Consolidating debt with mortgage - refused

BDeluxe

I don't want to get into how I got here but basically I'm in too deep on 3 credit cards totalling £27k.

We have a Nationwide mortgage of £90k on a property worth £300k with few outgoings other than the humungous CC's so with such a low LTV I thought it would be no issue consolidating but Nationwide said no.

Call me cynical but if I wanted 27k for an extension or a new roof they'd have no issue but they are deeming this unaffordable which is ridiculous because the extra borrowing would come in at about £250 a month over 10 years whilst my CC's are costing near £600 on minimum payments and getting nowhere. Are they not considering the that the 27k CC debt will be gone? I'm a bit taken aback and confused because if I don't sort this one way or another the next call I have with Nationwide will be along the lines of 'I can no longer afford my mortgage'.

Any other options? I already spend zero on coffee and sandwiches and I have no other expense I can cut back on.

Ebe_Scrooge

Consolidation is rarely a good idea.  And it's a really bad idea to turn unsecured debt into secured debt.

The "affordability" issue is likely to be for the simple reason that Nationwide have no way to guarantee you'd use the new lending to repay existing debt - they have to take the view that it will be in addition to existing debt.

Can you shift at least some of it to 0% cards?  That would at least allow you to make a little more headway into repaying the capital.

Other than that, a really good start is to post up an SOA over on the Debt-Free Wannabe board and let the helpful folk there offer some suggestions.

BDeluxe

2 cards are already on 0%, my worry is I've run out of wriggle room when they expire as my credit rating has taken a dive from perfect to fair purely from the amount of credit I'm utilising.

It's my fault and I've sleepwalked into this, feeling a bit dejected about it all as I can't see a way out. 

[Deleted User]

BDeluxe said:

2 cards are already on 0%, my worry is I've run out of wriggle room when they expire as my credit rating has taken a dive from perfect to fair purely from the amount of credit I'm utilising.

It's my fault and I've sleepwalked into this, feeling a bit dejected about it all as I can't see a way out. 

Ignore the fake credit rating, nobody but you sees that. If you're paying more than the minimum and have good income then you might get some more.

You said "Are they not considering the that the 27k CC debt will be gone?"

In a nutshell yes. If they loan you 27k to pay off debts, you could go and dump the lot on Nobby Noggin at the 3:30 at Kempton and then suddenly you have 54k of debt to pay off, hence why consolidation loans are never a good idea and are very rarely given. 27k of unsecured debt is a pain but won't mean you lose your house, putting it as a secured debt is not a great idea as it could do. 

Either try the debt free pages on here, research snowballing debt and/or speak to the bank about financial hardship as they may be able to freeze the debt/interest for a while to help you pay off more capital

Brie

BDeluxe said:

It's my fault and I've sleepwalked into this, feeling a bit dejected about it all as I can't see a way out. 

Don't get too despondent - it's not the end of the world. 

as others have said best to put a statement of accounts in on the debt free forum to see what suggestions people might have.  the obvious ones will be selling stuff, getting extra work, downshifting on the shopping and doing things about subscriptions, phones and pay for view TV.

Thrugelmir

BDeluxe said:

I don't want to get into how I got here but basically I'm in too deep on 3 credit cards totalling £27k.

We have a Nationwide mortgage of £90k on a property worth £300k with few outgoings other than the humungous CC's so with such a low LTV I thought it would be no issue consolidating but Nationwide said no.

Call me cynical but if I wanted 27k for an extension or a new roof they'd have no issue but they are deeming this unaffordable which is ridiculous because the extra borrowing would come in at about £250 a month over 10 years whilst my CC's are costing near £600 on minimum payments and getting nowhere. Are they not considering the that the 27k CC debt will be gone? I'm a bit taken aback and confused because if I don't sort this one way or another the next call I have with Nationwide will be along the lines of 'I can no longer afford my mortgage'.

Any other options? I already spend zero on coffee and sandwiches and I have no other expense I can cut back on.

Debt consolidation provides an answer but not the solution. Mortgage lending is to buy or improve a property. That's why interest rates charged are so low. Mortgage lenders aren't interested in underwriting debt consolidation loans. As takes them into a totally different regulatory environment.

Seek support and guidance to resolve your issues. 

K_S

BDeluxe said:

I don't want to get into how I got here but basically I'm in too deep on 3 credit cards totalling £27k.

We have a Nationwide mortgage of £90k on a property worth £300k with few outgoings other than the humungous CC's so with such a low LTV I thought it would be no issue consolidating but Nationwide said no.

Call me cynical but if I wanted 27k for an extension or a new roof they'd have no issue but they are deeming this unaffordable which is ridiculous because the extra borrowing would come in at about £250 a month over 10 years whilst my CC's are costing near £600 on minimum payments and getting nowhere. Are they not considering the that the 27k CC debt will be gone? I'm a bit taken aback and confused because if I don't sort this one way or another the next call I have with Nationwide will be along the lines of 'I can no longer afford my mortgage'.

