Remortgage advice urgently needed

oliel

Hi there

Our debt is getting out of control and we have a house worth approximately £275, we need a mortgage for £165 to consolidate our debt to make our outgoings manageable. Our debt has slowly increased over the last 5 years, we have been renovating a house with lots of unexpected costs and this is mainly the reason. We have completed an SOA and taken advice on this to which we have been told there is only very little we can cut back on. We have approached a mortgage broker as borrowing £165 would mean 4 x joint salaries. He mas managed to find someone who will lend us the money on a good fixed rate for 2 years. Our issues are as follows
1) Borrowing over the longer term is going to cost us a lot more money,
2) I have concerns that when the fixed rate runs out we will be stuck with the lender with not option to shop around due to our salaries.
3)Would changing to a endowment mortgage save us much? Are these advisable these days? - heard lots about endowment shortfalls.
4) selling is a consideration but we would need to pay for homebuyers report and have no idea how long it would take to sell our house.

Suggestions would be much appreciated - Feel stuck between a rock and a hard place, gutted at the thought of having to maybe sell a home that we have worked for 3 1/2 years to do up, but also scared of the prospect of unaffordability of staying here. Thanks

poppy10_2

oliel wrote: »

Hi there

Our debt is getting out of control and we have a house worth approximately £275, we need a mortgage for £165 to consolidate our debt to make our outgoings manageable.

You've been down this road too many times before.
In 2009 your mortgage was £102k, and you remortgaged to consolidate debts and pay for home improvements. By last year your mortgage was up to £125k and you were again remortgaging, taking your borrowings up to £148k. Now you want to up it again to £165k.

You need to stop treating your home as a piggy bank.Eeach time you 'consolidate debts' you just free up debt which you rapidly re-accumulate. There's only so long you can keep travelling down this road before the equity runs out and you end up bankrupt. It would be better to address the underlying problems of living beyond your means and spending more than your income, rather than taking out an ever-increasing mortgage loan.

We have completed an SOA and taken advice on this to which we have been told there is only very little we can cut back on.

That's not really what you were told. Perhaps it's what you wanted to hear, but that's not the same thing.

Electricity............................. 78 Electricity and gas seem a lot, any way you could reduce them? do you turn every appliance off, turn lights off, turn the heating down?
Gas..................................... 78 See above
Telephone (land line)................... 50 seems really high
Mobile phone............................ 45 Seems high. How many phones is that for?
TV Licence.............................. 12.5
Satellite/Cable TV...................... 8
Groceries etc. ......................... 400Could your reduce this a bit?
Clothing................................ 0
Petrol/diesel........................... 125
Road tax................................ 25
Car Insurance........................... 45 could you reduce this a bit when you renew it? Are you young drivers?
Car maintenance (including MOT)......... 15
Buildings insurance..................... 25
Contents insurance...................... 25That seem really high! Could you shop around at renewal time. Use comparison sites, Quidco or other for cashback?
Life assurance ......................... 25

Presents (birthday, christmas etc)...... 45 That's £540 a year on present! Can you reduce? Buy in sales/ on offer etc?
Haircuts................................ 31 Is it really necessary every month?
Entertainment........................... 150 You can't afford this. Not until you have paid off your debts.

oliel

Gas and electric (we live in scotland and we dont have double glazing its and old 5 bedromed house) Heating is expensive here last year we had temperatures of minus 17 at times and not unusual for it to be minus 7ish. Mobiles will go down as soon as our contracts get renewed. Phone wise is annoying as we live in a rural area reception on many of the cheaper phone/internet providers just doesnt work so most people end up with bt because of reception issues, I have shopped around several times on life and house insurance - i never seem to be able to get it any cheaper than it is. Haircuts (i dont do this monthly about every 3 months but thats me spreading the cost). Entertaining is leisure membership which again becuase we live in the country we dont have a leisure centre (nearest 17 miles) so we have to pay to be members of the local hotel so that the children can get swimming lesson there - i am going to try and see if we can do it so that the kids only are members might say something there. Other leisure is brownies for kids and football, gym. presents is the cost of presents for the whole extended family over the course of the year budgeted at £50 for my kids £20 for extended family kids and parents. nothing for me and my husband. Debt has gone up mainly due to renovating the house with quite a few unexpected costs that were not budgeted for. There are only 4 of us living here with an occasional visit from a relative (maybe twice a year). I am maybe thinking we should just downsize and cut our losses? Has we known about the extra costs doing up the house perhaps we wouldnt have moved here but hindsight doesnt make any difference what does make a difference is what you do about the future.

DannyboyMidlands

As poppy says, constant remortgaging is not the way to deal with your debts. No only are you eating up all the equity in your house but you are extending these debts over 25 years. So an additional £65k becomes more like £100k by the time you've paid it off. Crazy.

Sell the house while you still have some equity and learn to live within your means.

Trollfever

Time for a reality check.

https://forums.moneysavingexpert.com/discussion/3907525=

Conrad

OP, replace finding happiness through the aquisition of things, with finding happiness from control over your destiny. Saving and building financial security are much more valuable than and things you care to buy.

The_J

poppy10s post is possibly the best I've ever seen on here.

You can remortgage but it's spiralling out of control, you must not borrow once you have paid off the debts by consolidating and you should OVERPAY on the mortgage if you consolidate debts to pay it off faster.

Switching to interest only (endowment) would be the worst thing you could ever do because I bet you the endowment would be the first thing you stop paying.

shortchanged_2

It does sound to me very much like you are living beyond your means.

Everytime you remortgage I take it your monthly payments are increasing?

Therefore you actually have less and less disposable income every month which in turn continues to add to your problems.

The point you make about selling, at least it looks like you have plenty of equity in the property so even if you accepted a low offer you would still be able to clear your current mortgage debt with plenty left over for a deposit on somewhere new.

Personally I think 4 times a joint income mortgage is too much and judging by what you say it certainly seems that way for you.

The_J

4x income is still comfortably affordable if you have even a degree of financial restraint in other areas. I have demonstrated on another thread that 4x income mortgages can be paid off within 10 years via aggressive overpayments and sensible budgets.

shortchanged_2

The_J wrote: »

4x income is still comfortably affordable if you have even a degree of financial restraint in other areas. I have demonstrated on another thread that 4x income mortgages can be paid off within 10 years via aggressive overpayments and sensible budgets.

Good for you.

But obviously it is not the same for everyone. It depends really how much of a life you want to lead besides just pumping all your money into property.

The_J

Pumping all your money into debt actually. The moment you bought the property you were investing in equity.