overpay the new mortgage to get rid of the £10000 as soon as you can. If you can afford your current payments of £550 and £700, continue to throw this at your new mortgage and you should work to your advantage.