Advice Wanted - Remortgage to clear debt?

datlex

Whilst the increase of a mortgage is never to be recommended. In your case OP are your loans and credit card with the same company as your mortgage?

fiisch

In theory it should work, assuming you aren't going to get into debt again. However, it requires a bit of a step change, and mortgage lenders are - justifiably - cautious about lending purely for the purposes of debt consolidation.

From a lender's perspective, you could remortgage to pay off the debt, but equally there's no guarantee you wouldn't find yourself in the same position, only with inflated mortgage costs.

If you do go down this route, I'd suggest using the monthly income freed up as overpayments on the mortgage. You don't mention how long your remaining term is, but it might mean you end up paying significantly higher interest in the long term for a - relatively - short-term gain.

I would also advise against obtaining more than you need - there's seemingly a £9,000 gap which is not accounted for?

sourcrates

Brucefan wrote: »

but it would still take us longer to pay off the cards than it would to pay off the remortgage we are looking to get, so still seems like best solution to me. Have contacted a broker who thinks should be possible.

It may well be possible, but its rarely the right option.

It seems like a great way to sort out the problem, and still retain your credit worthiness.

Well, i`ve been there, as have a good proportion of this forum, borrowing more money is not the way to pay off existing debt, it does not address how you came to have £38,000 of credit card debt in the first place, unless you change the way you deal with money, and learn to live within your means, you will end up in even deeper trouble, very quickly.

Please think twice before following this all too familiar path to insolvency.

Brucefan

Thank you all for your comments. I honestly thought that with that much equity in our home we wouldn't have a problem remortgaging - it's only by seeing comments on here I've realised that we look like a bad risk to mortgage lenders. We have been very lazy and foolish with our finances, hence the silly amount owed,not helped by the fact we each have separate accounts.
The difference in our debt and the amount we want to borrow (£9000 as some of you have pointed out) was because I had not at that point got all our outstandings listed - we have total debt of £67,000 (including mortgage). We only have 10 years left on the mortgage. We have decided that remortgage is the right way forward for us and are going ahead with a remortgage, for 10 years.
I do appreciate that this is not advised, and I understand why, but for us we know it is the right thing to do, and believe me, lesson learned! We will have a joint credit card in future, for emergencies only, that will be paid off each month. We will also make overpayments on mortgage or actually save some money over the next few years.Thank you again for all your comments and advice.

EssexHebridean

OK - you asked a question on here and you've been given some very good and solid advice - I'm slightly at a loss as to why you asked bearing in mind you are now going to ignore the answers?

At the very least, you need to put the remortgage idea on the back burner for a few months. Sort yourself a proper budget (use the SOA we link to on here as that's a great way of making sure you don't miss anything) and then live within that budget, paying whatever extra you can off your debts, for 6 months. Anything extra you can save from that budget, you pay off the debt. At the end of the 6 months, you;re in a far better position for two reasons:

1) Your credit file will look better to lenders that you might be approaching, The mortgage will have dropped at least a bit giving you improved LTV, and the debt will also have fallen at least a bit.

2) you'll have experience of living within your means, with no credit cards as a safety net. That in itself makes it less likely that you'll dig your way back into a big debt hole in the future, just with a bigger mortgage.

Other things to think about
- that bigger mortgage - what difference would an interest rate of 5% or a little higher make to your monthly payments? Would you still be able to afford it?
- As things stand, what Overpayments are allowed? (Check this, don't assume they're allowed at all!)
- debt of 67k including mortgage, yet you're looking at borrowing 75k - why the extra?

Remember that there is a LOT of experience on these here forums - we've seen a LOT of folk doing exactly what you;re doing, and then a few years down the line we've seen them come back in a worse position than they started in - this is why we say to at the very least put the groundrules in place first.

Oh - and that credit card "for emergencies" - no - save an emergency fund and use that "for emergencies" - credit is not ideal to use in a crisis.

MrsSave

This isn't wise, and I have a feeling that you will be back on the boards within a year or so having built up more debt. £38k is a lot of money. How did you build it up in the first place? What happens next time you want something that you can't quite afford? Will it go on a credit card? Then there'll be something else, and something else. Before you know it, there'll be another few thousand on the credit card.

You need to address your overspending first, and as Essexhebridean mentioned live within your means and stick to a budget for a while first. Please listen to the advice given here. It comes from experience.

Pixie5740

There’s no such thing as a joint credit card in the UK. You can only have one principal card holder and (s)he is the one legally responsible for the debt.

jimjames

fiisch wrote: »

From a lender's perspective, you could remortgage to pay off the debt, but equally there's no guarantee you wouldn't find yourself in the same position, only with inflated mortgage costs.

I guess from a lender's perspective they might be less worried with a LTV of under 20% as it means they have plenty of equity in the house to cover any default and repossession.

Apart from that there isn't a lot to add as I'd agree with the other replies especially those suggesting you review budgets for a few months. You need to examine how you accrued £38k originally to prevent it happening again.