Consolidating debt / adding to mortgage with Halifax

Manchestermrs

Hi there, 

Beginning 2022 stressed about money. We basically need to consolidate our debt as at the moment we cannot afford to even really made a dent in our debt due to a big mortgage and extremely high nursery fees. 

The situation is:

We have four kids five and under (two are twins - we went for a third and had two more). Our nursery fees are £1500 per month. 

We extended our house to fit everyone in. So it’s now our dream home but we weren’t able to raise all of the money needed to extend on our mortgage so we have £42,000 unsecured debt. 

Our home is worth around £600k and our existing mortgage is £245k. We want to add £40k to our mortgage. 

Our joint earnings are £61k. That means we’d need a mortgage for £287. 

We are locked in with Halifax for another 2.5 years. 

I tried to do additional borrowing a few months ago with them to consolidate the debt but because we have 5 credit cards and three loans between us, we are seen as having not much available to spend so I guess we are risky. 

Three of our credit cards are now charging us interest every month. 

Any advice on what we say to Halifax or how we approach it? 

Our unsecured debt is now costing us £900 per month so this is not sustainable alongside our really high nursery fees. We are having to put some essential spends for food etc on credit cards by the end of the month. 

One year to go and the twins will qualify for 30 hours childcare. 

Thanks in advance. 

K_S

@manchestermrs What happened when you applied for a further advance 5 months ago, was it declined for failing credit score or affordability or something else? Did they offer a lower amount?

On the plus side you've used the borrowing for an extension and that should have added noticeable value to the property.

Whether it is wise to consolidate unsecured debt on to the mortgage is of course a different question.

Manchestermrs

Thanks @K_S they went through the whole affordability thing for ages and then it got to the checking my credit file part and they just said they can’t go any further. 

They said I am using a high proportion of my credit or something like that (which I explained why I want to add it to my mortgage). 

Since we had that conversation I’d estimate that my debt has gone down by around £10k (my husband got paid £8k as a redundancy payment a few months ago and we used that to pay off debt). 

Thanks for your help. 

K_S

@manchestermrs Well it sounds like a credit-score fail because of the level of background debt.

Your debt levels are lower now and lenders tweak credit-scoring requirements regularly so an application made today might not necessarily return the same result.

Alternatively, given the very low LTV, you could also consider doing a debt-consolidation remortgage to another lender, though this would incur an ERC with Halifax.

Another option to consider might be to get a second-charge loan to consolidate the high-interest debt and then consolidate that into your main mortgage at remortgage time. 

Hope I don't sound like a parrot but just want to repeat here that what I've said above is simply limited to the mechanics of a further-advance/mortgage application. Whether it is appropriate to consolidate unsecured debt on to the mortgage and which of the above solutions might be best is a different issue and depends on your particular situation.

With regard to consolidating unsecured debt on to your home, MSE explains the aspects to consider very nicely over here https://www.moneysavingexpert.com/mortgages/move-debts-to-mortgage/

Manchestermrs

Thanks so much @K_S for the advice. 

I feel consolidation is the only only viable option at the moment as we just need to balance the books each month and it is just not possible at the moment, even living frugally, due to our childcare costs. 

Would you advise me to go through a broker like London and Country to find out about second charge mortgage if Halifax say no? Many thanks. 

K_S

@manchestermrs I don't think L&C advise on second-charge mortgages but I would definitely recommend getting advice from a broker in the first place and seeing what they suggest as a way forward. They can check out the Halifax further advance option as well.

If you do explore your second charge options, do keep in mind that it's very different from the first charge mortgage space. There are a lot of sharks around (both lenders and intermediaries) and you need to have your eyes wide open re fees and hidden costs.

Manchestermrs

Do you recommend a broker and are there any that do it for free? Thanks so much! No idea who to approach. Cheers 

K_S

@manchestermrs MSE has a section listing recommended brokers and different ways to find one https://www.moneysavingexpert.com/mortgages/best-mortgages-cashback/#step3

The affordability numbers look tight but I hope it works out in the end. Good luck!

[Deleted User]

Always enjoyable watching someone ask a broker if they can recommend a broker for them :-)

Halifax are particularly harsh on borrowing for debt con as a further advance.  I believe they only allow it to be done once every 10 years or something similar. 

Speaking to a broker (perhaps one who has been helpful so far in this thread) is your best option as they will also be able to explore Halifax options as well

Manchestermrs

Halifax is a no go as we’ve failed their credit rating. 

But my husband and I both have “excellent” Experian ratings on MSE credit club. It’s just our affordability is low. Well duh! 

Feel like contacting someone to complain as this is a vicious circle that I can’t see a way out of. Got a call in with Trinity Financial about a second charge mortgage. 

[Deleted User]

Manchestermrs said:

Halifax is a no go as we’ve failed their credit rating. 

But my husband and I both have “excellent” Experian ratings on MSE credit club. It’s just our affordability is low. Well duh! 

Feel like contacting someone to complain as this is a vicious circle that I can’t see a way out of. Got a call in with Trinity Financial about a second charge mortgage. 

tis not uncommon to see the set up costs of a 2nd charge be more than the ERC for exiting the main mortgage.   Be better to ask for a review of all options rather than just going down the 2nd charge route.