Mortgage in Principle, but rejected consolidation loan so worried

jamesd

If you had consolidated six months or more before the mortgage application the lower payments would have improved affordability. This close, it's something that you'd consider only after discussion with the mortgage underwriters if there is an affordability issue.

Rapished

Sadly due to us buying at the height of the market, in 2007 it would leave us with a big kick in the face and a massive loss, we put the house up for sale early this year with a 20 thousand off what we paid and had viewings but not enough and no bids.

So the plan is to stick with it until its equals what it owes then sell, its rented out and taking care of itself at present,

We have two options now

1. We're accepted tomorrow, god I wish but doubt it now

2. more likely, we have 20k in the bank, so we'll pay off the 15k personal debt and avoid the time scales to repay that and the interest on the payments, we'll be left with 5k, then rebuild our deposit over a further 12 months to over 20k in total,

would that make sense, be debt free bar the other mortgage then re apply in 12 months with a healthy deposit and minimal out goings?

Or am I waisting my time and just go rent on a longer term basis and forget buying another house?

Thrugelmir

My personal view, is that you have all the ingredients for a financial disaster waiting to happen. A let property in negative equity with a considerable amount of unsecured debt on top. The net result is that you are paying an enormous amount of interest for no benefit or upside.

So sit down and tackle the priorities in order. Start with the highest interest debt burden first. This will release more cash to tackle your debts and then snow ball over time.

Is the let property on a repayment or interest only mortgage? Is the income being declared to the tax authorities?

Rapished

its on a re payment set up, but yes negative everything,

So you agree, get shot of the loans credits cards etc, that will leave us payment free with exception of the mortgage, which we only top up, on top of the rental income.

our debts mount to about 15k we have 20k in the bank which would have gone on a deposit, so if we clear that and we're left with 5 to rebuild?

somethingcorporate

You missed the question about whether you are declaring your rental income to the tax authorities.

ACG

I dont think that question comes up with any lenders.

jamesd

Best to see how things go tomorrow.

For the personal debts, I'd be inclined to keep them if they do not cause you affordability problems, but look to make them cheaper, perhaps using 0% for purchase credit cards or balance transfers. There is a cost to this but it has the advantage of giving you a higher deposit. That can mean you qualify for a better mortgage interest rate on the larger mortgage amount of money borrowed, so accepting the cost in the short term can save you cost longer term. Provided the affordability calculation works for the lender. The larger deposit amount helps with that by reducing the amount borrowed.

Thrugelmir, there is a substantial benefit from the let property: not taking a large capital loss on the property.

You don't need to deal with it immediately but only the interest part of a mortgage for a BTL property can be deducted from rental income for income tax purposes, not any capital repayment part. It's likely that you have ongoing maintenance and letting agent and other costs that take care of the rest but once things are resolved in some way on Saturday it's worth taking a look at how this is being handled.

happycamel_2

HSBC wanted out tax returns showing "submitted" for our BTL when we took the mortgage for our family house.

jamesd

Probably wanted to ensure that it was a self-supporting BTL so they could verify affordability on the personal one.

Building_Surveyor

Sorry but if you have 20k in the bank but your sitting with debt accruing interest you would be mad to not pay it off. Getting into more debt by applying on a new mortgage is a disaster waiting to happen.

Get yourself debt free, then you can thoroughly enjoy buying a new house when the time comes.