Re-Mortgaging with existing debt

Confused_Re-Mortgager

Current situation:
- 42K mortgage @ £245 p/m
- 26K loans & CC @ £718 p/m (9K on CC & 17K on personal & car loan)
- Therefore Total: 68K @ £963 p/m
- Monthly Income = £1400
- So monthly disposable income = 1400-963 = £437

I Live on my own with an 8 yr old son, therefore can’t live off £437 a month. However my house is now worth 80K (risen from 42K, 4 years ago)

I tried to get re-mortgaged with my current supplier (Alliance & Leister) and was declined as they said it would be irresponsible lending. This I don’t understand as by my calculation I could re-mortgage as below:

Re-Mortgage Solution:
- Mortgage of 68K to cover all debts, @ approx £400 p/m
- So new monthly disposable income = 1400-400 = £1000

My credit score is good as I have never missed a payment on any loan or CC.

Could somebody please advise how the Alliance & Leister could see this as irresponsible lending when you look at the solution figures.

Any suggestions on a way forward would be much appreciated.

herbiesjp

As long as you are ware of the implications of turning unsecured debt into secured borrowing against your property then your thought process is correct

You will indeed improve your monthly affordability by doing this. However by spreading the loan and acrd amounts over a longer mortgage term will mean that you will end up paying the lender more interest over the longer term. One way to reduce this would be to make capital overpayments and reduce the mortgage as and when possible.

However, as you rightly say, if you find that you do not have enough to live on each month, then re-mortgaging coul dbe an option

Are you on around £22k pa gross salary? If so getting £68k should not be a problem especially as you will be clearing all your debts.

If A&L will not do this for you plenty other lenders will. DO you have any penlaties if you were to leave A&L?

One importnat thing to say is that if you do consolidate your debts, you should not then go out a taake out other loans and spend on the cards all over again (which a lot of people do) and this then defeats the object of what you are trying to do, and that is improve your affordability for you and your son

HTH

Confused_Re-Mortgager

Thanks for the reply, herbiesjp.

You are correct I am on about 22K pa gross, However there will be a redemption fee from the A&L of about 2.5K for leaving their Mortgage.

I was also wondering if my credit score would be affected by the A&L declining to re-mortgage.

No need to worry about CC & personal loans after I’ve consolidated the debt. My circumstances have changed and the lesson has been severely learnt

herbiesjp

The fact A&L have said no, will not affect your credit score

toonfish

I can't understand why A&L has turned this down. Did you let them know that you would be repaying all the outstanding credit?

regularsaver1

Are they concerend that you would still borrow on credit cards after repaying them with the advance, maybe

do you have more information for their reasoning?

Confused_Re-Mortgager

Only info I got from them was that It would be irresponsible lending as I have a son and my monthly disposable income (mdi) was less than £600 and that seems to be the magic number for single parents. They did not seem to take into account that after Re-mortgaging my mdi would be £1000.

LisaT186

Seems a little harsh of them to turn you down based on what you have said. Did you go to a branch or phone them? On their website they have a calculator that shows how much you can borrow and depending on your postcode £22K income, no debt remaining, 1 dependant on your property value you should be able to borrow up to £76,000.

You mention remortgaging, just checking on terminolagy, you did ask for a further advance of £26,000? There's no confusion that you wanted £68,000 extra on top of what you already have?

danjberry

seems very weird as only about 3.5 time your income, did you tell them the money will be used to clear all existing debt? that is one of the only reason i can think as to why they have refused you, other then possibly a hunter match or low credit score, have you had any bad credit recently or applied elsewhere recently? i would check your experian as well to make sure