Advice please on debt vs mortgage

Wantingtobesolvent

Hello

Thanks for reading, we’re hoping for some advice!

We are both 47, no dependents. First full-time income of £47,500. Second income made up of two part-time jobs (one permanent, one 1 year into 10 year contract) £23,750 and £4000 respectively. Total guaranteed household income £74,250 (plus about £5K-£10K self-employed income but this is not secure so we haven’t counted this). We have combined debts of £39K which we currently pay £1020 per month towards, and they should be paid off in 41 months. No late payments or anything sinister, but clearly a lot higher than ideal.

We have two repayment mortgages with HSBC, both on BoE base rate + 1% for the duration of the mortgage. The first on stands at £82,500 and ends September 2027, the second one £88,000, ending July 2030.

Our house is currently on the market for £300K, and we’re looking to sell for no less than £280K. We’re looking to buy a house in the region of £240K, and would like to pay off a substantial amount of the debts in the process of doing so.

Any advice on whether we would be better off going to a broker for a new mortgage, or whether we would be able to port our current rate to a new property and increase our LTV? If the latter is an option, would a whole new application process be started, or will the bank just do a valuation of the new property? Will we even get a mortgage?

Thanks!

Thrugelmir

Given your level of debt. Having a frank and open discussion with your your existing lender would be a good starting point. Repaying your debt entirely as part of the process would also add credibility. When you meet have all the figures to hand i.e. income, expenditure and debts. While you may feel uncomfortable no one is going to judge you. This is a business transaction. Lenders have a mandate to assist borrowers who wish to help themselves. You've nothing to lose.

dimbo61

You have a great deal with HSBC can you remember what was the LTV when you took out the mortgages?
With £170,000 of mortgage debt and a £240,000 property you are under 75% LTV
With £168,000 Mortgage you are at 70% LTV

Wantingtobesolvent

When we took out the mortgage, LTV was (almost) 95%. Does this make a difference to any arrangement we may make in future?

Our other option would possibly be to try to consolidate the debt by taking out an additional mortgage/charge. This would bring monthly repayments down significantly, and we can then overpay. We understand the implications of this, and would not do this lightly. No debt has been added since we have started to take charge. It would allow us to avoid having to move, and fork out in the region of £10K just for that. £210K against a £280K property would be 75% LTV. Is that feasible?

Thanks for responses.

Thrugelmir

Wantingtobesolvent wrote: »

When we took out the mortgage, LTV was (almost) 95%. Does this make a difference to any arrangement we may make in future?

Our other option would possibly be to try to consolidate the debt by taking out an additional mortgage/charge. This would bring monthly repayments down significantly, and we can then overpay. We understand the implications of this, and would not do this lightly. No debt has been added since we have started to take charge. It would allow us to avoid having to move, and fork out in the region of £10K just for that. £210K against a £280K property would be 75% LTV. Is that feasible?

Thanks for responses.

Your first objective has to be to convince a lender that you've changed your ways. Clearing your debt totally is the way. Consolidating debt more often or not doesn't work. As it merely extends repayment over an even longer period. People have a habit of slipping back into their old ways. That's called human nature. Dealing with the issue directly is the lesson that leaves a lasting impression.

getmore4less

If the move is just to release funds then have a rethink,

it will cost money to move, say £10k

you will not release enough to pay off all the debts.

Your mortgage rates are good so if you can't port and keep most(all) of it your move will achieve very little.


review your budget you should be able to find the money to pay off the debts quicker.

Mortgages are payments around £650 and £550

what rate are the debts, if £1020 will pay £39k off in 41 months that average around 4% and the total interest is less than £3k, it will cost more to move.


IF you can meet the current payments I don't see the point in moving.

income is around £2900+£1600+... so with mortgage and debt you should have over £2kpm to live off + the extra income
(should be at least another £500pm, £200 pm will come from the £4k job)

Use the self employed to have treats.

I would go to debt free wannabe board do a SOA and see what option people suggest.

I think there will be a better solution than moving.

getmore4less

Thinking about it further,

The move is very expensive and the money might be better used just paying more interest.

If the £1k payment is a bit higher than you would like(a SOA should find out why it may not be a problem) then it might just be better looking at extending the current debts over a longer period with some other borrowing

depending on the current structure and min payments a 0% CC added at some point migh give more flexability, a purchase could divert some normal spends to higher rate debt for a while.


try the snowball calculator with a lower payment and see what the total interest will be as long as it is less than moving costs you still win.

eg £39k £1020pm is around 4% over 41 months.

if we allow £8k(moving costs) for interest and a lower payment these are some examples.

5 y £783pm 7.6%
10y £392pm 3.84%



I still think the first step is back to basics and the SOA/Budget to give the full picture and other options that don't throw away £10k moving when you may prefer to stay in your current house.

If looking at spends does not solve it then what about income.

eg: what difference would a lodger make for say 6 months or a Mon-fri might be less stress and inconvenience than a move.

http://forums.moneysavingexpert.com/forumdisplay.php?f=76
http://www.stoozing.com/calculator/soa.php
http://www.stoozing.com/calculator/snowball-calculator.php