Any other options? I already spend zero on coffee and sandwiches and I have no other expense I can cut back on.

@bdeluxe This is not meant as debt advice but purely touching upon the mechanics of reducing your debt servicing costs at the present time.

If your main mortgage lender has refused your request, your next best option may be to get an ERC-free or low ERC second charge loan which should be fairly straightforward given the LTV as long as your income supports it. The rates won't be as good as mainstream residential lending but will be a whole lot better than cc interest rates.

You can then either work towards paying off the secured loan as quickly as possible or when your current mortgage fix comes to an end consider paying it off with a capital raise remo. At that point you'll have the whole market to work with, not just Nationwide.

Again, as others have mentioned above, there are cons to converting unsecured debt to secured, but it may help give you the breathing space you need to sort things out.

JohnDorian

I just wanted to say I know exactly how you feel. I was in a similar place last year and in for a huge amount of debt. My debt came from home improvements and two cars and I had debt over personal loans, credit cards and store credit for furniture and credit with a double glazing company.

It wasn’t that I couldn’t afford it but more that I realised I had sleep walked into a crazy situation where the debt was all over the place and a huge burden. I was having sleepless nights just thinking of it even though I hadn’t run out of cash. I looked at a lot of solutions and no one wanted to help for the exact reason given by experienced members above that the debt already there counts in the calculation. I tried for a second charge loan and it was not easy. The first couple of applications fizzled out and the the third would have been successful. But these guys were charging a £4.5k fee and 4% plus base for 2 years fixed which was  too much for me to stomach.

At that point I decided not to take on more debt. I was very lucky that I had two in demand SUVs with very little finance outstanding. I sold them for more or less their price three years ago when I got them, paid off their loans and then bought 2 cheap to run cars for cash. Put the rest of the cash into my debt to reduce it. And then I began to focus just on debt. 

A year later I’m almost done. I have a loan that I will let run it’s own course over the next two years and my final CC which is interest free to next April so my DD is the exact amount monthly to finish of the balance by April. When I began this journey I ignored the interest rate on my debts and simply went for biggest payments first. That way I reduced my outgoings quicker and got some relief as my monthly outgoings reduced.

My point is that I understand how you feel. Debt is just a game and the game isn’t fair. It’s rigged and just a computer algorithm. When I wanted people to listen to me, they wouldn’t. Your best bet really is to just go for it and pay off what you have now and in its current form. Once you make in roads you will start to see options. Last year a CC flat out refused to up my limit. They told me I was too deep in debt. That card is now paid off (£12k when I began) and last month they pre-approved me for £25k in personal loan which would have the money in my bank in 2 hours if I accepted in their app and this Tuesday they have upped my credit limit to £25k on the same card they wouldn’t even consider me for in less than half that debt last year. Just go for it. You don’t need to get to zero. Once you’re making progress they’ll be wanting to offer you solutions that can help you change the profile of your debt and spread it out. 

IMHO it’s painful but short term pain is better than getting stuck into expensive products over longer periods of time.

fatbelly

You dodged a bullet there - you should thank Nationwide for doing the right thing.

Here's a link to the soa that you need to post on debt-free wannabe

https://www.lemonfool.co.uk/financecalculators/soa.php

Please format for mse

[Deleted User]

BDeluxe said:

2 cards are already on 0%, my worry is I've run out of wriggle room when they expire as my credit rating has taken a dive from perfect to fair purely from the amount of credit I'm utilising.

It's my fault and I've sleepwalked into this, feeling a bit dejected about it all as I can't see a way out. 

This is known as your 'lightbulb moment', it's when you're at rock bottom, know you're in far too deep and feeling completely depressed and desperate.
This is the position to be in to really get things sorted and take back control - being out of control is a horrible experience and the minute you can start getting it back it's a much easier journey.

Most of the, truthful, members on here have been exactly where you are right now and we can completely empathise.

As @fatbelly said, a Statement Of Affairs shows you, and members trying to help, steer you in the right direction, it's purely factfinding, nothing judgemental or to be taken personally. 

As @K_S has said, there are ways forward, the other professional members on the Mortgages board, and Debt Free Wannbe boards, will be able to give their help too. 

enthusiasticsaver

There is a way out of this but not by putting the credit card debt on your mortgage. Incidentally any phone calls to say you cannot pay should be to your credit card providers not your mortgage provider. They hold your house as security so the implications of defaulting on your mortgage are much worse than defaulting on your credit card repayments. 

Debt consolidation is frowned on now by lenders purely because it  shows the borrower has been living beyond their means and there is  no guarantee that will change after consolidation. That is even more crucial at the moment with costs going up and a possible recession on the cards. If you cannot meet credit card repayments you could ring stepchange to discuss a possible DMP  or you could self manage it by writing to your lenders and letting the cards default which hopefully will mean an interest freeze.  Presumably  this is why you are getting nowhere as I assume you are paying high interest and cannot get any 0% deals? If you can then this should be your first option so at least you are not paying interest.