Consolidate Debts. Remortgage/Second Charge Mortgage.......advice appreciated!

berniebeyer

Hello everyone....

We are considering consolidating the debt we have, the debt is approx £43k, originally we were planning on a remortgage, however there is an ERC of £9k which ideally we didn't want to pay, we are now considering a second charge loan, the same length of the mortgage, then when the mortgage deal ends, consolidate the whole lot into the mortgage and overpay to make savings on interest and length of mortgage.

We don't know anything about second charge loans, are there any potential pitfalls we should know about? Is there a way to obtain one without the use of a broker? Should we have a broker for this type of borrowing? Are these type of loans easy to end after 3 years without any penalties?

The main reason for doing this because our debt is split over 6 lenders and is not leaving us with much outgoings each month, and occasionally we add to the debt.

Thanks everyone...

[Deleted User]

Turning unsecured debt into secured is generally a terrible idea. Also, the problem is not the number of lenders you have, but the amounts and rates.

Visit the DFW boards and complete an SOA, to get more tailored advice on our options.

berniebeyer

Thanks zx81

I presume DFW is Debt Free Wanabee? But what is an SOA?

Thanks again

[Deleted User]

Statement of affairs - your incomes, outgoings and debts.

It will often reveal a better solution and will focus on the individual debts and their rates, rather than lumping them all together.

berniebeyer

Ok thanks, got it.

System

As above. Consolidation rarely works as it fails to address the underlying problem of not spending within your means, usually ending up not only paying out the same again as you were per month but now with double or more the amount of debt.

Consolidation only works if you don't take on additional borrowing, cut up the credit cards and take a bit of pain for a while.

berniebeyer

Yeah the idea was to consolidate everything into the mortgage and overpay, so we can get out the mortgage early and save on the interest.

We are fairly high earners but as the debt is spread over 6 lenders we are a bit short each month, in an ideal world we wanted it in one place and attack it with overpayments and giving us some more money each month.

At the moment we are unable to overpay our mortgage as there isn't any free money

The problem with the re-mortgage is the ERC.

We wouldn't have a problem with the secured loan payments as they are very low.

Do you think it's best to wait until the mortgage deal ends and remortgage then adding any outstanding debts to it at the time?

Thanks everyone!

zippygeorgeandben

To the OP, I can understand that you think you'd get some kind of clarity on your situation if it was just one amount coming out of your account(s) each month instead of being split over several but generally I would follow the advice of previous posters.
Have you sat down with your OH and discussed why you got into £43k of debt? Look around you. What have you got to show for it?

Consolidation rarely works. You're just making your debt free journey longer in reality.
If it was me (and it seems you've had honest discussions here with your OH) I'd put an SOA on the DFW boards and people will give you advice on where you can cut costs. You say you are both high earners but that might not last for ever as you never know what's round the corner..
Dum dum DUUUMMMM!

Good luck

foxy-stoat

Pitfalls outweigh the short term gains.

Sell everything, overpay the highest interest debt first, get as much on 0% or low interest rate balance transfer cards, down value the car(s) and change your lifestyle.

berniebeyer

Thanks everyone for the responses.

You've given us something to think about

System

OK lets put this into some context for a long overdue wake up call. Given you're having to do additional borrowing to meet your bills and to buy food you're in the same debt crisis as someone who is on the dole using payday lenders to keep the lights on and to eat. It is that serious and just because you earn a high salary doesn't mean you're in any better financial position and the only thing that is preventing you from being classed as bankrupt is the fact you own property with equity in it. Without that you'd seriously be looking at having to do a debt management plan or an IVA with an insolvency practitioner.

£43000 of debt isn't something you get into just because you have lending spread over 6 lenders. £43000 of debt is something you get into either because you've had a catastrophic event that's happened in your life and you've had a year or two with little or no income which you've not said you have or because you've not been keeping an eye on your spending and have let it get completely out of control. Not only have you spent the high salaries you get, you've spent £43k more equivalent to roughly the take home pay of a £60k salary more than you've earned, more than double that of the national average wage in the UK.

To put £43,000 into context it is over two years worth of the UK average salary and there's no way that has happened just because you've got borrowing from 6 lenders.

The life you've been living of the plastic millionaire you cannot afford. Lots of things are going to have to be given up, the things you consider your little treats are gone out of the window for the next few years, it's going to be a Skoda instead of an Audi, a Mondeo instead of a BMW, Prosecco instead of Champagne, short back and sides instead of a £100 stylists cut. Because if you don't then another few years it could be standing in front of a County Court judge as he stamps the bankruptcy order, spending hours on the phone with the official receiver and packing all your belongings he hasn't decided to keep from the house he's taken off you into a removal van to take to your new rented pokey flat.