Debt consolidation mortgage

KatieLab

Hello all.


Just wondering if anyone had experience of this? We bought a house a couple of years ago which required a lot of work to it. We extended and knocked through walls, installed a new central heating system, re-wired, new kitchen and bathroom to name a few things.) The house isn't entirely finished but we wanted to re-mortgage and borrow more to pay off all of our credit card debt and if there is enough equity, borrow a little extra to finish the house.


I spoke with Natwest, who we are currently with and she seemed to take the value of the credit card debt into consideration when calculating our liabilities. However I know we wouldn't be able to borrow anymore if we were not paying off the cards. Do they take the debt into consideration even if it is being paid off?


I was also querying how the property would be valued. She stated a drive by viewing and I confirmed that the extension etc it to the back of the house and a was worried that all of the work and money spent wouldn't be evident or taken into consideration. She seemed to think it was nothing to worry about and a drive by would be fine.


The most important aspect of the re-mortgage in my eyes is the valuation as that determines the equity.


I just wondered if anyone had any experience of re-mortgaging with Natwest to pay off debt? Is the debt included in the calculation and how can we ensure a fair valuation?


Many thanks in advance.

MortgageMamma

Hi there

When speaking with Natwest they take credit card debt and repayment details as a matter of course when keying your mortgage application/agreement in principle. There is a little box that can be ticked next to the list of debt that says it will be paid off on completion. This means the system doesn't include those monthly payments in your mortgage affordability calculation.

Unfortunately these days most lenders do automated valuations or drive by valuations. There are still a few lenders who will do a manual physical valuation if you request it at the time of application, so perhaps you would have more success if you spoke to a broker and got advice and used one of those lenders.

Also, there is a way you can insure yourself to a degree against these automated valuation models lenders use in the future. If you contact Zoopla you are able to tell them about the changes you have made to your property and they update their system, it finds comparable properties in your area to compare with and that will usually throw out a more realistic valuation.

Just be aware that if you do insist that a valuation is done manually you may have to pay a couple of hundred pounds for it.

Finding a lender who will not charge for a phyiscal valuation may be possible but you may not get the very best mortgage rate.

I realise I've given you quite a lot of info there so if you need further help please just ask.

KatieLab

Thank you for your reply I really appreciate this.


I updated our details on Zoopla a few months ago and I agree with the valuation that they have given on their site. However, the front of the house is what needs doing (new windows required etc) so I was worried that a drive by valuation wouldn't be the best for us. Inside is really lovely... in a nice neighbourhood but we are the tattiest house on the street at the moment before we finish the work


Currently Natwest were saying that they wouldn't be able to allow us to borrow any more on top of our mortgage despite us being about £90k in equity (going with a £240k valuation). Outstanding mortgage is £160k and Zoopla valuation is just over £255k (I understand this might not match the mortgage valuation). We wanted to add £40kish to the mortgage to pay off debt and finish the house so would hopefully still have a reasonable LTV.


Our joint salaries are just under £90k.


If we were able to pay off the cards our monthly outgoings would reduce by around £700 and the mortgage looks like it would increase by £100 - so a great saving each month.


I just wonder why their systems are saying no at the moment and didn't want to risk a low valuation as she said we couldn't get this changed and when they receive their valuation it is final. We would be happy to pay for a manual valuation. I would be interested to know what the automated valuation was but I guess we couldn't get this information first.


It might be worth looking for a broker rather than just going back to Natwest... although I have always been really happy with them.


Thanks again for your advice.

MortgageMamma

Hi KatieLab

I think the issue you may be having with Natwest is due to the fact its considered debt consolidation (even though the money's been spent on the property). They only go up to 75% loan to value (£180000 based on a £240000 valuation) for debt consolidation.

You do have more options. Look for a lender who will allow an 85% loan to value for debt consolidation purposes. This could incur early repayment charges on your current mortgage though (see section 10 of the original mortgage quote or look in your mortgage offer for details of early repayment charges).

You'd need to compare the viability of this method with taking a stand alone secured loan to consolidate the debt and release as much as you need for your front of house work. This method is usually a higher interest rate and charges, but it may work out better if you have high early repayment charges on your mortgage.

Remember a secured loan is a 2nd mortgage on your home, so it works the same way as your first mortgage, known as a first charge. A second charge is a secured loan, all that means is if your property is sold the main mortgage lender gets their money first, secured loan company second (hence the higher rate).

I think the best way through this is for you to speak with an experienced professional Mortgage Broker/Adviser and see what your options are.

If you have any more questions please let me know

MM

KatieLab

Thanks so much. Natwest website says it allows 90% for debt consolidation mortgages so I will query this with them. They used a valuation of £240k on their calculation and £190k mortgage (£160 left to pay with £30k additional borrowing) and it still said no. They have asked to see my Experian report which seems fine (no missed payments etc) so I will see what they say after viewing mine and my husbands. She mentioned an £8 unpaid fee for something which I have no idea what that is so need to find out as that might be having an impact too!


It is more the valuation I am worrying about. If they were going by Zoopla then it would be fine but I have heard people say they received valuations £30k less than they anticipated and were very shocked and there was nothing they can do about it.


Thanks again for the info.

Icecream2

Hi, jumping on this thread. Just wondered did you ever get this sorted? We are in a similar position, awaiting a decision from Natwest (brokers recommendation) but posts i have been reading seem that they accept very few people for consolidation?