Re-mortgage or Personal Loan?

catmanscoop2810

Hi,

I am in two minds about which direction to take about consolidating debt/home improvements. Me and my partner currently have credit card debts combined of around £5500 and are currently playing £210 a month off on these but with the feeling we are going no where to clearing. I must mention we still live a good life in regards to socialising and using on our daughter, we didn't really realise this until sitting down together some weeks ago as we've always just got on with it.

We have also passed the first year in our first home together after renovating it to a suitable living standard before we moved in but we are now ready to do works on updating the bathroom and kitchen (dated and miserable!) amongst other little bits here and there all with free labour (myself and the fathers!)

I am considering taking a personal loan of 10,000 with my bank santander (who I have both current and joint accounts with and also a credit card) to help consolidate these debts while also using the rest of the loan to improve the home and thinking this route instead of putting against it my mortgage when my 2 year fixed rate ends with Halifax in February. My credit rating after regularly checking is solid and is above the average in my area.

We purchased the house for a great price, it was on the market for £150,000, eventually dropping to 125,000 over a period of months for us then to snap it up at £119,000 with 10% deposit. Houses around us generally go for £140,000-150,000 so I've always been confident that in 5 years time we will have equity on this.

The personal loan after quickly liaising with Santander would probably be costing us around 180/190 a month and therefore costing less than we currently pay off on our credit cards, if we can also use some additional money for home improvements then in my eyes this seems a no-brainer and we should go for it as I can't really see the advantages of using it against my mortgage for 25-30 years.

Does anyone see any bigger negatives to this than just having debt? Will this affect renewing mortgage elsewhere/with Halifax in February? Should I be looking to add this to a mortgage instead?

Just hoping to collect some views on this.


Thanks

MortgageMamma

Hello


without knowing the finer details of your personal finances I can only offer generic information, but here are some points to consider.


1. If you have less than 20% equity in your property you may struggle to raise the amount you would need on a secured basis.
2. If you did somehow manage to raise the extra on a secured basis you would be at higher risk of negative equity and could find it more difficult to move or remortgage in future.
3. If you secure more finance against your home you are likely to pay it off over a longer term, and therefore could pay more interest than unsecured lending
4. whichever route you take, the amount you borrow will be factored into your affordability calculations next time you remortgage - affordability rules change regularly so whats affordable now may not be in a years time or longer.


Unsecured lending is usually at a slightly higher rate than your mortgage and over a shorter term. It can help with debt consolidation and home improvement costs, but budget carefully and think to the future, can you see any changes in your finances pending? Is your income protected if you are unable to work due to sickness, accident or unemployment? Do you have life cover, critical illness or family income benefit? All these things are much more important than kitchens and bathrooms. Though I do appreciate how miserable a dated kitchen and bathroom can make you feel when you are stuck looking at it all the time.


Could you possibly live frugally, overpay the credit cards and reassess your situation in February once your remortgage/product transfer has been dealt with?

catmanscoop2810

thank you for that appreciated. All Halifax (my current mortgage lender) have told me is that I will need to pay £300 for a valuation and dependent on the results is how much to borrow (if any at all) so your reasons do point to a unsecured loan being the route.

I have life cover and critical illness cover and employed in a fairly secure job which pays suitably well. Your defiantly correct in saying that we are miserable looking at dated rooms! We just feel that if we don't do it this way we possibly won't be able to for a very long time. With us being a fairly young couple (under 30s) and more children/responsibilities on the way possibly, sooner rather than later feels much more appealing than trying to skimp and save, some find that easier than others and sometimes you need that kick up the you know what and helping hand. The scattered debt on the two credit cards also frustrates us and would like it in one place knowing it's being paid off for sure.

Waiting till February is an option but getting the work done through Autumn/Winter is in our heads. Thanks again for your reply.

fewcloudy

Hello


£210 a month on combined credit card debts of around £5500, and a feeling of going nowhere to clear it is horrible.
That £210 must include a significant amount of interest to be so high?


I suggest you apply tonight for a 0% interest credit card. Use the links under Cards at the top of the page; you're looking for Balance Transfer Credit Cards, and maybe a long period/low fee offer. Last time I checked on here I think it was Sainsbury's Bank and Virgin had a 0% interest free period of 40 months for balance transfers, with a lowish balance transfer fee. 40 months will be more than enough time to clear your card balance. There are other shorter periods than 40months if you prefer.


If you take out a loan you will have to pay interest on it.


Assuming your credit really is good, I can't see why this wouldn't help your situation hugely.


