Remortgage to clear debts

Mr_Clark1000

Hi All, so final realisation has set in that my outgoings for debts have reached my limits, especially now I’m having to pump in an extra 150 to 200 each month due to utilities rises and council tax rises.

I know I’ve been terrible with decisions in the past, but I have put that behind me and I’m dedicated to clearing this.

As it stands I have approx £37k of unsecured debt and pay over £900 a month getting rid. Luckily none of it is high interest and I switch 0% deals to keep it that way.

We are however lucky that we have a good house that has increased in value these past years. Nationwide seem to think it’s worth £440k and the area prices seem to confirm it’s around 400k at least (bought for 330k 5 years ago, before area had a lot of investment put in it)

Our mortgage stands at £190k and our combined household income is £65,600.

I’m very keen on putting all this behind us as right now financing things such as home improvements are a no-go

Im drawn to the idea of raising our mortgage from 190k to 225k to clear all these debts and have a little bit of a clean state. We would still retain a good loan to value and with overpayment options in the future I’m certain we could minimise issues relating to debt over long mortgage terms.

Our mortgage term is up in August and I’m trying to think of ways to fix all this between now and then.

As nationwide seem to not like the idea of increasing mortgage to pay off debt, I was thinking of clearing some of the big monthly items such as £277 I pay on Barclays loan by August and then trying to get them to provide the mortgage amount we seek. Right now due to affordability criteria they will not release any more than we already have judging by the online system.

Any advise on going down this route? To me it would ease short term problems and allow us to still overpay to keep the term and interest reasonable. Thanks for all and any help!

My SoA is below

Household Information

Number of adults in household........... 2

Number of children in household......... 2

Number of cars owned.................... 2

Monthly Income Details

Monthly income after tax................ 2995

Partners monthly income after tax....... 1048

Benefits................................ 0

Other income............................ 0[b]

Total monthly income.................... 4043

Monthly Expense Details

Mortgage................................ 797

Secured/HP loan repayments.............. 0

Rent.................................... 0

Management charge (leasehold property).. 0

Council tax............................. 240

Electricity............................. 200

Gas..................................... 58

Oil..................................... 0

Water rates............................. 40

Telephone (land line)................... 0

Mobile phone............................ 110

TV Licence.............................. 14

Satellite/Cable TV...................... 32.86

Internet Services....................... 34

Groceries etc. ......................... 500

Clothing................................ 30

Petrol/diesel........................... 100

Road tax................................ 22.5

Car Insurance........................... 58.33

Car maintenance (including MOT)......... 33

Car parking............................. 0

Other travel............................ 0

Childcare/nursery....................... 190

Other child related expenses............ 50

Medical (prescriptions, dentist etc).... 0

Pet insurance/vet bills................. 50

Buildings insurance..................... 10.77

Contents insurance...................... 0

Life assurance ......................... 0

Other insurance......................... 0

Presents (birthday, christmas etc)...... 40

Haircuts................................ 10

Entertainment........................... 100

Holiday................................. 83

Emergency fund.......................... 50

Total monthly expenses.................. 2853.46

Assets

Cash.................................... 1500

House value (Gross)..................... 400000

Shares and bonds........................ 0

Car(s).................................. 14000

Other assets............................ 0[b]

Total Assets............................ 415500

Secured & HP Debts

Description....................Debt......Monthly...APR

Mortgage...................... 191000...(797)......1.74

Total secured & HP debts...... 191000....-.........-   

Unsecured Debts

Description....................Debt......Monthly...APR

Virgin Credit..................2083......45........0

Barclaycard....................9042......208.......0

PayPal.........................3782......128.......0

Barclays Loan..................6892......277.......3.5

First Direct Loan 2 ...........5168......93........3.8

First Direct Loan 1............6935......97........3.8

First Direct Credit............3493......120.......0

Total unsecured debts..........37395.....968.......-  

Monthly Budget Summary

Total monthly income.................... 4,043

Expenses (including HP & secured debts). 2,853.46

Available for debt repayments........... 1,189.54

Monthly UNsecured debt repayments....... 968

Amount left after debt repayments....... 221.54

Personal Balance Sheet Summary

Total assets (things you own)........... 415,500

Total HP & Secured debt................. -191,000

Total Unsecured debt.................... -37,395

Net Assets.............................. 187,105

Grumpelstiltskin

Don't think of transferring unsecured debt to secured debt.

What is happening to the £722 left over each month?

Mr_Clark1000

Grumpelstiltskin said:

Don't think of transferring unsecured debt to secured debt.

What is happening to the £722 left over each month?

Hi, thanks for your reply.

I've rejigged it as i did it on phone and wasn't properly accounting for my wifes elements

The reasons I really think rolling this debt into our mortgage are as follows:

1. Currently we have a good loan to value rate on our home, less than 50% if we go by valuation guides
2. Mortgage rates are good, and I am more than willing to overpay our mortgage to bring the term down and reign in the interest we would accrue by adding this to our mortgage
3. Doing away with these debts would allow us to undertake some home improvements, nothing drastic but more than the nothing we can do now

It's just not sustainable as it is right now and going back to how our mortgage was just a few years ago seems acceptable?

sourcrates

Why not clear the 37k by going on a debt management plan instead ?

