Remortgage to reduce debts

andy1314

Hi MSE world,

I am currently thinking about remortgaging, my current deal comes to an end at the beginning of March and my house has gained about £20k in value, although this is still to be confirmed by my / a lender but similar properties nearby have sold for the price I am assuming.

I want to use the money to use the money to clear down debts that I have having done the sums and realising I can reduce my net monthly outgoings by c.£600, which when I worked it out shocked me a lot, guess it shows how I've let debt and finances go.

However, the issue I have is my credit file is a pretty poor state. I have had missed payments as well as unfair mark against it which I am in the process of removing. I have time to repair my credit file, but I fear I may not repair it enough. If this is the case, can I look at an option of adding the debt onto my mortgage to save the remortgage process? Does this have a terminology around it?

Thanks for your time, Andy.

juststuff123

Hi Andy
This is called debt consolidation. Very few people have managed it successfully (it hides the root cause of the problem) And it means that unsecured debt becomes secured debt making it easier to loose your house. I suspect many more knowlegable than I will tell you that it's a very risky move and best avoided. Most people on this forum will tell you to tackle your debts using the snowball method instead. Good luck whatever you decide.

sourcrates

Hi,

Consolidating your unsecured debt into your mortgage seems like a good idea...........when your desperate.

Whilst it may be true that you could save a whopping £600 a month in debt repayments, you will be extending the length of your mortgage, and obviously, you will repay a lot more in interest over that period.

The problem you will have, infact, the problem most people who consider consolidation will have, is the fact they dont change the behavior pattern that got them into debt in the first place, so lets say you did get this re-mortgage, you paid off all your debts with the proceeds, then you carried on again as you have been doing, before long, you will have amassed another Hugh mountain of debt, which this time, you simply wont be able to service.

This is the position a lot of people, including my old naive self once, find themselves in, then the only options open are some kind of formal debt solution, and of course you then put your home at risk.

You need to change the spending behavior that allowed the debt to build up in the first place, otherwise your just going to keep repeating the same old mistakes again, and again.

Consolidation, in some cases can work, but you have to remove all temptation to spend on credit again, and live within a pre-defined budget.

Katzen

In almost all cases you would be mad to do this. As sourcrates said, you will prob find yourself building that debt again firstly and secondly, the interest over the life of the mortgage will be even more eye watering.

Look at what rates you would be offered for a remortgage on your current sum with the extra 20k counted as value on your loan to value ratio. With a bit of luck your monthly payments would go down. Put the extra towards debt payments and take a good look at your spending habits to reduce your chances of debt on future.

andy1314

Thanks all, very good points about spending, I've started budgeting and getting a grip on how much is going out. I'll get out of the hole I'm in, and it is a lesson learnt. Now to deal with the issue. Onwards and upwards though, '16 hasn't been great but '17 will be the turnaround!

EssexHebridean

Put together your SOA (Statement of affairs) - you'll find the link in the "sticky" post at the top of this board. If you then post it in here we can take a look and see where in your general expenses you may be able to make savings to chip away at your debt without you going down the route of risking your home on it. we rarely see one where we can't see savings, and often people find the very act of setting out their budget in that format means they get a clearer grasp of where their money goes, too.

Something to ponder on also - remortgaging doesn't reduce debt, it simply relocates it. It's still debt - money you owe to someone else.