Remortgage to pay off debt

enthusiasticsaver

Given the fact you don’t have a stable budget and have consolidated and built up debt again in the past I would say categorically a remortgage to pay off unsecured debt is not a good idea. If it is on 0% that is good and tbh having to constantly think about BTs is good because it keeps the debt uppermost in your mind. Your post reads like you want an easy fix to moving it (remortgaging it is not repaying it) so you can spend more on doing up your house. Before too long you could have a much larger mortgage plus n more debt. A job loss or health problem could tip you over the edge and defaulting on your mortgage has much more serious consequences.

kimwp

weston800 said:

Thank you for the comments and advice, I will be completely honest in saying that we have been in debt before (£40k) - we paid it off with inheritance and then used the balance for the deposit on our first (and current) house. We closed all credit accounts and vowed to never get into debt again, it slowly crept to £9k (home improvements) - manageable but then my husband went self-employed, covid hit and then he ended up having no work. During this time we were both earning less than what we are now (around £10k joint p/a) We were also saving for our wedding & honeymoon, we then had to use these savings to live meaning the wedding & honeymoon went on credit (£20k) - after 3 years it's ended up hitting £52k. My husband has been PAYE for 2 months now and we've not had to use any credit in these last 2 months - we have paid a little over the minimum payments too. 

I have completed the SOA below and have been completely honest, you will notice the large expense on tobacco and alcohol; whereas this will come as a shock to most of you, please try to understand that my husband is working hard on his alcohol misuse issues - he used to spend a lot more than £365 a month so it's actually a positive in my eyes. I'm not asking for sympathy, we are on a journey and getting there slowly - I just wanted to be completely honest.

We have been in debt before as mentioned but I do feel as though we're mentally stable to not get into this situation again (if we were to pay it off by remortgaging).

So, your history of overspending, your current situation of not knowing where significant sums of your money go and the collective experience on here shows that you will almost certainly get into debt again if you put it on your mortgage. Sorry if it sounds harsh, but you can break the cycle and deal with your debt now or deal with it when you don't have an easy get-out. If you are planning on having kids, then it really would be better to deal with it now as they will only add to financial outgoings.

TheAble

As others have pointed out, you're treading a perilous path. Adding the debts to your mortgage will only weaken your financial position further. How would you cope with a job loss for example? More debt?

Pay it off with income, cutting your expenses where you can, then build some savings. Make home improvements out of savings. It's slower yes, but it will keep your home secure which is what counts.

EssexHebridean

weston800 said:

Grumpelstiltskin said:

Even with the large alcohol and tobacco spend you still show that you have nearly £500 left over. Where does that go?
Groceries at £400 is large for just 2 people bearing in mind you have all the extra for alcohol and tobacco.

Pet food costs us £140 per month - that’s in with the groceries. 

Honestly, I don’t know where the disposable goes - I guess the odd trip to the cafe/takeaway, gardening items, things that are just spent spontaneously without being accounted for 

OK - the bit in bold is absolutely key to you "sorting your lives out" as it were. £500 a month is a LOT to be "losing" - for context remember we're talking about £6000 over a year as RAS points out - or in other words, a decent quality small second hand car. This is where a proper budget comes in though - you have an entertainment budget for cafe/takeaway spending - so increase the amount in there to maybe £80 - £100 a month as a maximum, and then use THAT for those spends. Remember also that those things should be considered "occasionals" for most folk, and particularly those in a substantial amount of debt - so a takeaway a month, and a stop off for coffee and cake once a month too. Gardening things should be budgeted for and also right now I'd try to limit them to things that are needed not just pretty things to make it look nice.  A spending diary would be a great starting point for you in tackling this I think - so start from now writing down absolutely every penny you spend outside of the regular Direct Debit payments for bills, then you'll be able to see what really goes where. 

I'm going to hazard a guess that the £400 that you "think" you spend on groceries is also a long way short - and that is probably where some of that surplus goes too. The amount being lost from surplus each month suggests that takeaways are pretty common at the moment (we've almost all been there, I think!) and so that in itself should reduce your groceries bill, but if I had to guess I'd say you don't currently meal plan (which adds to the takeaway costs) and you very probably don't shop from a list, either? If you tackle both of those things it will be pretty easy to keep a rein on the spending on food. 

You've been very upfront about your husband's issues with booze/ciggies - that must have been pretty tough, and it must be pretty tough to deal with too, I wish you luck getting him sorted there. Is he also receiving professional help though as that additional support might well make al the different to you both - don't forget that there are organisations there to support YOU with this as well.  Are you making a plan to gradually decrease the amount being spent in this area? If so remember to keep a close track of the savings being made and ensure that gets added to surplus to be paid off a debt. 

Your SOA confirms that you would be making a disastrous mistake in swapping out unsecured debt for secured right now too - it's never something we're inclined to recommend anyway, but definitely not in a situation where the household budget isn't under control. 

