Advice on release of equity

fiesty2000

Hi there,
I wonder if you could give me any advice about debt management. I have had my fingers burnt by quite a few debt management companies and as I am a homeowner I was thinking about releasing some of the equity from my house to become debt free. I would appreciate any advice or pitfalls about doing this. Thank you.

poppy10_2

fiesty2000 wrote: »

as I am a homeowner I was thinking about releasing some of the equity from my house to become debt free.

"Releasing equity from your home" does not give you free money, and does not allow you to become debt free. All it does is transfer unsecured debt (loans/credit cards) to debt that is secured on your home (your mortgage).

Your mortgage will increase, and you will end up paying more overall (as the debt is compounded over the remaining term of your mortgage, which could be 25 years+). More importantly, if your can't keep up the repayments, you could lose your house.

If you don't address the underlying problems of you spending too much relative to your income, then you will achieve nothing - you will pay off your loans and credit cards by transferring them to your mortgage, and then will end up taking out even more loan and credit card debt to fund your spending habits.

Try posting an SOA on here so people can advise where you can make savings.

DVardysShadow

fiesty2000 wrote: »

I was thinking about releasing some of the equity from my house to become debt free.

What poppy says. 'Releasing equity' means borrowing money so you owe more on your house. You are replacing one debt with another - if you think this will make you 'debt free' you are deluding yourself.

Do the SoA at http://www.makesenseofcards.co.uk/soacalc.html, press the 'format for MSE' button, cut and paste everything, including format codes into a new post on this thread. People here just love commenting on SoA's

Poosmate

Yep, I'm with Poppy and DVS on this. Post up your SOA (Statement of Affairs) using the link provided by DVS and you'll get loads of suggestions on how to reduce your outgoings enabling you to pay off your debts much quicker without risking your home.

Another very important thing to consider (to anyone thinking of doing this) is that, the mortgage interest rates are so very low at the moment and there is only one way that they will go. Though your mortgage may be affordable now, increase it and add a few rate rises (imagine it at 10% - remember it did go up to 15% once), in a few years it may well become unaffordable. I had a new mortgage in the late 80's (just married) and remember the sickening feeling every day as the rates were rising and that was in the day where you could only borrow 3x main earner's salary + half of the other earner's salary. Scary stuff.

Poo

fiesty2000

Thanks so much to everyone who replied. I've got great advice and obviously will not be releasing any equity. I will take on boatd everything that was said and act. I have 3 ongoing cases with the Financial Ombudsman and the Office of Fair Trading due to 3 different dept management companies due to the way my affairs and because of them I have ended up further in debt than I was at the start. But have learnt a very hard lesson. Thanks again to everyone.