L&C update and advice please :)

InAPickle76

Hi, so we were contacted by L&C today who have advised that a debt consolidation mortgage is the best option based on our current affordability. This would mean our LTV would be just over the 75% mark. We were advised that there would be more options available to us if we could overpay enough on the loans to take us below the 75% LTV. If we were to do this, it would mean us wiping out our savings/emergency fund completely, leaving us with no back up.

I understand that we may get a better rate with a 75% LTV as opposed to an 80% LTV however having no savings at all really worries me.

Just wondering what your thoughts are? Would there be a big difference in rates with a 75% LTV remortgage compared with an 80% LTV. Struggling to know what the best way forwards would be. I guess we may not even be accepted, not even at the AIP stage yet - just in the process of looking at possible options.

Many thanks in advance

MFWannabe

Did they not give you an example of rates? 

Are you able to get below 75% ltv? 

How much would you need to pay to get below this? 

How long would it take to replace the savings? 

Also you then ask difference in interest rates between 75% and 80%, there’s usually no difference 

InAPickle76

MFWannabe said:

Did they not give you an example of rates? 

Are you able to get below 75% ltv? 

How much would you need to pay to get below this? 

How long would it take to replace the savings? 

Also you then ask difference in interest rates between 75% and 80%, there’s usually no difference 

No they didn't give any examples of the difference in rates - I will ask the question.

It would be approx £2300 that we would need to find - this pretty much wipes all of our savings of £2500. It would probably take us at least 6-8 months to build it back up again - not sure I would like to live on the edge for that long!!

If there is little difference I think I would prefer to keep the savings and pay a slightly higher rate?

Any thoughts welcome

MFWannabe

InAPickle76 said:

MFWannabe said:

Did they not give you an example of rates? 

Are you able to get below 75% ltv? 

How much would you need to pay to get below this? 

How long would it take to replace the savings? 

Also you then ask difference in interest rates between 75% and 80%, there’s usually no difference 

No they didn't give any examples of the difference in rates - I will ask the question.

It would be approx £2300 that we would need to find - this pretty much wipes all of our savings of £2500. It would probably take us at least 6-8 months to build it back up again - not sure I would like to live on the edge for that long!!

If there is little difference I think I would prefer to keep the savings and pay a slightly higher rate?

Any thoughts welcome

It’s personal choice but if it were me I would keep my savings especially if there’s not much difference between the rates 

amnblog

Debt consolidation into a mortgage is fraught with difficulty and risk. To find yourself on completion with zero in the back is clearly not sensible.

You also need to be careful of:

The size of the debt you are looking to consolidate. If considerable against your income you may struggle to pass credit score with many lenders

Securing the debt against your home. Currently your home is not at risk if you struggle to maintain payments on this debt. Once consolidated you will be.

Make sure any Broker has had a thorough look at your situation before they make any recommendations or you take any action.