Consolidating debt / adding to mortgage with Halifax

K_S

@manchestermrs Don't beat yourself up too much, unfortunately this happens more often than you would imagine.

As JMA said, do make sure that Trinity are looking at both first-charge and second-charge options to see what works best overall. Tbh they should be doing that in any case.

Manchestermrs

Thanks both. I’ve checked and we’d have to pay around £15k in early repayment charges to Halifax as we still have 2.5 years to go on our fixed rate. 

I’m unsure whether to go with a second charge mortgage or whether to soldier on. I have worked out that if myself and my husband got a loan - MSE credit club says we have an 80% check of a £7k loan at 2.8% with The AA - instead then we could halve our credit card monthly payments and get rid of all of our credit cards bar one. 

That would mean I have have personal loans worth £20k plus a £5k credit card and my husband would have loans worth £22k. 

It’s either that or get a second charge mortgage. I think those are our two options as we are paying interest now on most of our credit cards. 

Manchestermrs

Sorry @Deleted_User and @K_S - just checked and the early repayment would be more like £9k, not £15k. Still loads! 

If we scrimp and really watch the pennies we can just about afford to get by but we definitely don’t want to be paying interest on four credit cards which is the situation we are now in. So we definitely need to either get loans or a second charge mortgage as I doubt we’ll be able to put everything on 0% credit cards. 

london21

With the help of a broker Trussle are free but think you will have a better luck with another lender such as Virgin money they are ok with debt consolidation with maximum 80% LTV. Your current LTV is decent and the debt was spent on adding value to your current home.

But 2.5 years left in order to avoid the early repayment charge. 

Try not to stress out, things will get easier.

Brie

Is there anyway to reduce your available credit on the cards?  Obviously you may want one to use but if the others have say £1k free that is not being used maybe you could increase your chances of a loan eventually by asking for your credit limit to be reduced.  

Manchestermrs

@london21 @Brie thanks both!

I thought it was a bad thing to have “less available credit” - ie. if I am seen to be using all of my available credit on three cards, won’t that be seen as a negative on my record rather than having more credit available? Cheers! 

Thrugelmir

Manchestermrs said:

Feel like contacting someone to complain as this is a vicious circle that I can’t see a way out of. 

Don't waste energy complaining. Affordability criteria is set for good reason. Likewise debt consolidation statistically fails in the majority of cases. Hence mainstream mortgage lenders aren't in the market for that type of business. Risk is priced. There'll be options but not at rock bottom lending rates. Shop around wisely. 

Brie

It will depend on where your credit is. MBNA is very good about allowing a high limit a d granting you 0%. 

Brie

Manchestermrs said:

@london21 @Brie thanks both!

I thought it was a bad thing to have “less available credit” - ie. if I am seen to be using all of my available credit on three cards, won’t that be seen as a negative on my record rather than having more credit available? Cheers! 

What I mean was that if you have a £5k limit on a card and are using it all and paying it off slowly there's not much you can do about it.  But when you get the debt down to £4.5k you might ask them to reduce your credit limit to that.  And again when you get to £4k.  And so on.  

Ultimately what the bank will be looking at is that you want a mortgage of £XXXk plus you have £4k credit available on one card, another £Xk on a second and so on.  So when the look at what you can afford they are thinking about both the mortgage and all of the cards/loans.  It doesn't matter that you will use the higher mortgage to pay off the cards in full asap.  You say that but they don't know it will happen and have to factor that in to what you might be able to afford.  

At least that's what my bank told me when I tried to do similar.

That's why considering snowballing is also very important...if you throw anything available at the card with the highest interest it will have the greatest impact on the interest that you pay.  But alternatively if you clear the smallest debt first and get rid of that credit completely you may appear to be a safer risk.

K_S

Brie said:

Manchestermrs said:

@london21 @Brie thanks both!

I thought it was a bad thing to have “less available credit” - ie. if I am seen to be using all of my available credit on three cards, won’t that be seen as a negative on my record rather than having more credit available? Cheers! 

Ultimately what the bank will be looking at is that you want a mortgage of £XXXk plus you have £4k credit available on one card, another £Xk on a second and so on.  So when the look at what you can afford they are thinking about both the mortgage and all of the cards/loans.  It doesn't matter that you will use the higher mortgage to pay off the cards in full asap.  You say that but they don't know it will happen and have to factor that in to what you might be able to afford.  

At least that's what my bank told me when I tried to do similar.

@brie I hope you don't mind me fleshing out the part in bold a bit

The approach to affordability calculations for debt-consolidation mortgages (and indeed debt being repaid prior to or at completion) differs across lenders and also differs according to LTV.

Some lenders will do as your lender stated, other will be conservative at high-LTVs and more liberal at low-LTVs, others will ignore debt being repaid for affordability calculations.

The options available depend on an individual lender's criteria and how they match up to the applicants' individual circumstances and numbers so there's no one blanket rule to it.