You probably realised that your posting history had given away the fact that you've had ongoing debt issues - as mentioned before, often being able to clear debt in one go with some form of windfall isn't actually helpful - it solves the problem short term, but doesn't actually deal with the background issues as you have found here. Your husband losing his income previously clearly contributed massively to the scale of the situation now - but don't overlook the fact that you were headed back into substantial debt in comparison to income prior to that happening, will you? I'm not meaning to be harsh here, but it worries me a lot that you are clearly still thinking about risking your home to get a "quick fix" in this situation - you've done the "quick fix" before - and as someone wiser than me once said "the definition of insanity is doing the same thing over and over again, but expecting different results".  

My suggestion then:
- Sort out the budget properly - this time in three months you should know where every penny goes, and have freed up a good chunk to pay off a specific card each and every month.
- List out all the cards individually - along with their current balances, when their 0% deals end and what the interest rate will revert to afterwards.
- Continue supporting your husband in his recovery - IMO you shouldn't even be considering any form of plan to deal with this debt other than creating surplus and overpaying the balances until such time as not only he is sober, but he has been sober for a period of several years. 
- Build an emergency fund - this is then going to help if the brown smelly stuff hits the fan again. Aim for £1000 to start with, but then keep adding to it. 
- Choose one card - possibly the one with the smallest balance, possibly the one with the shortest 0% period remaining - we'll be able to make suggestions on that if you post the list I suggest above in here - and throw all overpayments at that until it is gone. 

Maybe think about starting a debt free diary on the diaries board here - as this is going to be something you are in for the long haul. You can do it though - and what's more, you can emerge from the other side far less likely to be back here in a few years in the same situation as well - and that would definitely be a win, no? 

EssexHebridean

I'll add one further thought - and I'm deliberately doing it in a new post. 

Right now - if one of you lost your job tomorrow, you could meet your monthly commitments aside from the debt payments* from the other wage alone. If you increase your mortgage payment by adding a substantial chunk of debt to it, then that may well not be the case. What happens then? 



*this is relevant because with unsecured debt, in the event of simply being unable to pay, you would just stop those payments and engage with the creditors so they were aware of the situation - you cannot do that with secured debt. 

Stateofart

I have to ask (and I'm not being judgemental) but how did you manage to spend £50 grand on credit cards.  Typically there's a decent car in most people's debt of that amount.

kimwp

Stateofart said:

I have to ask (and I'm not being judgemental) but how did you manage to spend £50 grand on credit cards.  Typically there's a decent car in most people's debt of that amount.

I don't recall cars particularly contributing to debt figures of that level or higher, usually people quote their debt excluding hire purchase commitments.

EssexHebridean

Stateofart said:

I have to ask (and I'm not being judgemental) but how did you manage to spend £50 grand on credit cards.  Typically there's a decent car in most people's debt of that amount.

I don't think we need to know this detail to help the OP, quite honestly. They have already been extremely open and honest with us, and sometimes it's more important to try to provide the support than to know every last detail. 

The other thing I have learned over the years - there is no "typical" when it comes to debt. One person's "huge" debt is another person's drop in the ocean. One person might buy a couple of 30k cars on credit and never once think of themselves as "in debt" whereas another feels that the 50k left on their mortgage is "a big debt". one of the bigger debts we've seen here over the years had no car, no mortgage, and no mindless frittering involved at all - and arguably it could be said that the OP of that one wasn't at fault for ending up where they did - which probably helped them to deal with it in the calm, methodical and thoughtful way they did. 

macman

Stateofart said:

I have to ask (and I'm not being judgemental) but how did you manage to spend £50 grand on credit cards.  Typically there's a decent car in most people's debt of that amount.

The OP already stated that £20k of the debt was for the wedding and honeymoon. So that's 40% of it accounted for.

MFWannabe

weston800 said:

During covid (inc job loss) for my husband, we’ve wracked up £50k debt (over 9 credit cards). Thankfully he is now full time employed. We are making required payments on time for our debt and always try to pay extra when we can. A 

We are due to select a new mortgage rate in Jan 2024 but can apply as soon as October and we were considering looking at remortgaging to pay off the £50k debt - is this possible?

Joint income £60k, aged 34 & 32
House value £210k
Owed on mortgage £126k
Years left on mortgage 25
Current rate (until Jan 24) 2.1%

Monthly mortgage payment £523

We are paying £700-£900 every month off debts; they are currently interest free but I am having to do balance transfers to keep it this way. 

I know we would go from unsecured debt to secured debt but we feel this would better suited to us and we could finally start using disposable income to do the house up etc. 

I know mortgage rates have gone through the roof so I don’t even know if we’d be accepted a remortgage - our credit scores are stable but we are utilising nearly all available credit and I know this doesn’t sit well with lenders. We plan on going to see a mortgage advisor when the time comes but we’re just looking for some advice at the moment. 

Thank you. 

Going from a mortgage of 126k to 176k would be madness in my opinion 
You currently have no idea where your ‘disposable’ income is going so that is being frittered away somewhere so same will happen again if you go down the remortgage route 
Imo it was crazy to put 20k on credit cards for wedding and honeymoon; sensible people would have postponed wedding until in a better financial position 🤷‍♀️