Remortgage Advice

KR57

Hi All, I’m after a little advice if possible, we were caught up in the Northern Rock mortgage crisis back in 2008 and our mortgage has since been moved to Helidor Mortgages on a crazy rate.  We’re still on an interest only mortgage, we were stuck in negative equity, but with the increase in house prices in the area we have around 20% in equity.  I want to move us to a better mortgage as I’m now earning more money and our credit score is much better so that should strengthen our application.  The issue is we’ve been through a tough time (we’re out of it now) in which we’ve ended up with a considerable amount of unsecured debt.  I’ve got around £12k that we’ve saved and my question is, will it strengthen our mortgage application if we use the money to clear some of our unsecured debt (loan and a couple of credit cards) or pay it towards the mortgage?  

Apologies for the long and probably confusing question!  Any help would be greatly appreciated as I feel quite embarrassed speaking to a broker and admitting the mess we got into, but I’m determined to get us out of. 

ACG

Its not so much the debt that is the issue, its what the repayments are. 
£12k at £50 a month is a bit different to £12k at £500 a month. 

But that to one side, it is all relative. If your household income is £100k, £12k does not look too bad. If your  household income is £30k then £12k is a sizeable chunk. 

It just forms part of the overall picture. It might be an issue but it may not. 

KR57

Thanks, do mortgage lenders look at the fact we’ve been interest only for so long as a negative? 

K_S

@kr57 The first thing I'd say is, there's absolutely no need to get embarrassed about speaking to a broker. If it's one thing most brokers do well, it's to take judgement out of the equation as that's not part of the job and doesn't help us or the client. A good broker's job is to find a mortgage solution that works for you at that point in time, or point you towards what needs to change to get you where you're like to be.

If you want to pay off debt, with respect to the mortgage, do remember that as far as loans are concerned, it's the monthly payment that matters not the outstanding loan size. As far as credit card balances are concerned, it's the outstanding balance not the interest rate (0% or 25% has the same impact).

Get a copy of your credit reports and speak to a good broker to see what they say.

To get a very rough idea of affordability, you could play around with a few lender calcs. Plug in your numbers and see what kind of borrowing figures it throws up. You can tweak the debt/outgoings to see what impact it has on the borrowing required.

https://www.halifax-intermediaries.co.uk/tools-calculators/mortgage-affordability-calculator.html https://online.accordmortgages.com/public/mortgages/quick_enquiry.do

The MSE guide here can help you find a broker, https://www.moneysavingexpert.com/mortgages/best-mortgages-cashback/#step3 Alternatively, get a recommendation from friends/family/colleagues. Good luck!

KR57 said:

Hi All, I’m after a little advice if possible, we were caught up in the Northern Rock mortgage crisis back in 2008 and our mortgage has since been moved to Helidor Mortgages on a crazy rate.  We’re still on an interest only mortgage, we were stuck in negative equity, but with the increase in house prices in the area we have around 20% in equity.  I want to move us to a better mortgage as I’m now earning more money and our credit score is much better so that should strengthen our application.  The issue is we’ve been through a tough time (we’re out of it now) in which we’ve ended up with a considerable amount of unsecured debt.  I’ve got around £12k that we’ve saved and my question is, will it strengthen our mortgage application if we use the money to clear some of our unsecured debt (loan and a couple of credit cards) or pay it towards the mortgage?  

Apologies for the long and probably confusing question!  Any help would be greatly appreciated as I feel quite embarrassed speaking to a broker and admitting the mess we got into, but I’m determined to get us out of. 

ACG

KR57 said:

Thanks, do mortgage lenders look at the fact we’ve been interest only for so long as a negative? 

No. In the main it would not be an issue, there might be exceptions with some lenders but I doubt you would need to use those lenders.  

K_S

KR57 said:

Thanks, do mortgage lenders look at the fact we’ve been interest only for so long as a negative? 

@kr57 Generally speaking, no. Though do keep in mind that if you remortgage to a new lender at 80% LTV it'll more likely than not have to be on a capital repayment basis.