Release equity from properties to pay off credit cards

Martico

Sorry, but this tale screams denial. Especially the line "I planned to pay off when I remortgage with extra borrowing..."
You don't pay off debt with debt, you just move it, and potentially/possibly/probably add to it.
Like others, I'm not surprised that you're being denied more credit.
I'd have a think about the reality of your situation, get over to the Debt free wannabe subforum here, and ask for further advice there. Good luck

johnwest

BikingBud : no, I've turned 5k cash into around 1.8mil cleared equity. That's AFTER clearing debt (mortgages). All my UK properties are around 50-60% LTV. The abroad one I own outright.

With the abroad property is actually another funny situation. Can't use it as security for UK banks, because it is abroad and can't get mortgage/secured loan in abroad bank because I do not have income over there.

The banks abroad would not take into account my UK income.

I made crucial error. Assumed that there wont be a problem with releasing some equity and getting extra borrowing to cover the cards, and focused on family matters. If I knew it will be difficult I would have remortgaged way before end of the deal, swallowed the early repayment charges (few grand) and remortgaged long time ago when there was no problem with extra borrowing.

I've been in the game for a while and have a bit of experience. If I knew the 40k loan for 3 months would be futile I wouldn't bother and just sold one of the properties. I know however that it would solve the problem and prevent sale of any property at loss. Immediate loss at the moment of sale AND future loss in form of lower rental income after retirement in couple of years. Just want to avoid it and I do have equity to be released. Just can't do it via a high street bank due to their regulations.

Yes, it was gamble on my behalf. However no more than a gamble of anyone who :

- purchases property with a mortgage. You only safe during initial fixed interest period. Then you remortgage and you might have to remortgage into much higher, potentially unaffordable rate. Last couple years gives you a glimpse.

- keeps more than 85k (guaranteed by FSC) saving in one bank. Bank do collapse and only insiders/professionals have chance to predict which bank and when. Look at SVB and CS recently.

If it happens anything above 85k in one bank can vanish ...

You can see the above as an advertisement

I was really hopping one of you can point me in direction of some organization other than high street banks who do not consider individual choices anymore. Couple years ago high street mortgage advisers had ability to override the SYSTEM and make educated decision accepting or declining the deal against SYSTEMs assessment. Mortgages advisers can't do that now and SYSTEMs decision is final.

johnwest

Martico said:

Like others, I'm not surprised that you're being denied more credit.

I don't want nor need MORE credit.

I need to swap cards debt into mortgage debt.

To a lender credit cards debt is much more volatile than mortgage debt.

After all mortgaged debt is secured against property while credit cards debt is secured against ... customers will and ability to fulfill the obligations

Ryan_Holden

OP, you have already answered your own query.

You cannot find anyone to lend you money because you have too much unsecured debt against you already and, clearly, no means to pay it without releasing an asset.

You've already recognised that your houses are a form of security. Right now, you need that security and it's odd you think other people should resolve it for you with their money at their risk, even with a contract.

You are asset rich and cash poor. It might not be palatable to you because of the loss but selling one is your solution, you can then always buy another property down the line.

As a side observation, you read as if you're in denial about the magnitude of your issue, that it's all someone else's fault you had to run up some £40k on credit cards but that you can sort it out if you "just get a bit of help now". Which is often the mentality of someone struggling with debt.

The idea that you were hoping someone here could direct you to some form of lender that will lend you vast sums of cash and bypass their due diligence (system) and lends just really on the understanding that you're "good for it". One would argue if you were good for it you wouldn't have £40k of credit card debt. The loan shark comment may have been tongue in cheek but makes sense when you read it again.

I sympathise with you, debt is awful, but I think a bit of ownership of your situation will help you make better decisions.

johnwest

Thank you for some constructive comments.

The £40k on cards is a result of couple unforeseen events in last 15 months. Majors were:

- had a major repair to one of the properties and insurance covered only part

- had a medical emergency in my family and donated well over 30k to pretty much save relatives life.

My critical error was to presume that releasing some cash from property during remortgage wont be a big problem. From my past experience and from what I was told by mortgage advisors I know for years, it wouldn't be a problem couple years ago, but some rules have changed recently.

If I knew it will be a problem I would still help my auntie and still done the needed repairs, but would have done it in different way.

Whats done is done.

Now I am trying to find a way to avoid very high penalty in form of property sale.

