Clearing Debt with additional borrowing

Wozza85

My Wife and I want to clear 15K off Credit cards before we remortgage (Jan 2024).

Is a good option to borrow 15k from mortgage provider on a same length of term as Mortgage or little less years so that it adds £50-100 a month on mortgage, and then when we come to remortgage we are cleared of that Credit card debt and then can look to take more money out to do the kitchen work. Is this a good idea? rather than getting a personal loan and paying more. 

K_S

@wozza85 I can't give an opinion on what you should do but one mortgage-related aspect I will point out is that - when one takes out a further-advance/additional-borrowing or a capital-raise remortgage, lenders typically have lower LTV caps if any of the cash released is being used for debt-consolidation (paying off unsecured like personal loans or credit-cards) as opposed to other reasons such as home-improvements, going on a holiday, buying a new car, etc.

A typical example would be a cap of 80% LTV for any debt-con, but 90% LTV for home-improvements.

kingstreet

It's not normally a good idea to turn short-term debt into long-term debt as you pay more in interest. It may also not be sensible to turn unsecured debt into secured debt as it can then put you in a situation where you could lose your home.

Have a look at lower interest unsecured options, such as a personal loan and see if there are any interest-free periods to be had on balance transfers.

FrugalCat

Your last three discussions started have your mortgage going from:
£195k in 2020 to £210k in 2021 and now you're looking to increase again

My advice is to stop spending more than you earn. Mortgage debt is cheaper than a personal loan - but it's still debt.
The end of the road you're on isn't a pretty place.

Wozza85

K_S said:

@wozza85 I can't give an opinion on what you should do but one mortgage-related aspect I will point out is that - when one takes out a further-advance/additional-borrowing or a capital-raise remortgage, lenders typically have lower LTV caps if any of the cash released is being used for debt-consolidation (paying off unsecured like personal loans or credit-cards) as opposed to other reasons such as home-improvements, going on a holiday, buying a new car, etc.

A typical example would be a cap of 80% LTV for any debt-con, but 90% LTV for home-improvements.

Thanks for your response. 

Currently our mortgage stands at 212K and house value is 400K so we are ok with the LTV percentages. 

I am thinking we do this now to clear all debt and then come remortgage time we then look to take out additional for kitchen work. If our house is still valued at 400K or higher by 2024 we will still be within the 80% LTV for house work if we want to take out an additional say 40-50k. 

Thrugelmir

You are not clearing debt by consolidating it into your mortgage balance. You are simply compounding the problem. That as @Frugalcat has pointed out has worsened since your thread in 2020.  Something that mortgage lenders will detect when processing your application. 

K_S

Wozza85 said:

K_S said:

@wozza85 I can't give an opinion on what you should do but one mortgage-related aspect I will point out is that - when one takes out a further-advance/additional-borrowing or a capital-raise remortgage, lenders typically have lower LTV caps if any of the cash released is being used for debt-consolidation (paying off unsecured like personal loans or credit-cards) as opposed to other reasons such as home-improvements, going on a holiday, buying a new car, etc.

A typical example would be a cap of 80% LTV for any debt-con, but 90% LTV for home-improvements.

Thanks for your response. 

Currently our mortgage stands at 212K and house value is 400K so we are ok with the LTV percentages. 

I am thinking we do this now to clear all debt and then come remortgage time we then look to take out additional for kitchen work. If our house is still valued at 400K or higher by 2024 we will still be within the 80% LTV for house work if we want to take out an additional say 40-50k. 

@wozza85 At such a low LTV, assuming the income numbers add up for the total loan amount, you should be fine.