Remortgage?

Simarrie

Hi there,

Apologies for signing up just to ask questions, but I'm not sure where to start...

Myself and my Wife are looking to clear some debts, which we have run up over the last three years - two unsecure personal loans, and a number of credit cards. We'd estimate that the total debt is around 20k.

An online property valuation of our home suggests it may have risen in value by 30k since we purchased it - our mortgage is almost three years old, of five years fixed (120k), running for 35 years.

Though I appreciate that an actual valuation would need to be carried out, and the house may be worth less than initially thought, the prospect of freeing up some equity to pay off debts, is very appealing and would help us massively each month.

We're not struggling to pay the debts, and aren't on the bread line by any stretch - we also know how lucky we are to even own a home; it would just be nice to have lower monthly commitments to meet - even if it means starting a mortgage again.

Has anyone else been here before, and might be able to offer some advice?

Many thanks for any help.

amnblog

The important thing to remember when considering his course of action is that current £20,000 of your total debt is not secured.

'Freeing up equity' as you suggest means securing this debt against your home.

If you later have trouble repaying your debts, your home will be at more risk as a result of this action.

pathtofreedom

What was the LTV when you bought the place? There is a big difference of adding 20k when you still have 25% equity, and doing it when you have a 95% mortgage or something. No one can predict if the house prices are about to go into tail spin again, so if you end up in negative equity then have a lot of expenses - redundancy, health problems, kids appear.. is this place going to become a millstone round your neck as you can't remortage, rent it out or sell it without getting bigger loans to pay back the difference.

Simarrie

Thank you for the replies. Think our LTV was 80% - our home was 150k, with 30k deposit.

Thrugelmir

Simarrie wrote: »

Myself and my Wife are looking to clear some debts, which we have run up over the last three years - two unsecure personal loans, and a number of credit cards. We'd estimate that the total debt is around 20k.

First step is to start tackling the issue earnestly yourselves. Any lender reviewing your credit file is going to have concerns at the speed with which your debts grew. While repayments are affordable. They most likely depend on your monthly pay cheques arriving without fail. What tips people over the edge is the unexpected financial event when it's least expected.

The additional concern is also that you'll simply borrow again in the future. Debt consolidation is an easy way out. No lesson is learnt.

Brock_and_Roll

Running up debts of £20k in 3 years is quite alarming - implies "overspending" of £555 per month - which is likely to be a very significant proportion of the OP's net income.


The most important question is whether the underlying cause of this overspending has been addressed - whether it was some unexpected event/crisis or just general spending on "stuff".