Release equity from properties to pay off credit cards

johnwest

Thanks for comments !

Just to answer to some of the recent point.

The 0% balance would be an answer, however the existing credit card debt is an obstacle. I have been operating with 0% balances for years. It was crucial part of the strategy, especially in the beginning, which  allowed me to multiply initial "wealth". Had top limits on several cards and used most of available credit when needed, but never paid a penny in interest as always was repaying all before % hits. This first time that it is different scenario.

I do expect large amount of income within a year. One of the supermarkets approached me with offer to buy part of my foreign land and they offer 200k. Not huge amount, but more than enough to solve my problem. Problem is that before the supermarket can buy it, the local council has to change land designation to commercial and that might happen next week or 12 months from now. I have no influence on how fast the council will process my application, so for now I prefer to be on safe side and assume its not happening and I wont rely on it in any financial planning.

As mentioned I could have taken different route than using credit cards to pay for large bills and my mistake was that I assumed nothing changed and extra borrowing against property wont be a problem. I  waited for fixed rate deals to end to remortgage, pull some equity out of properties and pay off the cards.

I have not attempted extra borrowing a year or two ago for couple of reasons:

- not foreseen that I will have difficulties with it now

- wanted to change a lender when the fixed term ends, and having extra borrowing would complicate matter

- have been preoccupied with other matters and cards seemed simple and efficient

When would the borrowing be repaid?

Within 3 months.

I have been assured by banks, that extra borrowing on the mortgage is waiting and as soon as I pay off the cards and credit file updates I will get it.

If I had 80 or even 120k more debt in form of mortgages I wouldn't even remotely consider it a problem.

However 40 on cards is a problem - it costs way more and it is killing my credit rating on top of it.

For that reason I need to pay the cards off ASAP.

Sad thing is that all my properties are on 60% or less LTV. In normal circumstances I could easily go to 75% (or more). That would release several times more than the debt on cards. However that, relatively small amount on cards is preventing the release of equity. So back to viscous circle.

Herzlos

Tucosalamanca said:

johnwest said:

Just to summarize. I need to find a lender, 40k, for 3 months or less.

I offer good interest, have securities and will pay for lawyer to draft a contract.

This comes across as an advertisement / classified ad.

Just saying

Yeah, it sounds like he's trying to get some unofficial borrowing to make it look like he's not got any debt, but it won't work because NatWest will be curious as to where the £40k suddenly appeared from - they'll want to see bank and credit card statements before giving you any money, and a transfer in from a random person will look suspicious.

If he just gets a loan, he'll just shift it from card to loan.

The best way to get rid of the debt is the old fashioned way; pay it off. That probably means selling something - a car, one of the houses, etc, and cutting your costs otherwise - phone plans, tv plans, fancy foods, etc.

Do you have anything in savings or is it all in property?

Ryan_Holden

I don't understand, how are you paying off this £40k you want to borrow in 3 months?

If it's 3 months, surely you can service the minimum payments until then?

Edit - Oh I see, you want to borrow money to clear your debt and then repay the lender with your re-mortgage. Does your mortgage lender know that?

johnwest

Just learned how to do quotes!

Herzlos said:

Yeah, it sounds like he's trying to get some unofficial borrowing to make it look like he's not got any debt.

Not really sure where you get it from, but I won't get it from.

Herzlos said:

The best way to get rid of the debt is the old fashioned way; pay it off.

Exactly! Same way as many of us a paying off mortgages. Not in a month or two but over years!

Herzlos said:

Do you have anything in savings or is it all in property?

Never came across savings which offered more interest than the inflation. Maybe if I was looking for them really hard I would have found one that matches inflation. Nothing more.

Since I was bent on earning money and not losing them I stayed clear of savings. Equity is savings.

Just to prevent some pointless comments - even if sell with big loss I am still massively in profit for last 10 years period. If I was the savings guy, by now, I wouldn't have more than the deposits and definitely much less than deposits if you take into account inflation.

born_again

johnwest said:

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

Turning a unsecured debt into a secured one is never a good idea.

Clearly you have far too much debt to income ratio.
How do the lenders know you will fulfil your obligation to pay off the mortgage? As you have a property oversea's they may see this as a major red flag, as someone who will simply up sticks, leaving them with 3 properties with sitting tenants & a big bill to even get to the point of being able to sell them. Even then odd's on at a loss.

See if one of your tenants wants to buy a property. As unless you are going to sell with sitting tenants, it will take a long time to remove them.

