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borrowing more on mortgage

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Hello,


my husband and I bought a house in 2014, our current mortgage has just over £112k and is on a fixed rate of 3.54% until 2021.


We currently have debt totalling around £18500 on two credit cards and a loan. The credit cards are both currently 0%. each month we are struggling to afford to live etc after the repayments for these and sometimes we have to resort to using a third credit card to buy food and fuel. we have cut down massively on luxuries like days out and have started shopping at Lidl etc to try and save money wherever possible. we are managing to make the monthly payments every month and don't have anyone knocking on our door for money but as I say we are forced to buy essentials on a credit card which leaves me feeling concerned that this cycle will never end.


Last week we applied for a loan for £19000 in order to consolidate the debt into one, which we were turned down for.


a member of the family works for a bank and has suggested borrowing the money against the house as we gather our house has increased significantly in value, possibly to the region of £150/160k. This would reduce the monthly payments and enable us to overpay the mortgage slightly and relax a little bit (don't worry we wouldn't go silly).


is this a good idea? we have no plans to move but since we bought our house we have had two children ad I have gone part time so I'm not even sure we would be accepted? does applying to borrow more and being turned affect our current mortgage?


Any help or advice is greatly appreciated. we are both so miserable at the moment and feel stuck.


Thanks
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Comments

  • Chappers27
    Chappers27 Posts: 97 Forumite
    Tenth Anniversary Combo Breaker
    edited 17 August 2017 at 4:11PM
    I think from a budgeting perspective a remortage would be a good idea. I've just remortaged on a property to consolidate debt. Remortgage means that Im paying much less per month to service debt and im now personal loan and cc free. I went through a broker, as going direct to banks they asked me allsorts of personal questions like "how did you get into the mess in the first place". But I feel much happier now. Of course my creditcards are now cut up.

    Your mortgage rate looks high as well. I reckon you could reduce your mortgage payments down too on a 2 or 3 year fix. You need £19k, £112k means you should do a remortgage for £131k. Work out what the LTV is on that first. A broker should be able to guide you. Prob best to look for a mortgage where fees are added to loan and legal fees paid for. Your LTV is around 85% so close to the mark.

    ps. check exit fees on your existing mortgage.
    no signature
  • tom2205
    tom2205 Posts: 42 Forumite
    It is feasible but you would have to stick to lenders loan to value limits for debt consolidation on the mortgage. For example, if a certain lender will permit a maximum loan to value of 80% based on your house price (If valued at £160,000 they would only consider a maximum loan of £128,000 if there is an element of debt consolidation on the loan).

    If this was the case then it would permit you to potentially clear £16,000 of your outstanding debts by putting it on your mortgage.

    One thing that you need to carefully consider is that you are securing your outstanding debt against your home and, in most cases, you are taking it out over a much longer term that what would be natural for a credit card. Let's say if you were expecting to clear the credit cards in 5 years, you may be doing it over 25 years if you remortgaged the debts on that basis and could be paying much more in interest over the long run.

    Short answer - yes, it is potentially doable and you may benefit from lower monthly payments but the long term cost may be higher and you are securing more debt against your home.
    I am a Mortgage & Protection Broker

    You should note that this site doesn't check my status as a Mortgage Broker, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
  • mrginge
    mrginge Posts: 4,843 Forumite
    Where did this debt come from? If you remortgage it away, what's to stop you running up another £18k ?
  • thanks for your replies, we obviously have a lot to consider. we have only just remortgaged in February so I'm not sure about exit fees etc.


    Mrginge it is a combination of student debts, replacing a car which was written off and living costs over the span of two maternity leave periods. trust me when I say we will not build that debt up ever again, it might not come across that well, but we aren't idiots.
  • kingstreet
    kingstreet Posts: 39,258 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    You won't get a further advance from your existing lender for debt consolidation.

    You could look at a secured loan which would allow you to leave the mortgage alone and avoid hefty ERCs eating into the money you need to borrow.

    Remortgaging to a new lender to repay your existing mortgage and raise the debt consolidation funds might be a goer, but will invoke the ERCs mentioned above and reduce what you might be able to pay off.

    One for a broker who will go over the options with you in detail.
    I am a mortgage broker. You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice. Please do not send PMs asking for one-to-one-advice, or representation.
  • Chappers27
    Chappers27 Posts: 97 Forumite
    Tenth Anniversary Combo Breaker
    edited 17 August 2017 at 5:37PM
    Do not go to your existing lender. Go to a broker. Do not go anywhere near a secured loan - I looked at them and the rates are crazy. PM me if you want to approach the broker I used.

    nb you only just remortgaged in February??? Did you rack up the debt in 6 months? Why didnt you consolidate debts back in February??
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  • System
    System Posts: 178,348 Community Admin
    10,000 Posts Photogenic Name Dropper
    Be aware that unless you make mortgage overpayments, you'll be paying this debt more slowly than if you just keep shifting between 0% cards, and if you're paying interest, even at a low rate, that long period of time can compound it into more

    0% balance transfer cards best, if not then remortgage but overpay/ invest after building an emergency fund
    This is a system account and does not represent a real person. To contact the Forum Team email forumteam@moneysavingexpert.com
  • amnblog
    amnblog Posts: 12,728 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    Chappers27 wrote: »
    Do not go anywhere near a secured loan - I looked at them and the rates are crazy.

    The rates are not 'crazy' they are suitable for some borrowers in some circumstances and should certainly be considered in this case.
    I am a Mortgage Broker

    You should note that this site doesn't check my status as a Mortgage Broker, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
  • Thrugelmir
    Thrugelmir Posts: 89,546 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    mrs_b112 wrote: »
    we have cut down massively on luxuries like days out and have started shopping at Lidl etc to try and save money wherever possible.

    If you seriously want to make inroads into your debt levels. Then pain is inevitable by changing ones lifestyle for a period of time. Nothing in this life is for free. A short period of austerity may accelerate the process. There's plenty of things to do that are free.

    Don't despair either. Channel your energy into knowing that you are creating a better future for all the family.
  • Chappers27 wrote: »
    Do not go to your existing lender. Go to a broker. Do not go anywhere near a secured loan - I looked at them and the rates are crazy. PM me if you want to approach the broker I used.

    nb you only just remortgaged in February??? Did you rack up the debt in 6 months? Why didnt you consolidate debts back in February??


    This is the first house either of us have ever owned, and it was the first time we had to re-do the mortgage and we did it online and didn't really know what we were doing. I think we thought at that point in time it would all be ok and would get better but we have just continued to struggle
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