Re-mortgage for Debt Consolidation with Bad Credit record

Panic74

Please dont judge!!

So long story short, we have racked up debts of £50k ish.... we have £163k mortgage on a house worth £345K so under 50% mortgage. I spoke to the Halifax today to see if we could re-mortgage to clear the debts, but we cant as they failed us on the credit checks! Credit reports are bad due to amount of debt!

Is it worth looking at a bad credit mortgage? or would we be better getting a secured loan? or the Halifax said about a second charge mortgage with someone else.... It seems ridiculous that we cant use some of OUR equity to clear debts that are going to free up nearly £2000 a month! 

Any ideas of what we could do? We really want to start again and clear everything!!! Help!

Thrugelmir

Panic74 said:

It seems ridiculous that we cant use some of OUR equity to clear debts that are going to free up nearly £2000 a month! 

You can use the equity. Sell the house. Or find a lender, most likely second charge who'll lend you the money. Albeit at a higher rate of interest than your mortgage. What you need to remember is that residential mortgage lending is priced to buy property not provide debt consolidation. Additionally that's the market mortgage lenders are targeting. With a finite amount of money available they've no need to take on a higher level of default risk. 

There'll be options for you. Don't fall into the trap many do and reoffend though. Debt consolidation is the easy solution but far too often not the answer. Might free up £2k a month, but the debt still needs to be repaid over many years and interest rates might rise. Life may throw you an unwelcome curved ball over that time frame. Use the opportunity wisely. 

Have you visied the Debt Free Wannabe forum? 

K_S

@panic74 What is the "bad-credit" that you're referring to? Is it simply the level of background debt or do you have issues on your credit reports such as missed payments, defaults, payday loans, CCJs etc?

And are you currently in a fix with Halifax?

Another recent thread on a very similar topic - https://forums.moneysavingexpert.com/discussion/6323045/consolidating-debt-adding-to-mortgage-with-halifax#latest

Panic74

I was in a DMP until 4.5 years ago when it was all cleared. No missed payments since then on either file. My husbands is nearly good on Experian just the level of debt! 

getmore4less

Panic74 said:

I was in a DMP until 4.5 years ago when it was all cleared. No missed payments since then on either file. My husbands is nearly good on Experian just the level of debt! 

£50 a fair amount to accumulate in 4.5 years

Won't look great after a previous DMP.

Thrugelmir

No surprise that you have failed credit checks with the Halifax. Was a LLoyds group company one of your creditors within the DMP? 

Panic74

getmore4less said:

Panic74 said:

I was in a DMP until 4.5 years ago when it was all cleared. No missed payments since then on either file. My husbands is nearly good on Experian just the level of debt! 

£50 a fair amount to accumulate in 4.5 years

Won't look great after a previous DMP.

Why do people on this forum do this!? I thought this was a place to get help. Do you not think We know this, do you not think we are beating ourselves up about it? Do u not think we go to bed every night worrying about it? Do you know the circumstances of why we borrowed the money!? NO! If you’ve got nothing helpful to say why say anything! 🤷‍♀️

RelievedSheff

Steady on. They were just pointing out the realities of the situation.

It would be worth you popping across to the Debt Free boards and checking out some of the hints and tips on there to reduce your monthly out goings. They are a friendly bunch and will be able to offer advice on where you can curb your spending.

The reality is, since you finished your DMP you have racked up around £1k per month in debt and lenders are not going to look on this lightly. They need to know that they will get their money repaid and with your current financial situation that doesn't look likely.

While a remortgage and debt consolidation may seem like the best option it is well documented that debt consolidation rarely works and most people end up in the same situation further down the line. There are other options and it is best to look at them all rather than jumping into anything rashly. 

K_S

Panic74 said:

I was in a DMP until 4.5 years ago when it was all cleared. No missed payments since then on either file. My husbands is nearly good on Experian just the level of debt! 

@panic74 Given the very low LTV, you could consider doing a debt-consolidation remortgage to another lender, though this would incur an ERC with Halifax if you are in a fixed period.

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. Consolidating secured loans on to the mortgage is much more straightforward than unsecured debt-con.

I just want to stress here that what I've said above is simply limited to the mechanics of debt consolidation. 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/

I would recommend getting in touch with a broker to see what your options might be. Plenty recommended on the MSE guidance here https://www.moneysavingexpert.com/mortgages/best-mortgages-cashback/#step3

Panic74

K_S said:

Panic74 said:

I was in a DMP until 4.5 years ago when it was all cleared. No missed payments since then on either file. My husbands is nearly good on Experian just the level of debt! 

@panic74 Given the very low LTV, you could consider doing a debt-consolidation remortgage to another lender, though this would incur an ERC with Halifax if you are in a fixed period.

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. Consolidating secured loans on to the mortgage is much more straightforward than unsecured debt-con.

I just want to stress here that what I've said above is simply limited to the mechanics of debt consolidation. 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/

I would recommend getting in touch with a broker to see what your options might be. Plenty recommended on the MSE guidance here https://www.moneysavingexpert.com/mortgages/best-mortgages-cashback/#step3

Thank you. That’s very helpful. 

getmore4less

Panic74 said:

getmore4less said:

Panic74 said:

I was in a DMP until 4.5 years ago when it was all cleared. No missed payments since then on either file. My husbands is nearly good on Experian just the level of debt! 

£50 a fair amount to accumulate in 4.5 years

Won't look great after a previous DMP.

Why do people on this forum do this!? I thought this was a place to get help. Do you not think We know this, do you not think we are beating ourselves up about it? Do u not think we go to bed every night worrying about it? Do you know the circumstances of why we borrowed the money!? NO! If you’ve got nothing helpful to say why say anything! 🤷‍♀️

Just pointing out it is not just the level of debt there is some history that will be seen by lenders and makes the hurdle higher.

Here is an example Halifax with second charge they don't come cheap
https://forums.moneysavingexpert.com/discussion/6323045/consolidating-debt-adding-to-mortgage-with-halifax#latest

I appear that you have decided your solution is bigger mortgage when there will be other options including another DMP
you need to explore all options 

Most of all you need to have fixed the circumstance that have resulted in the borrowing.

as said debtfreewanabee is the place to start and  a SOA is going to be needed there.

https://forums.moneysavingexpert.com/categories/debt-free-wannabe
https://www.stoozing.com/soa.php