Debt consolidation

Jananne19

We're hoping to move in the new year to a house approx £60k more than we're in now. We have 20k of debt after an expensive few years that we want to add onto the mortgage as the payments are £700 which is affordable but a struggle. We've weighed up whether or not to do this and sat and did the sums so don't need advice about adding debt to mortgage.
But we are thinking of apply for a new mortgage and consolidating now, in a tracker so we aren't tied in.
Thought this would be better as it would mean we could save the money that isn't going on repayments to put towards moving costs/decor.
Also thought it might be better as when we go to move and apply for more to move we aren't having to worry about being declined due to debt repayments.
We would still be well within our affordbaility.
One of the things I am concerned about is whether it would impact our credit rating/chances of being accepted if we're taking out a mortgage now and then again in 2/3 months when we move ?

[Deleted User]

Debt consolidation is rarely a good idea - especially not turning it into secured.

Visit the DFW boards and look at ways of cutting back and paying down the debt. Focus on getting it cleared rather than just kicking it down the road and increasing your spending again.

Jananne19

Thanks for the advice, as I say we've weighed it up and in our circumstance it is the better option. To add it to the mortgage, although over a longer term it's a lower interest rate and works out as about £948 extra in total. Worth it to not be paying £700 a month.
As I say it's more a case of either doing it now or when we move, but concerned whether doing it now would create problems if we go to move I.e whether lenders would be put off by the fact we took a mortgage out then three months later apply for another one?

Retired_Mortgage_Adviser

Setting aside the pros/cons of debt consolidation, just so I understand you correctly -

- you are currently on a tracker mortgage which you can exit penalty-free
- you intend to move home soon and so expect to be taking out a new mortgage in the next few months.

In your place, I would avoid trying to do a debt consolidation remortgage now. Just to be clear, when your intention is to do debt consolidation, affordability will usually be calculated disregarding the current debts as the assumption is that these will be 0 at completion. So, as long as you are servicing the debt properly (no late payments, etc) and the other numbers stack up, you don't need to worry on that front.

Jananne19 wrote: »

We're hoping to move in the new year to a house approx £60k more than we're in now. We have 20k of debt after an expensive few years that we want to add onto the mortgage as the payments are £700 which is affordable but a struggle. We've weighed up whether or not to do this and sat and did the sums so don't need advice about adding debt to mortgage.
But we are thinking of apply for a new mortgage and consolidating now, in a tracker so we aren't tied in.
Thought this would be better as it would mean we could save the money that isn't going on repayments to put towards moving costs/decor.
Also thought it might be better as when we go to move and apply for more to move we aren't having to worry about being declined due to debt repayments.
We would still be well within our affordbaility.
One of the things I am concerned about is whether it would impact our credit rating/chances of being accepted if we're taking out a mortgage now and then again in 2/3 months when we move ?

Jananne19

Thanks @retiredmortgageadvisor, that helps reassure me about the affordability. What would make you avoid doing to the remortgage now for consolidation, would it go against us later on having the application on file?

csgohan4

remortgaging now would be a risk, would the lender allow you to port the mortgage to your new property? if the new property is more expensive, it may affect your affordability.


if they don't allow porting, you have to pay an early repayment charge which defeats the point and is costly as you are in a fixed period when trying to move


As above with debt, you need to look at it sooner, kicking the can down the road may only prolong the debt.


Some lenders don't like you borrowing more for debt

foxy-stoat

Another one for doing your debt consolidating when you move - as you are going to do it no matter what folk on here say. Use this time to sell stuff, make overpayments and reduce the amount of debt you have when you come to move.

While I am not 100% against the idea of moving unsecured debt to secured, IF you address the reason why you amounted that much personal debt in the first place, to "save money" each month, all that does is allow you to pay less off the balance so prolongs the pain.

If its affordable and you 100% will not accumulate that amount of debt again then do it.

Retired_Mortgage_Adviser

In addition to the reasons outline by csgohan above, I have had instances where 2 BTL customers (against my advice) used tracker mortgages in place of a bridging loan and exited after 7-8 months. This led to them being refused further mortgage business at a later date from the same lender. I agree that this is anecdotal but the main point is that mortgages are a long term thing, and lenders might not look favourably upon using them as a short term debt management tool.

As a broker if you told me your plans as decribed in this thread, I would be very reluctant to advise you to remortgage now.

Having said that, I don't know your entire financial circumstances. If (for instance), waiting for 6 months would mean that you would struggle to service your unsecured debt at the current level of repayments, risking late/missed payments and/or severe financial difficulties, then you obviously need to look at quicker solutions to either tackle the debt or give yourself some breathing space. Debt consolidation through a remortgage might be one of the tools in that instance.

But in the unlikely event that the above is the case, I would recommend getting free, judgement-free and professional advice from a debt advice charity.

Just to be clear, the above is not advice, just a general opinion.

Jananne19 wrote: »

Thanks @retiredmortgageadvisor, that helps reassure me about the affordability. What would make you avoid doing to the remortgage now for consolidation, would it go against us later on having the application on file?

Jananne19

The porting side of it shouldn't be an issue as we would plan to get a tracker for the remortgage on the current property with no repayment fees and then apply for a completely new mortgage on the new property.
We didn't have equity on the current property when we moved so most of the loan was for improvements, we've now got 70 equity so we'd plan to use 20 on the debt, 25 for home improvements on the new place and 25 for the deposit, so shouldn't be any need to take out extra debt again/loans again.
@csgohan4 Keeping the debt long term isn't an option as we'd like to start a family once in the new place so being on maternity pay, paying a mortgage and keeping the £700 loan repayments as well wouldn't be possible.

Thrugelmir

Given your plans to spend £25k on home improvements, incur considerable costs in moving to the new property and start a family. Perhaps continuing to pay down your existing debts until you actually move would be the best option.

Extending debt repayment to lower monthly outgoings is a false economy. The novelty eventually wearing off.

Jananne19

"There is no neeed for home improvements" Sorry but there was a need for home improvements, we bought a house that needed doing up and have added value by doing so. My priorities are to have manageable monthly payments and a house that's liveable, I don't think that's unreasonable. We can't afford to buy a house that's been done up in the area we like so would again buy one in need of some work new bathroom, kitchen etc which are costly but works out cheaper than buying a house already done out.

By your logic no one should buy a house until they are 60 and have saved £300k. It may work out better interest wise and on paper but is defeats the object of buying a family home.

I appreciate your advice but the post wasn't about my priorities or whether to get more debt. It was about whether a remortgage now would impact on being accepted for another mortgage when we move.