Mortgage renewal - credit card debt or kitchen loan?

Katharine1471

Our mortgage is due to be renewed in 18 months time. We've had a new kitchen put in which we're currently on an interest free period part of a repayment plan for 5 years. We could clear this loan though by putting it onto a credit card (lower interest than the loan when we start paying that) - but which is considered more negatively when we are renewing our mortgage?

We are hoping to have cleared the money entirely before the mortgage renewal but if we can't for some reason what would people suggest?

Obviously the kitchen loan will be a fixed payment each month so I'm guessing that they'll look at that going out each month as now assigned money. The house we bought needed a lot of work so I am hoping the work we have done will have allowed the price to be a lot more and so we will have a greater share of the house and so putting us into a better LTV bracket.

I'm unsure how best to ensure we can still get the best deal on the mortgage renewal baring in mind we now have this extra money we owe.

dimbo61

1 Do you know what the mortgage reverts to at the end of the current deal ?
2 What is your LTV now and did you buy in 2008/2009 when prices where very high.
3 what have other houses like yours sold for in your neighbourhood.
4 House prices have increased in some parts of the country, some have stayed the same and some parts of the country have seen major loses in property prices!!
5 Putting in a new kitchen / bathroom will not add value or increase a property value in the current market.
6 Paying down the mortgage debt is the best way to increase the equity

kingstreet

As dimbo said, you need to know the follow-on rate. What will the rate be when your current product ends?

You then need to look at products your lender will offer you as an alternative to your follow-on rate.

Finally, if you consider a remortgage - repaying your current mortgage with a new one from a new lender, your income, loan to value etc become important.

TBH you've got 18 months. No point looking at rates now, as there's every chance they'll be different.

Katharine1471

Thanks for responding, but neither have really have answered what I was trying to ask.

When it comes to a mortgage renewal, is it considered more negatively to have outstanding credit card debt, or a loan agreement in place with monthly installments?

As extra info I will try to answer your questions:

We only just got on the property ladder as first time buyers. We grabbed a bargain and haggled a lot and given the interior of the property have been told by several people that renovating it would indeed drastically increase the price, especially given that the price we paid was a lot less than its valuation even in its current state. We are in a 85% LTV bracket when we bought it. According to the original valuation we paid 5% less than its value, and were under the impression carrying out all the improvement works would increase value by an additional 10%. We have no intention of moving however, we're doing it for our own benefit and intend to stay for a long time, but any increase in price will obviously increase our equity in the property which will then be of benefit for remortgaging as we'll most likely want to fix for as long a period as possible.

However, as we've now had the kitchen put in, we want to put ourselves in the best position when it comes to mortgage renewal in terms of how mortgage companies view us - so we're wondering if having a debt which is a loan agreement from the kitchen company is perceived as 'better' or is having a debt on a credit card?

Hopefully that clarifies things a bit?

Maybe I should just phone our mortgage advisor and chat through it with him to see which he thinks is the better option.

Thrugelmir

Katharine1471 wrote: »

When it comes to a mortgage renewal, is it considered more negatively to have outstanding credit card debt, or a loan agreement in place with monthly installments?

Will depend lender to lender. Some lenders factor in both the monthly repayment and the outstanding balance in arriving at the maximum that will make in terms of a mortgage offer. So switching to a longer repayment term (i.e, credit card) makes no difference.

A mortgage valuation may well differ to open market valuation that an estate agent will give. As a lender would look to dispose of the property in a relatively short time frame. Whereas the encumbrent seller can wait for as long as they like to achieve the price they want.

If the kitchen loan is fixed and interest free. Then overpay your mortgage in the next 18 months. This will reduce the amount you owe and improve your LTV.