Questions about remortgaging

snapey19891

Hi everyone (first post here).

Basically my home is worth £170,000 and i owe £80,000 on it. I have a loan of £3,000 which i want to pay off (never missed any payments) and i just want to generally see some money in my bank for a change so am looking to remortgage by £10,000 (which is the minimum with the Halifax).

As mentioned i have never missed any payments or anything of the sort but i have read applying for credit before applying for remortgage can be an issue. I have applied 3/4 times over the past 12 months (hence the loan amount has increased) but payments have been perfect.

Obviously it is only a small remortgage and bar applying for credit my file should be perfect. Am i over worrying here do you think? I literally have no idea so sorry if i am being stupid!

Thanks in advance for any help you can give me.

glosoli

1) The extra £7,000 on top of the debt consolidation, what would you use these funds for? It would not be an acceptable reason just to say "to have cash in the bank". A mortgage adviser wouldn't recommend you have a loan which accrues interest for the sake of it.

2) Is it wise to consolidate your loan? How long is left to run on it? What interest rate is it? Would it be wiser to overpay on the agreement? Remember if you default on a unsecured loan then your house is not at risk, but if you default on the mortgage then your house is at risk. Also by consolidating the loan, you will likely be extending the repayment period, which may accrue more interest into the longer term.

snapey19891

Thanks for your response,

Perhaps i didn't make myself to clear so apologies. As mentioned i have never missed a payment on my mortgage or loan repayment but i would just feel a lot better if i did not owe that £3,000 as with my repayments i am finding it harder to put away money each month and quite frankly i don't like that loan being there and given the fact i have a lot of equity in my home i would much rather do it this way.

One other thing if forgot to mention is when i get the £10,000 i will obviously use it to pay off the £3,000 loan but will then look to pay £5,000 off my mortgage straight away.

I have decided i am definitely doing this as my monthly payments will work out much better and i will feel much better about it.

My main question was more about my recent applications for credit effecting my application? I would like to think not given the fact that it is such a small remortgage and the equity i have. My credit score is above average on all the credit score sites.

Thanks

glosoli

It is unlikely to have that much of an effect to be honest with you, they are more interested in actual adverse information such as late payments, defaults and that type of thing. I wouldn't be too concerned about that.

When it comes to the extra £10,000, I can't help but think you are going to run into difficulties. Remember that this isn't a self selection process, and an adviser needs to make a recommendation to you, particularly when debt consolidation is involved. Your rationale for debt consolidating appears to be fine, i.e reducing monthly outgoings, however an adviser won't be able to make a recommendation for £10,000 unless you actually have a valid reason for what the funds are going to be used for. If you say that you are just going to put £5,000 back into the mortgage, they won't recommend you release it in the first place, leaving your loan amount below the minimum required.

snapey19891

Thanks again for your response.

If i said it is a mixture of Debt Consolidation and Home Improvements would that be OK?

In all fairness it will be as like i said i feel at the moment i can't save and spend on much else and if i had the spare cash i would look at spend on the home etc.

So you feel the applications shouldn't effect it it is more the reasoning behind it?

Thanks

aneary

Why would you borrow £10k and then pay back £5k that doesn't make any sense.

ViolaLass

If you add the money to the mortgage, you may be borrowing it for longer and, if so, may end up paying back more than you would have just to have 'money in the bank'.

glosoli

snapey19891 wrote: »

Thanks again for your response.

If i said it is a mixture of Debt Consolidation and Home Improvements would that be OK?

In all fairness it will be as like i said i feel at the moment i can't save and spend on much else and if i had the spare cash i would look at spend on the home etc.

So you feel the applications shouldn't effect it it is more the reasoning behind it?

Thanks

If I was you I would do the following:

1) List all of your debts, including interest rates, balances, terms remaining, monthly repayments, and seriously think if debt consolidating is a wise idea and if it can be avoided.

Have a think about what has led you to require to consolidate debt in the first place, and what measures will you take to ensure that you don't make a habit out of simply consolidating debt, and then racking up unsecured debt again.

Also have a think about what exactly you are looking to achieve by consolidating debt.

2) If you decide to go for debt consolidation, giving the amount required leaves you below the minimum that your existing lender can process, have a look into whether it is actually a better decision to remortgage the entire mortgage to a new lender, so that you aren't borrowing more than you are actually requiring.

Does your existing mortgage have any early repayment charges? If so, when do these end? Is it feesable to wait until this period expires? What interest rate are you on at the moment?

3) If you decide that you need to remain with your existing lender, then you will need concrete answers as to what the funds will be used for. Yes you can borrow the additional £7,000 for home improvements, but what would you do if they requested home improvement quotes to determine that this is what the funds are going to be used for? Is this something you will be able to produce?

Furthermore, if you do take the additional funds for home improvements, and then latterly decide you no longer require the funds for this purpose, is there going to be any penalties for putting the funds back into the mortgage? If so, is this going to wipe out any interest saving you may make by consolidating your debts in the first place?

Sorry for long response just thinking out loud.

snapey19891

Thank you for the responses it has certainly given me a lot to think about. May all seem long winded just to not have a 3k loan outstanding but it has really been getting me down!

ViolaLass

snapey19891 wrote: »

Thank you for the responses it has certainly given me a lot to think about. May all seem long winded just to not have a 3k loan outstanding but it has really been getting me down!

You will still owe the money, just to someone else and perhaps for longer.

fewcloudy

aneary wrote: »

Why would you borrow £10k and then pay back £5k that doesn't make any sense.

I am guessing because 10k is the minimum amount (post #1).