Downsizing with debt: best bet to arrange new mortgage/ consolidation loan?

FetaBrie

Hello All, new to posting but I have been a lurker for years, and have been inspired to take control of our situation that has been out of control for many years. I won't bore you with all the reasons why but after struggling with too much debt, we have accepted an offer on our house and made an offer on another house for half the price. The relief I feel is enormous, and it is definitely the right thing to do for us to be able to live our values and achieve our financial goals.
What we need help with is how to proceed with arranging the mortgage. My husband's credit rating is excellent, whereas I have a 'fair' score as a result of 3 recent late payments on a tiny balance on a Next account (I know, awful, am so angry with myself), as well as quite a lot of debt on credit cards (I have 28k, he has about 6k) that have just got out of hand in order to bandage over the cracks. We also have a 25k loan and an HP car (110/ month).
We are lucky in that we both have good salaries (65k combined) at permanent jobs. The new house price is 76,500, and we have accepted 158 for ours, with an outstanding balance on the mortgage of 134,500. No chain on either side so we could potentially move in 8 -10 weeks. What is the best way forward: mortgage broker, current bank, current mortgage provider? Do we try to arrange a loan first to cover outstanding CC debt? 15% deposit or would 10% be enough? Any advice so gratefully received, I am not sure which direction to go next and am fearful of making any other marks on our credit report by applying. Thank you so much for reading & offering any help.

geoffken

So you have £60 ,000 debt
Equity of £20,000 after costs and you want to borrow another £50,000.
Good luck with that

FetaBrie

So are you saying we won't be able to arrange the mortgage to downsize?

bargainbetty

Speak to your own bank and your current mortgage provider (if they are different). See what they say first.


Good luck

FetaBrie

What about an independent financial advisor? I have an appointment with them tomorrow.
BTW our bank was suggesting a re-mortgage to consolidate (knowing the extent of our debt) but a. we didn't think we would get the valuation as high as she was suggesting, and b. we wanted downsize. Does that mean they would be more likely to approve?

National_Debtline

Hi FetaBrie


I would certainly go ahead with your IFA appointment tomorrow, subject to checking that the advice is free at this initial stage.


You should be wary of turning any existing unsecured commitments into secured debt. That is not to say it won't sometimes work out, but if your bank have suggested it, it's doubtless because they expect to make money from bringing all of your existing debts under their umbrella.


Have you sat down and worked out the approximate costs of paying a mortgage on the new property and all of the associated bills? This will presumably be a good deal lower than the same costs in your existing property, and the affordability of your mortgage payments is one of the main things a potential lender will scrutinise nowadays. For that matter, have you thought about how long you will want the term on the new mortgage to be? Stretching it out to retirement age will reduce your monthly repayments but increase the total interest you repay over the mortgage's duration.

Good luck


Dennis
@natdebtline

FetaBrie

Thank you Denis. Cutting our outgoings to an affordable level is the main driver of the move (although there are other reasons as well, such as location, convenience, friends nearby, and schools). I am in the process of getting all the details ready for tomorrow and am also in contact with our current provider as well as our bank. We shall see! Keeping fingers crossed that this will go through.

FetaBrie

Statement of Affairs and Personal Balance Sheet
Household Information
Number of adults in household........... 2
Number of children in household......... 2
Number of cars owned.................... 2
Monthly Income Details
Monthly income after tax................ 2381
Partners monthly income after tax....... 2044
Benefits................................ 137
Other income............................ 0
Total monthly income.................... 4562
Monthly Expense Details
Mortgage................................ 817
Secured/HP loan repayments.............. 423
Rent.................................... 0
Management charge (leasehold property).. 0
Council tax............................. 125
Electricity............................. 56
Gas..................................... 64
Oil..................................... 0
Water rates............................. 40
Telephone (land line)................... 62
Mobile phone............................ 48
TV Licence.............................. 12
Satellite/Cable TV...................... 0
Internet Services....................... 0
Groceries etc. ......................... 600
Clothing................................ 100
Petrol/diesel........................... 200
Road tax................................ 14
Car Insurance........................... 89
Car maintenance (including MOT)......... 0
Car parking............................. 0
Other travel............................ 0
Childcare/nursery....................... 0
Other child related expenses............ 26
Medical (prescriptions, dentist etc).... 8
Pet insurance/vet bills................. 0
Buildings insurance..................... 49
Contents insurance...................... 0
Life assurance ......................... 36
Other insurance......................... 0
Presents (birthday, christmas etc)...... 85
Haircuts................................ 20
Entertainment........................... 0
Holiday................................. 0
Emergency fund.......................... 0
Total monthly expenses.................. 2874

Assets
Cash.................................... 200
House value (Gross)..................... 158000
Shares and bonds........................ 0
Car(s).................................. 6000
Other assets............................ 0
Total Assets............................ 164200

Secured & HP Debts
Description....................Debt......Monthly...APR
Mortgage...................... 134500...(817)......4.2
Secured Debt.................. 25000....(313)......8.7
Hire Purchase (HP) debt ...... 2400.....(110)......0
Total secured & HP debts...... 161900....-.........-
Unsecured Debts
Description....................Debt......Monthly...APR
barclaycard....................9892......220.......0
mbna...........................7505......243.......0
m&s............................10725.....237.......0
barclaycard (his)..............6989......157.......0
Total unsecured debts..........35111.....857.......-

Monthly Budget Summary
Total monthly income.................... 4,562
Expenses (including HP & secured debts). 2,874
Available for debt repayments........... 1,688
Monthly UNsecured debt repayments....... 857
Amount left after debt repayments....... 831
Personal Balance Sheet Summary
Total assets (things you own)........... 164,200
Total HP & Secured debt................. -161,900
Total Unsecured debt.................... -35,111
Net Assets.............................. -32,811

pleasedelete

You are selling your house for less than the outstanding mortgage and the secured debt. Do you have the rest of the amount available that you will need to pay when you sell (mortgage is £134,500 and secured debt £25,000 making £159,500- so you will instantly owe £1500 and need to pay selling fees and get a deposit for the new house). You wont have any money to pay off any debts and will owe more than you owe now. If it is a secured debt as the SOA says the debt will be secured against the house?

How much less will the new mortgage be? seems to be too little difference to make it worthwhile as you wont be able to pay off any debt. That is if you can get a new mortgage

FetaBrie

No, it isn't secured against the house so I've put that in wrong. So, after we set aside 3k for moving costs & agent fees, we'd have 21k left from the sale. The thinking is put 10% down deposit = 8k (or 11.5k if required by lender for an 85% LTV). Even at a higher interest rate we'd be paying around 350/ month on the mortgage instead of 817, which frees up 500 per month as well as getting rid of 65k in mortgage debt. Surely this is a good thing?

Upsidedown_Bear

Hello :hello:

You might want to ask the questions you have about getting a mortgage on the Mortgages and Endowments board here:
http://forums.moneysavingexpert.com/forumdisplay.php?s=&daysprune=&f=15