consolidating unsecured debt onto mortgage

kirstymac21

Hi there wondering if anyone can tell me what my chances are? we are with the scottish building society and are looking to put 17,500 of unsecured debt onto our mortgage, we have 58,000 on our mortgage and our house is valued at 225,000. myself and hubby both have good credit rating(my dad was also guarantor for our mortgage and he has good credit rating and earning 30k a year)

at the minute our debts are costing us 380 a month but if we put onto mortgage would only be 135 a month which is great as we are just managing these payments just now no defaults or anything, my partner is self employed and his net profit is around 8000, im part time and get around 9000 plus another 8000 with my tax credits and child benefit(they also have my dad as guarantor for mortgage so he would act as guarantor on this additional loan also) i have submitted my application and relevant docs but wondering if anyone could tell me how long this process takes and what you think our chances are of getting the additional 17,500? i'm a born worrier and hate waiting! thanks

HappyMJ

It can be a good idea if you earn so much and have so much equity. However, I would not reduce the payments on the debt. Keep on paying as much as you possibly can. If you are currently paying £380 then keep on paying £380 per month otherwise making the term longer will just cost you more as all you will be doing is just paying the interest over a longer term and you will still owe the original amount.

However, your own personal income is low to support such a large mortgage. Can you increase your income before applying? I think your chances are reasonable but low.

Where did the £17,500 of debt come from? If it's from a general overspend each month what is stopping you from running up another £17,500 debt in 5 years time?

kirstymac21

Hi there, we bought the house from family at a cost of £60,000 was my husbands grandmothers house which lay empty for 20 years was worth £125,000 when we bought but the rest was really a gift of equity. however the house needed majorly refurbed and near the end we ran out of funds hence the 17,500 debt. We have now completely refurbed and house is now worth £225,000 and we owe £58,000(around £75,000 with additional if we get it) on our mortgage and have 15 years left to pay. Our current mortgage payment is £375.00 and the debt on top of that is £380.00 whereas if we put it onto our mortgage it will only be £135.00 on top of mortgage and we can make overpayments of £250.00 every month without penalty. Yes we can just afford to pay our monthly payments at moment but only just we need to reduce our monthly outgoings. Our ltv on house at moment is around 25% so i hope that helps our application

StuC75

Are those earnings before or after tax? as would suggest high lending multiples required to stretch that far? How many more years of Tax credits & Child benefit..

Echo HappyMJ as how this debt has come about - and what there be to stop you re-incurring this debt over the next couple of years..

kirstymac21

my daughter is only 2 so another so got a goof few years left with the tax credits and child benefit. Earnings for myself are after tax.

HappyMJ

kirstymac21 wrote: »

my daughter is only 2 so another so got a goof few years left with the tax credits and child benefit. Earnings for myself are after tax.

The tax credits count when they are doing an affordability calculation rather than an income multiple. They want to see that you can genuinely afford the repayments from income rather than benefits. Benefits are not guaranteed. Can the self employment income/profit be proven over at least 2 tax years? Does it look like the income/profit and business is improving?

If you have £17,000 of income from earnings, a guarantor and plenty of equity then you should have a half reasonable chance of it being approved but it's really too close to call. It could go either way. But...it doesn't matter as you won't save anything if you reduce your repayment so you may as well just refinance your spending onto 0% credit cards and other similar methods and not secure the debt at all.

kirstymac21

yes he has 3 years worth of accounts and this years projection is good.