PS Just checked it myself, Wow, you could get a Tesco card 24 months 0% interest and NO transfer fee!! How times have changed...


fc

catmanscoop2810

thanks for the research fewcloudy!

the £210 is what we both have in direct debits combined, thats not minimum payments, sorry should of mentioned that but even so we still feel it's going to take a while to purely clear all this.

the 0% credit card is a great idea and something we have actually already done but I go back to not feeling like we're getting anywhere and the 5500 is combined over 2 credit cards both each in one of our names.

Also if we was to clear £5500 over 40 months this would be £138 a month, and only about £40-50 less than combining this with a loan for debt clearing AND home improvements, we simply can't wait another 40 months to start on improving the home! So hoping we could do both at the same time for the extra £40-50.

Like I say I'm pretty confident I'd get accepted for 10k and this seems the way to go and would put our minds at rest if we had both the debt shifted and home improvements in one place.

Thanks again

Thrugelmir

catmanscoop2810 wrote: »

Me and my partner currently have credit card debts combined of around £5500 and are currently playing £210 a month off on these but with the feeling we are going no where to clearing.

Looking in from the outside. You've run up debts and aren't making any real attempt to clear them. As would prefer to maintain your lifestyle. Now you wish to take on yet more debt to upgrade your home while also consolidating existing. What happens when the novelty of the new decor etc wears off. Take on yet more debt to give another buzz.

At the end of the day the choice is yours. Spend your money how you wish. Don't complain though when all your friends in years to come are mortgage free and enjoying life to the full. While you've years to go on repaying the mortgage.

catmanscoop2810

Thanks for your reply although I have to say a little harsh/sharp (but appreciated as differential views is what makes this forum useful!)

The fact we pay our direct debits way over the expected minimum payment is shows to me we are trying, maybe we could afford to clear more but we have a young daughter, still want to be able to go out now and again for the relationships sake while also looking to build a home that we could potentially look to make money on in a few years time. (as im confident it would do so) - if Im honest the 5500 debt isn't from recent times and is more of a build up of stupid rash decisions/things I could of gone without 5-6 years ago!

Point im making is = Carry on paying £210 a month off now on 2 separate credit cards while also still having access to these cards for use; or try and get secure a 10k loan which puts our combined debt debt together, means we can close down the credit card accounts with the guarantee of our debt being paid off same time every month for 5 years WHILE also having some more money to look into modernising our property which I'm fairly confident would sell with equity (even now at it's worse state!) - After all we are only talking a bathroom/kitchen refurb, no foundation, extension, structural work.

Maybe I'm answering my own question and searching too much for reassurance but guessing I'm just looking for people with similar experiences who can prove to me there is no detrimental effect as long as your sensible. It just feels more secure and organised this way.

Thanks again for your message.

fewcloudy

catmanscoop2810 wrote: »

The fact we pay our direct debits way over the expected minimum payment is shows to me we are trying,

Point im making is = Carry on paying £210 a month off now on 2 separate credit cards

Sorry, do you mean £210 is way over the minimum required for your credit card debt?


I think you said you have already got your credit cards at 0% yes? If so then why would you overpay on that? You should pay the minimum you have to on that debt 9at least minimum to clear it before 0% period ends, to avoid balance transfer fees again if possible).


So if you paid the minimum to the CC debt, would you maybe be better then getting a 0% Purchase card to upgrade the d!cor, and use the money that you are no longer paying to the CC to bring down the balance on the new 0% purchase card? Basically all of your debt would be interest free if managed carefully?


fc

catmanscoop2810

yes minimum payment on each ranges from about £50-£60 a month on each card but we pay the £210 combined.

My CC - £3300 with direct debit of £150 a month and min payment expected of £50/60 a month - OFFER ENDS Jan 2017

Partners - £2200 with direct debit of £60 a month (min payment) - Offer ends sometime early next year also

We wouldnt get these paid off in the timescales the cards have and we kick ourselves but thats life and now we are truly set our hearts on getting this stabalised while also knuckling down with the home.

After initial discussions The 10k loan would work out paying £936.60 in interest over the 5 years = £15.61 a month (which would also include money for home improvements!) - I truly believe this would clear all my debts after 5 years and I wouldn't have or NEED another credit card during that time to hand!

My current home is seen more of an investment than a long term home to be honest and being in the trade I want to get stuck in on these small works in the house to try and make the equity I truly believe it has potential to make. With the free labour I can acquire I believe I can do both bathroom and kitchen on a decent budget.

Thanks

catmanscoop2810

...may aswell also ask seeing as it's played on my mind since, would getting accepted for a 10k loan severely impact on my re-mortgage come dec-feb?

I would be going through a broker whos a family friend when re-mortgaging anyhow but not sure how much this loan would play a part? Does one 10k loan look worse than 3 credit cards?

Thanks