Tucosalamanca

Clear as day that OP is over-leveraged.

A building repair that the insurance did not fully cover.
Where is the sinking fund to cover this kind of event?
Where is the headroom to allow for unexpected financial events or interest rate rises?

Credit card debt built up over 18 months.
What has happened to the income from the significant property portfolio?
There should a substantial income stream, why has the debt not been paid down?

If a modest £40k is causing such issues, it suggests a serious oversight in planning and management, particularly as the last decade has been so 'friendly' for speculators.

So many red flags, no wonder banks are saying no...

johnwest

born_again said:

Turning a unsecured debt into a secured one is never a good idea.

It is bad idea only if you plan to stop paying it off.

Otherwise, especially when you look at costs and impact on credit rating it is excellent idea.

To somebody in my situation secured and unsecured debt doesn't differ much. Semantics really. In case of bankruptcy properties are repossessed to satisfy unsecured debt. A bit more difficult for creditors to repossess  if you have only one property, your main residence, but even your residence is not really safe if you go bankrupt on unsecured debt.

born_again said:

Clearly you have far too much debt to income ratio.
How do the lenders know you will fulfil your obligation to pay off the mortgage? As you have a property oversea's they may see this as a major red flag, as someone who will simply up sticks, leaving them with 3 properties with sitting tenants & a big bill to even get to the point of being able to sell them. Even then odd's on at a loss.

It is called LTV + repossessions.

Why would somebody in my situation "up sticks" and lose all the equity for no reason?

Come on, lets be serious.

born_again said:

See if one of your tenants wants to buy a property. As unless you are going to sell with sitting tenants, it will take a long time to remove them.

Removing tenants on standard monthly rolling contract is not such a big deal.

Presuming tenant-free property is needed. It is not always the case. I bought property with tenants in there and I was thankful for it - saved me lots of time on finding tenants.

Selling is what I want to avoid.

It would mean around 50k loss and no property.

I'd rather pay 50k in fees/commissions and keep the property!

Grumpelstiltskin

'Removing tenants on standard monthly rolling contract is not such a big deal.'

Oh dear I thought you knew what you were doing, believe you me it isn't quick or easy.

You wonder why people save, the answer to that is they can cover things that come up when TSHTF

You have discovered that having to use credit cards to cover such situations has it's problems. ie. you can't pay it back and no one will lend you more money

CliveOfIndia

OP, with respect, you seem to have a somewhat unconventional view of things.

johnwest said:

born_again said:

Turning a unsecured debt into a secured one is never a good idea.

It is bad idea only if you plan to stop paying it off.

No-one "plans" to stop making mortgage repayments.  It's the unexpected life events that can unfortunately force people into difficult situations.

johnwest said:

born_again said:

Turning a unsecured debt into a secured one is never a good idea.

In case of bankruptcy properties are repossessed to satisfy unsecured debt.

The problem with secured debt is not so much bankruptcy, it's when you just can't afford to keep up mortgage repayments, that's when the problems arise.  Bankruptcy is a whole different ball-game.

May I politely ask why you posted here in the first place?  You've been given a lot of very sound advice, yet you appear determined to ignore it.  People are not being judgemental, ignorant or just plain "nasty", rather they're doing their best to provide helpful answers to your questions.

born_again

johnwest said:

johnwest said:

Why would somebody in my situation "up sticks" and lose all the equity for no reason?

Come on, lets be serious.

Selling is what I want to avoid.

It would mean around 50k loss and no property.

I'd rather pay 50k in fees/commissions and keep the property!

You have a £40K debt you can not service, without borrowing more to pay it back, over time it could/will get worse. As no one will lend you anymore. Which is the situation you are in now. Only you can afford the mortgages.
So it snowballs to the point where you can't pay the mortgage on properties.

Only/Easy way out. As no one will lend you anymore.
Up sticks & enjoy the million £ oversea's property. 

So you turned a small amount, into what you have now .👍Well done. But fail to see the bigger picture, that offloading one to clear the debt is not the logical decision & starting again to buy another one.

What's the interest rates on the £40K? How much a month do you pay on the CC's. Compared to how much you make on a property.

Pop into debt board & you will find post after post where people want to pay a debt off with another debt. The advise is always DO NOT. It does not solve the problem.

Only way any 3rd party would lend that to you would be secured on property @ a large interest rate, if you can find anyone. So while you keep the property for now, how long before you are back in the same place?

This is not a dig at you. Just a view from the outside.