No extra borrowing on your mortgage, interest gets frozen, you only pay what you can comfortably afford to the debts.

What on earth did you even spend 37k on in the first place, can you remember ?

What is needed is a complete re-think of your financial behaviour, because if you took the consolidation option, and didn`t change your ways, 12 months down the line, you may be facing losing that £440.000 pound house.

Think about how that would feel for a moment.........not a nice feeling is it, much better to accept you need to change, implement a plan, and run with it, because put simply, you cannot borrow your way out of debt, it seldom works well for anyone.

Vinknut

Putting unsecured debt to secured debt is generally a bad move.

From that SOA you shouldn't be in debt, so where has all that debt come from?

If you don't address that, then you'll end up back where you started again, except with less equity and more debt secured on your house.

Do paypal do 0%? I thought that was just for 4 months at a time? Also the days of swapping 0% between cards is pretty much done - you'll be lucky to find £18ks worth any time soon.

That £722 left, if genuine, is enough to start snowball/avalanching the 0% deals before they start charging you interest.  3 months will clear the smallest debt, although you should start on the 0% deal ending first...

Grumpelstiltskin

You still have more than £200 a month that is not accounted for.

I think you need to do more work on your budget and double check the interest on the debts.

Mr_Clark1000

sourcrates said:

Why not clear the 37k by going on a debt management plan instead ?

No extra borrowing on your mortgage, interest gets frozen, you only pay what you can comfortably afford to the debts.

What on earth did you even spend 37k on in the first place, can you remember ?

What is needed is a complete re-think of your financial behaviour, because if you took the consolidation option, and didn`t change your ways, 12 months down the line, you may be facing losing that £440.000 pound house.

Think about how that would feel for a moment.........not a nice feeling is it, much better to accept you need to change, implement a plan, and run with it, because put simply, you cannot borrow your way out of debt, it seldom works well for anyone.

Hi. Thanks.

The debt has accumulated over the years. I believe the bulk of it was on changing vehicles from time to time, holidays (sometimes 2 / 3 x a year) and a lot I spent on building a home office in the garage.

That and spending money I didn't have on things I didn't need. I know change is needed and I am committed to it.

Mr_Clark1000

Grumpelstiltskin said:

You still have more than £200 a month that is not accounted for.

I think you need to do more work on your budget and double check the interest on the debts.

I was putting £100 into Wealthify ISA and Pension, as well as £100 into general savings, but since just cancelled that as it's not leaving enough spare. Some months I might spend 500 on groceries, etc, but some months are more expensive should we decide to do day trips etc, which with 2 kids can quickly burn 50 - 100.

Interest wise, fair few on paypal are 12month repayments and others 4 months interest free, which I pay off as they come to an end, often by selling things.

I think I could raise about £2000 or so by another batch of selling stuff off. I'm very keen on getting this under control.

AnnieB2018

Think like this - you add all unsecured debt to your mortgage, but still keep paying the same amount out each month (higher mortgage payment and the rest of it as a monthly mortgage overpayment). Right, you have exactly the same amount of money left at the end of the month.
Yes you will pay less interest this way. 

However, now all your debt is secured against your family home. Bit scary?

Ah, you are not planning on paying out the same amount each month in getting your debt down!? Well, then you are planning on getting into more debt or staying into debt for longer.

Mr_Clark1000

AnnieB2018 said:

Think like this - you add all unsecured debt to your mortgage, but still keep paying the same amount out each month (higher mortgage payment and the rest of it as a monthly mortgage overpayment). Right, you have exactly the same amount of money left at the end of the month.
Yes you will pay less interest this way. 

However, now all your debt is secured against your family home. Bit scary?

Ah, you are not planning on paying out the same amount each month in getting your debt down!? Well, then you are planning on getting into more debt or staying into debt for longer.

The thing is, I’d like to be able to control how much we pay off. A mortgage with overpayment options gives flexibility. Many months I may be able to afford to pay much more, some months we may want to pay the normal amount. This would be helpful.

a few years back we had a higher mortgage amount than what I’m proposing, we had less income and the house was worth a fair bit less than it is now. 

I believe when we bought this place we needed a 230k mortgage, I was earning 15k less than I do now.

Now the place appears to be valued approx 70k more than then, I’ve added a significant upgrade in terms of separate office (where around 10k of this debt came from) and we are again looking at revisiting a mortgage amount that was deemed more than acceptable at the time… I don’t know but to me that doesn’t sound like a bad way to be, I want to have less debt but at the same time I’d rather have a manageable amount going into that debt repayment!

Grumpelstiltskin

You can take children out on day trips without spending £100 and to get anywhere you must change your mindset.

How old are the children? Because if they are young £500 on groceries is way too much.

To get out of this you have to realize you must spend less especially as everything is increasing in price.

It  will be doable but you have to realize you can't carry on spending as you have been.