Mortgage / dmp / equity / second charge

PUREHOMES

I'm looking for a quick bit of advice from someone more qualified than me - to see if my idea is viable. I've been over on the DMP board and was pointed in this direction.

As it stands:
House Value - Approx £285k
Outstanding Mortgage @ 1.94% until Aug 18 - Approx £149k
Outstanding Second Charge @ 6.2% - Approx £30k
DMP (was £49k) Outstanding Balance - Approx £10k due to end 04/18

Current outgoings:
Mortgage £895
Second Charge £260
Dmp £560
So those equal £1715 plus other bills

From the DMP we had 7 defaults. Of these, 3 should have dropped off as they are more than 6 years old, and the remaining 4 are 6 years old in March, June and Sept 2017.

Ok, so here is my idea:
My house is getting to the age now where a lot needs to be done to it. (Eg the heating just went and had to be replaced at a cost of £4k which was borrowed from parents).

I want to keep the mortgage as it is.
I want to try and refinance the second charge but tag on an extra £50k to it. (This will pay off £10k DMP, £10k owed to parents for previous issues - heating, car etc, and leave £30k to make house improvements, doors, windows, garage door, oven etc etc)

Therefore the mortgage will stay at owing £149k @ 1.94%
I will have a second charge of £80k at ???% over poss 20/25 years.
Then in a few years time, when my credit score has considerably improved, I can hopefully refinance it again into just a single mortgage / charge.

The mortgage payment would remain at £894 and the second charge would be approx £500 (hopefully).

I know it would make more sense to wait a couple of years until the dmp has finished, the defaults have all gone and the credit rating has improved, but I'm at the stage where the house improvements really need to be done. I'm aware that if I can refinance everything now, due to my credit score, the rate would be higher than the norm. But I'm willing to pay this for a couple of years, as then i could start rebuilding my credit history now rather starting in 2018. Then when 2018 comes, and the mortgage renewal is due, my credit rating will have increased significantly, and I can refinance everything again then into one 'package'.

Any advice would be greatly appreciated.

glentoran99

Im not sure you going to be able to in effect get an 80% mortgage while in a DMP, You have posted your outgoings but not your income, Do you really need 30k for house improvements? Seems foolish taking on more debt when you are still paying off previous over spending, If you really do need the home improvements then rather than risking your home by securing the debt on it can it not be financed another way? A lot of the things you mentioned are available on 0% deals

AnotherJoe

As far as I can see just as you are in a good place emerging from debt and well on the route to clearing it you are now contemplating getting a huge loan at what will inevitably be a very high interest rate and thus plunging yourself back in to deeper debt again.

Since as you say it would make more sense to wait a couple of years, why don't you take the sensible option? Is is not taking the sensible option in the past how you got into a financial mess in the first place?

For example, why turn a loan from your parents that's probably at zero rate and with no defined payment schedule, and a DMP at a manageable rate, ,into a loan that will have a very high interest rate and a strict schedule ?

This sounds to me, from what you've posted, someone in debt who thinks they can get out of it by borrowing more.

Thrugelmir

PUREHOMES wrote: »

Therefore the mortgage will stay at owing £149k @ 1.94%

Only until 2018. How much of a rate rise can your finances withstand. Make of the most of the current rate while you can.

Borrowing more isn't a way out of your current predicament. Lenders have a duty to lend responsibly. So there'll need some convincing. To fund a new oven over 25 years is a bad idea for example. If the property needs a high level of expenditure. You'd be better off selling and renting. Use the equity to clear the slate and start again from ground zero. Be far quicker.