CC Debt and Remortgage

twicebittennotshy

Hi,

I've been a keen reader of these forums for some time, but only joined to post tonight, so please treat me gently!

I have a problem and would be very grateful for your collective wisdom. Please forgive the long description below - it's the only way I could make it make sense (at least I hope it makes sense!)

My family is outgrowing our current house - we need somewhere larger. My current mortgage balance is £122k and I have around £40 - 50k equity in the property (7 years into a 30 year mortgage starting at £138k). I have credit card debts of around £23k (costing around £500 per month and a personal loan with £2k left to pay at £250 per month. On my £37k salary and my partner's part time earnings (she has no debt), things are rather tight, but I've not missed a payment or paid late in the last 7 or 8 years. Noddle says my credit rating is about half-way between fair and good and gives me a score of around 650. I understand that this doesn't make me an attractive mortgage prospect to a lender.

We have been offered some money, ca. £50k to help us afford a bigger house, but the money will only be given to us when we purchase - it can't be used to pay down my debt now. At current prices the house we would like to purchase next would be around £200 - 210k

As I see it, I have a couple of options, but I don't know which is best or what potential lenders would think:
1. Look to sell and move early in the new year when my personal loan finishes and frees up an additional £250 per month, hopefully having reduced my CC debt by ca. £2K in the meantime. I would look to use the equity in my current property to clear my CCs (at which point I would close the accounts) and use the remaining equity and the £50k gift to maximise the deposit on the new house.
2. Sell our existing property soon, using the equity to pay off the CC and loan, and move into rented accommodation and live debt-free while my credit rating recovers and house prices continue to rise. We would be able to save a large chunk of the £750 per month that we would no longer be using to service the current debt, but don't know whether this would keep up with the increasing house prices. We would add these savings to the remaining equity and the £50k to give us a decent deposit.

So, thoughts on the above please? Are lenders likely to find option 1 acceptable? If I go for option 2, how long before I should apply for a new mortgage? Is there an option 3?

Many thanks in advance for your suggestions and comments.

Thrugelmir

Only you know why the debt has accumulated. From the lenders perspective the obvious concern is that you'll simply end up in the same place again a few years down the road. Once the loan is settled you'll have the funds to make some inroads into your credit card debt. Little point in selling up and moving into rented. As you'll simply switch a mortgage for rent. At least over time the mortgage debt is reducing. Don't forget to factor in all the costs of moving either. As they will mount up.

AKinsTony

Hi ,


I have some issues regarding the mortgage product I was offered. The incident happens when I applied for a mortgage via a broker as I have a poor credit rating and was refer to a packager. This mortgage have been going on from December 2015 and up till now no results . I contacted the lender I was initial given a DIP on a 4.84% and when I ask they give me excuses and asking for additional documentation.


Suddenly 26/4/16, the broker raise another DIP on the same rate as before and I can sense that something is not right . I challenged it and he was asking for my card details again which this time I was reluctant to give as I am not comfortable with things that are going on. I ask if the lender has accepted the application and from his answers he said that he will get back to me .


What now brought this help I need was that suddenly , I was notified by my bank that Imy account have been overdrawn by £560 only to check that the lender has taken money from my account based on when the first DDM ( direct debit mandate ) I signed for valuation .


I contacted my bank to stop the transfer as I did not authorise it but the bank says I need to contact the lender and but all they can do is to raise a dispute on the transfer and it the lender that will return my funds back to me.


I called the broker and said I was surprised that you used my previous ddm to auhtrise a valuation on with the lender knowing that I did not agree with it and was expecting you to come back with explanation as he is using a packager.


His comments was that He told the packager that if the want to use the DDM they should contact me his client but they refused as they do not contact the clients.


The problem I have is how can I stop this application put the lender going forward and get my money back to my account as I am confused now and need some guidance


Any advice will be helpful

nkkingston

It's generally considered poor form to hijack another thread rather than starting another because it confuses the conversation. In your case you're not likely to get much help here either, because your problem is too different to the thread's title - people will click on this thread because they think they might be able to help answer questions about credit card debt and mortgages, while people who can help with reclaiming money from a valuation won't even think to look here.

nkkingston

Generally, twicebitten, I'd suggest you stay put until you've at least got rid of the loan. Maybe do a SOA in the debt free forum to see if anyone's got any advice to paying down the cards quicker or snowballing your payments. Mortgage companies are going to be wary of someone with a lot of credit debt because it suggests you've lived beyond your means, so they'll be stricted with affordability criteria, so the more you can do to get rid of it the better rates you'll get when you move.

twicebittennotshy

Thanks for your input.

twicebittennotshy

At the risk of hijacking my own thread, I now have a slight additional dilemma.

One of my existing CC providers has just offered me a second CC account with a long 0% balance transfer. This would enable me to move a balance from one of my higher APR cards and reduce my monthly payments (which would be good as things are tight), or maintain current payments but clear a greater percentage of my debt (which, of course is the more desirable option).

Whilst this is very a very tempting offer, I don't know whether it will improve or harm my chances of getting a mortgage at a reasonable rate in 6 -12 months time when I'm looking to move house.

Thoughts please?

steeeb

In 6-12 months time you'll likely have less debt as a result? That's good isn't it... In anyone's eyes.

Smedders11

An application for credit will affect your credit appeal, but if you're waiting for the better part of a year it shouldn't have a lingering effect--especially if you can use the 0% period to make greater progress reducing your debt.

MortgageMamma

Have you considered just applying for a mortgage now and agreeing to pay off the credit card and loan on completion out of the equity from your sale? You say you have 40-50 equity, there would be plenty left plus the 50k gift to get you moving.

You could do this and then have a mortgage of say 135-145k and be debt free so repayment mortgage, balance goes down etc.

There is no sense wasting time money and hassle renting. I've seen people try that before then they keep dipping into the cash lump sum they have and the deposit reduces. It takes a lot of self control to sit on 40k or so and not spend it.

droiderm

Personally I would completely stop thinking about a new house.
That's an awful lot of credit card debt. Significantly too much.

Someone suggested going onto the debt forum and posting an soa. That's a very wise move.

I don't think you quite understand or are willing to look at why you are where you are. That isn't going to change unless you do something about it.

Thinking about getting a bigger mortgage isn't wise.

I am speaking through experience , and you really need to look at your debt before thinking about a new house. Nor do I think paying off your credit cards with your equity is a good idea either. You need to understand why you are continually spending more than you earn. You will end up in an even worse potion in years to come.

I don't mean to criticise, just think about your finances