Debt solution when re-mortgaging

scobra182

Hi Guys, Sorry if this has been covered, first-time post and long time follower. 

I have done some research, but I am still a little confused so apologies. 

I am re-mortgaging just now, low rate ends in October so starting early. I had inquired about borrowing around £6.5 k extra on the re-mortgage to clear off a Credit Card and Loan (TSB Card 17% 3.3k, Loan Tesco 8% 3k with 20 months left). I also have around another £5k of debt, which I am going to settle from selling stock I have through my employer. I have been in debt for around 15 years, like all of us I am fed up with it ! Alot of it granted is my own fault, sometimes living out with my means, but also through difficult spells in my life in and out of work. Nowadays I have a family, we are in a good place now, but each month this debt is costing me around £450 as I am trying to pay this off. One is low cost loan, some 0% cards , some other cards (17%-20%) but I just want it gone ! 


I have had a mortgage accepted and just need to complete the paperwork. This is a 30 year mortgage (1 year less than my previous mortgage) and is £30 more than I have been paying on my previous mortgage deal. To me, this seems much better and I will be debt-free in October and £450 better off with no more monthly outgoings towards my debt. 


This to me seems too easy, hence why I am looking for some advice. Our mortgage is very affordable for us, we have never missed a payment in all the years we've had one, and the new monthly amount is fine. I see no issue with us paying our mortgage either. 

Lastly, through money supermarket when shopping around for a mortgage, a company called 'Fluent Mortgages' who are facilitating this for me, have a promotion through Money Supermarket where they do this with no fee. Again, maybe I'm a sceptic, but nothing is for free IMO ! 

What are the pros and cons of all of this ?

One question for me is, I understand if I do this the debts I pay off are secured against my home, but If I clear them and say shut down the loan and close the credit card, is that it finished with ? What way is my home at risk ?
Just looking for some independent advice and some of my questions may be stupid, anything is appreciated ! 

[Deleted User]

You won't be debt free at all.  You'll just have shifted it to a longer term debt and will pay more interest in the long run.

Focus on overpaying the highest rate debt and look for BT offers. You'll clear it quicker, pay less and become truly debt free.

Kicking the can yet further down the road just gives you a sore foot.

DrEskimo

Exactly as @Deleted_User says.

To me, this seems much better and I will be debt-free in October and £450 better off with no more monthly outgoings towards my debt. 

Far from being debt free, you will now be committing to carrying this debt for another 30-years!

Debt is the symptom, you need to identify the cause. The problem with consolidating the debt and treating it as though the issue is gone is that you will fall into the same habits, as the cause hasn't been addressed. You need to go through your spending, get a written budget and cut costs then go through the hardship and make sacrifices to pay the debt fully. This helps you identify where you went wrong to get into debt in the first place and ensure it doesn't happen again in the future.

scobra182

DrEskimo said:

Exactly as @Deleted_User says.

To me, this seems much better and I will be debt-free in October and £450 better off with no more monthly outgoings towards my debt. 

Far from being debt free, you will now be committing to carrying this debt for another 30-years!

Debt is the symptom, you need to identify the cause. The problem with consolidating the debt and treating it as though the issue is gone is that you will fall into the same habits, as the cause hasn't been addressed. You need to go through your spending, get a written budget and cut costs then go through the hardship and make sacrifices to pay the debt fully. This helps you identify where you went wrong to get into debt in the first place and ensure it doesn't happen again in the future.

Thanks so much for the comments guys,

Dr Eskimo, I totally understand that, and after speaking to stepchange I have done this, cutting nearly £400 off our monthly outgoings as well as significant behaviour changes in spending, we did this in November and have managed to make the changes we agreed. Just to reiterate, I haven't signed up to any debt management programme, advice was the first step. Since Novmeber, we have taken our total debt down from £14k, down to £11.5k. But again, this is costing me hundreds of pounds a month. Which is manageable in a way, just frustrating. Hence why I was thinking taking this onto my mortgage would pay it off much quicker for a very little monthly increase on my mortgage. 

The highest rate of debt is being paid off by the savings, which leaves me with the others to worry about. The only debt I want and im sure its the same for many of us, is my mortgage. So I suppose what I am struggling to understand a little, is how it will be with me for 30 years If its been paid off and added to my mortgage ? I would have this debt (mortgage) for 30 years anyway and it is a debt I am happy to have for now.

Again sorry if this sounds silly.

What I'm hearing maybe here, is a better option would be to take the £6.5k I would have left over after using savings to pay off £5k, would be to consolodate on a 0% CC ? Paying what I can afford over a period of time ?

DrEskimo

scobra182 said:

DrEskimo said:

Exactly as @Deleted_User says.

To me, this seems much better and I will be debt-free in October and £450 better off with no more monthly outgoings towards my debt. 

Far from being debt free, you will now be committing to carrying this debt for another 30-years!

Debt is the symptom, you need to identify the cause. The problem with consolidating the debt and treating it as though the issue is gone is that you will fall into the same habits, as the cause hasn't been addressed. You need to go through your spending, get a written budget and cut costs then go through the hardship and make sacrifices to pay the debt fully. This helps you identify where you went wrong to get into debt in the first place and ensure it doesn't happen again in the future.

Thanks so much for the comments guys,

Dr Eskimo, I totally understand that, and after speaking to stepchange I have done this, cutting nearly £400 off our monthly outgoings as well as significant behaviour changes in spending, we did this in November and have managed to make the changes we agreed. Just to reiterate, I haven't signed up to any debt management programme, advice was the first step. Since Novmeber, we have taken our total debt down from £14k, down to £11.5k. But again, this is costing me hundreds of pounds a month. Which is manageable in a way, just frustrating. Hence why I was thinking taking this onto my mortgage would pay it off much quicker for a very little monthly increase on my mortgage. 

The highest rate of debt is being paid off by the savings, which leaves me with the others to worry about. The only debt I want and im sure its the same for many of us, is my mortgage. So I suppose what I am struggling to understand a little, is how it will be with me for 30 years If its been paid off and added to my mortgage ? I would have this debt (mortgage) for 30 years anyway and it is a debt I am happy to have for now.

Again sorry if this sounds silly.

What I'm hearing maybe here, is a better option would be to take the £6.5k I would have left over after using savings to pay off £5k, would be to consolodate on a 0% CC ? Paying what I can afford over a period of time ?

That's fantastic, congrats on being able to make such a big dent on your debt, and finding such a large sum each month to repay these debts!

My advice is, just keep going! You are so close! Rather than adding this and letting it hang around for 30yrs paying it down £30 a time and accruing loads of additional interest, just keep plugging away and get rid of it permanently!

Moving it to a 0% card would be great, but it's not imperative. The interest rate isn't going to change things dramatically. What will is continuing to pay it down as fast as you can. Keep that £400/month and it will be done in just over a year! It's really more about the psychology of getting it paid and over with. All too often do we see people consolidating and that achievement and psychological hardship is missing, so they end up back here 2/3yrs later with double the amount of debt.

The thing to remember is that this isn't forever. This is just for another year and then suddenly you have £400/month extra in your budget to pay yourself! You can build an emergency fund, you can start making savings for future purchases and start building wealth to achieve your goals in life (e.g. pay off the mortgage early).

mcpitman

All as above and to re-itterate, don't put the debt over 30 years.

Personally I would look to keep paying what you are on your mortgage and put the extra £30 to paying off the debt, that itself will shorten the "pay off" of unsecured debt from 12 months to (near as damn it) 11 months.