Further advance reason on remortgage

adamsmt76

Hi all, first post so apologies if I'm in the wrong part of the forum.

We are due to remortgage at the end of our existing discounted term and are looking to take on some additional borrowing when doing so. This will be to clear some existing debts.

Obviously we will be assessed for affordability at the time and will be asked what the additional cash will be used for. One of the options is usually "To clear existing debts" or similar and I was wondering how this is generally viewed in the decision making process.

In a stand alone unsecured loan application I don't imagine that this is a great reason in comparison to purchasing a tangeable asset but as part of a mortgage which is obviously secured I wouldn't imagine that the lender would care?

If anything, this option should mean that your affordability would be better as the cash would be going to reducing existing debt?

So, is there anyone out there with experience from the other side of the process (i.e. Someone with experience of evaluating these applications) who could give me any insight?

Many thanks in advance for any help.

Matt

wannabeprudent

The truth. I just remortgaged to consolidate and broker found a lender who would do this.

betmunch

Its doesn't matter what is viewed best.


You put what the extra capital is actually for.


If a lender doesn't want to lend for that purpose then they wont lend.

Thrugelmir

adamsmt76 wrote: »

If anything, this option should mean that your affordability would be better as the cash would be going to reducing existing debt?

Not if the borrower continues to live beyond beyond their means and amass further unsecured debt.

adamsmt76

Yeah, when I mentioned affordability I was talking from the lender's perspective. If there are less outgoings on an application (as they are being cleared by the proceeds) then I assumed that would be a good thing. Anyway, I had a discussion with a provider and they confirmed that they didn't really put too much stock in the "reason". You could claim that you were going to clear debts and then not bother anyway. Thanks to those of you that offered useful advice.

adamsmt76

So, to summarise my experience so far NEVER use reconciling debt as a reason! This a causing no end of hassle as our current (and probably most) providers apply a stricter LTV for this specific purpose in comparison to home improvements. The reality is that we are now probably going to have to go elsewhere and submit an application based on home improvements. Lesson learnt.

adamsmt76

I'm actually tempted to go back to our current provider now and ask them to put forward an application based on home improvements instead. They've not actually submitted any application yet as we were only at the telephone interview stage with the Mortgage advisor. He's repeatedly said that the reason is the ONLY problem and we flew through the affordability checks. I'm sure we can come up with some quotes. I just don't know if I've got the front to do it!

Jon_B_2

You do realise you are committing fraud? How about get yourself over to the debt free wannabe boards and look to see how you can reduce your debt in other ways.

Let_Us_See

What is the level of debt to income ratio you are trying to consolidate? Most lenders will accept debt consolidation as a reason for additional borrowing as long as the debt is, how to phrase it, appropriate to your situation.

Talk to a broker or other lenders if your current provider (who is it) is reluctant to lend.

HappyMJ

Just tell them you NEED a holiday...a holiday worth thousands. They really don't care about the reason. A holiday isn't tangible. Whilst you're on holiday you're not earning. It's the worst reason ever to borrow money but they really don't mind. They'll come to exactly the same decision had you put refinance debts, buy a car or home improvements. What they generally won't lend money for is investment which could be considered gambling.

The money that is advanced doesn't ALL have to be used for the purpose you said it was for. As long as some of it was. So you can go on holiday with some of the money, pay of some unsecured debts, buy a car and make some home improvements.

adamsmt76

To John B, no I hadn't realised that at all so thank you. I definitely won't be going back to our lender with that suggestion then! It's not actually essential that we take on ANY additional borrowing. We just wanted to consolidate some debts. Our LTV with the prospective additional borrowing would be 85% Our lender is happy to go to 90% for some reasons but only 80% for reconciliation.