As outlined above, its not just loss because of sale below value now, but mainly high impact on my retirement plans. Sale now to buy another later is the exact thing I am no keen on.

I do want "other people to resolve my problem" in the same way as banks resolve our problems when we don't have enough cash to buy a house outright and they give us mortgages.

Devongardener

What strikes me here is the statement that the OP states he wants to keep his UK properties for his family to inherit but also has a farm abroad worth over £1 million.   With that security for the family why hang on to all the UK properties when selling one now would solve his problems now.

Ryan_Holden

I don't think the comparison to the mortgage is the same tbh, but I appreciate that your last reply is accepting of the predicament.

Sadly, I really don't see that you have any alternative. In the battle of assets vs cash, you have a lot of one and not enough of the other. Yes, selling might suck and you'd take a hit, but the unfortunate thing about debt is you don't really get to pick and choose when you need to liquidate.

The only other thing I can think of is have you considered or tried to transfer some of the credit card debt to new, 0% balance transfer cards? Experian can show you cards that you are likely to be approved for. I'm not sure if it would be time effective if you're approaching the point of no return.

theoretica

Your other option is to look at completely rewriting your personal budget - is there any way to afford the card payments and pay down the debt the slow way. Sell anything you own that isn't property, cut living right back...

I can see the logic of the banks - you have got yourself into a hole with credit card debt, and they would not want to lend to someone who gets into problems with debt.  As you say, a pity you didn't sort a different route out before you were in this situation and had credit card payments that will be a challenge to meet.

redux

Simplify this, and what is it?

Skip out all the detail about property and mortgages, debts, loans, the stuff in the middle, and reduce this to wanting to borrow more right now in order to help fund continuing income from the property in retirement in the near future. 

So when would that borrowing be repaid, is a question that might be occupying the banks. I don't see an explanation why such remortgages or loan applications, if feasible in the past, weren't done in good time a couple of years ago instead of using the credit cards

Plenty of us have been a bit financially reduced in the Covid era, and the banks have tightened things up. And some property has reduced in value, with the higher interest rates.

It's like trying to pull yourself off the ground by your bootlaces. From some of your other comments, you seem to have achieved stuff like that before. But the environment is different. Gearing was great with cheap borrowing and things going up, but not so good now. 

BikingBud

johnwest said:

BikingBud : no, I've turned 5k cash into around 1.8mil cleared equity. That's AFTER clearing debt (mortgages). All my UK properties are around 50-60% LTV. The abroad one I own outright.

With the abroad property is actually another funny situation. Can't use it as security for UK banks, because it is abroad and can't get mortgage/secured loan in abroad bank because I do not have income over there.

The banks abroad would not take into account my UK income.

Discount the 1 Mill that you appear to have exported and add the 40K on the credit card and between 400 and 480k of UK mortgage debt, you've turned 5k cash into nearly 500k of UK debt. At what yield on the properties? Still sounds like buying a football club, I just borrow against it and cash in later plan. Yeah of course the asset value will increase!

johnwest said:

Thank you for some constructive comments.

The £40k on cards is a result of couple unforeseen events in last 15 months. Majors were:

- had a major repair to one of the properties and insurance covered only part

- had a medical emergency in my family and donated well over 30k to pretty much save relatives life.

My critical error was to presume that releasing some cash from property during remortgage wont be a big problem. From my past experience and from what I was told by mortgage advisors I know for years, it wouldn't be a problem couple years ago, but some rules have changed recently.

If I knew it will be a problem I would still help my auntie and still done the needed repairs, but would have done it in different way.

Whats done is done.

Now I am trying to find a way to avoid very high penalty in form of property sale.

As outlined above, its not just loss because of sale below value now, but mainly high impact on my retirement plans. Sale now to buy another later is the exact thing I am no keen on.

I do want "other people to resolve my problem" in the same way as banks resolve our problems when we don't have enough cash to buy a house outright and they give us mortgages.

The first spend for repairs already indicated that your accessible funds were insufficient. 

Whilst I have some empathy with your stated second mitigation, although a 30K contribution for a medial emergency on a credit card doesn't seem like a UK originated problem. The fact remains you expected  resolution to be simple and are now finding that the reality is quite different. Banks do not solve your problems, they make a business decision on the present and known circumstances!

You admit the critical error and as you say what is done is done, I would offer that you gambled, over extended and it didn't pay off.

As I said initially the piper needs paying now. But what was the other way and why is that not suitable now?