Remortgage options if on a Debt Management Plan?

jjiow

I have been a Barclays customer for more than 30 years and had a mortgage with them for over 20.  When I took out my mortgage, I never asked for, but was given a facility of a Mortgage reserve account, which automatically gave me access to additional borrowing in line with the rising equity of my home.  This was initially via a chequebook, but then they added the account to online banking which made it available within a couple of clicks.  I have to hold my hands up and say I took advantage of this and used it to pay for holidays etc, so I may get little sympathy that it has gotten out of control, but I am desperate for help/advice.  I am paying my main mortgage off, but only able to pay the interest each month on reserve - the rate on the mortgage is about 5.5% and on the reserve it’s up to roughly 9%.  18 months ago I needed to take out a DMP to pay off credit cards, which I am successfully doing, but this has given me a poor credit rating (I know, from what I’ve said, it’s deserved).  I tried contacting Barclays and asked them to consolidate the main mortgage and the reserve into one repayment with additional years, which would mean a lower monthly payment than I’m currently making, but they said I’d have to go through an “additional borrowing” application, which I would not pass due to my DMP.  Barclays already gave me the additional borrowing, no questions asked, but now I want to make paying it back more affordable, they won’t help.  I feel trapped and it’s giving me sleepless nights - if interest rates go up any further, then I won’t be able to cover the reserve interest payments and I’m still not paying off the debt even if they don’t go up.  What are my options?

housebuyer143

jjiow said:

I have been a Barclays customer for more than 30 years and had a mortgage with them for over 20.  When I took out my mortgage, I never asked for, but was given a facility of a Mortgage reserve account, which automatically gave me access to additional borrowing in line with the rising equity of my home.  This was initially via a chequebook, but then they added the account to online banking which made it available within a couple of clicks.  I have to hold my hands up and say I took advantage of this and used it to pay for holidays etc, so I may get little sympathy that it has gotten out of control, but I am desperate for help/advice.  I am paying my main mortgage off, but only able to pay the interest each month on reserve - the rate on the mortgage is about 5.5% and on the reserve it’s up to roughly 9%.  18 months ago I needed to take out a DMP to pay off credit cards, which I am successfully doing, but this has given me a poor credit rating (I know, from what I’ve said, it’s deserved).  I tried contacting Barclays and asked them to consolidate the main mortgage and the reserve into one repayment with additional years, which would mean a lower monthly payment than I’m currently making, but they said I’d have to go through an “additional borrowing” application, which I would not pass due to my DMP.  Barclays already gave me the additional borrowing, no questions asked, but now I want to make paying it back more affordable, they won’t help.  I feel trapped and it’s giving me sleepless nights - if interest rates go up any further, then I won’t be able to cover the reserve interest payments and I’m still not paying off the debt even if they don’t go up.  What are my options?

You will need to go to a broker and look to remortgage with another lender who does adverse credit. The rate will be higher but whether it's more expensive or not will need to be seen. 
Also it depends how your affordability stacks up, how much is owing and how much do you earn?

MWT

jjiow said:

...if interest rates go up any further, then I won’t be able to cover the reserve interest payments and I’m still not paying off the debt even if they don’t go up.  What are my options?

Talking to a broker with adverse experience is certainly a good idea, but the degree to which a remortgage is going to be helpful depends a lot on the remaining balance on the mortgage account vs the balance on the reserve account, roughly what are those two numbers?

Also, how long do you have left on the mortgage?

ACG

As a broker, I would be very reluctant to take you away from Barclays, any new mortgage lender is going to be unable to compete with Barclays on rate. 

I think (I could be wrong), it might be better to look at a secured loan. The rate will likely be higher than the rate Barclays are charging on the reserve, but you can do it over a longer term and potentially start to make a dent (albeit probably a slow one) into the balance. 

But (and not to sound condescending), if/when rates come down or you receive pay rises, start to overpay and bring the balance down a bit quicker. 

caprikid1

I'm not a mortgage broker but would expect your options to be limited.

Decision Reference DRN-3416746 (financial-ombudsman.org.uk)

I assume this is not you in the article but is downsizing an option ? This is a very old product so even with the additional borrowing that night make a difference.

jjiow

caprikid1 said:

I'm not a mortgage broker but would expect your options to be limited.

I assume this is not you in the article but is downsizing an option ? This is a very old product so even with the additional borrowing that night make a difference.

This is not me, but it is useful information - I’m not denying responsibility for repaying the debt, but was hoping for more help from Barclays to repay it.  My main mortgage debt stands at £43k and the MCA is £68k, with a remaining term of just over 11 years.  The mortgage repayment is £415 per month, whilst the MCA is £500 (interest only) which I am just about managing to afford.  The problem I have is I am not reducing the MCA debt balance and if interest rates go up further, I would be in difficulties.  My problem with Barclays is they have already lent me this money - I’ve calculated that consolidating the two debts into one repayment and extending the term would be a cheaper monthly payment based on their available existing customer rates.  The issue is although I’m not increasing the overall debt, they require me to make an “additional borrowing” application, which I would not now pass due to my DMP.

MWT

jjiow said:

My main mortgage debt stands at £43k and the MCA is £68k, with a remaining term of just over 11 years.

It is good news that your mortgage still has 11 years to run, so you do have time to figure this out, but it does underline ACG's point above, that remortgaging elsewhere is not likely to be a good solution.

Looking elsewhere for a secure loan may well be an option worth considering though if you can get a long enough period to repay it...

jjiow said:

My problem with Barclays is they have already lent me this money - I’ve calculated that consolidating the two debts into one repayment and extending the term would be a cheaper monthly payment based on their available existing customer rates.  The issue is although I’m not increasing the overall debt, they require me to make an “additional borrowing” application, which I would not now pass due to my DMP.

I know it must feel like Barclays are not being helpful, but I'm not sure they have a lot of choice, you would need a new application to do what you want and that does mean passing affordability, and because of the DMP resulting from your other debt problems that isn't going to work which means it isn't really Barclays not helping, it is your other problems getting in the way...

You've been great at being honest about owning the problems you are now facing, so perhaps this is a good time to head over to the 'Debt Free' forum here and get some non-judgemental advice on how to deal with the current situation as this doesn't look likely to be solved with a mortgage solution..?

https://forums.moneysavingexpert.com/categories/debt-free-wannabe

ACG

Sometimes I can be quite direct and it can come across badly. This is probably going to be one of those times even though it is not intentional but I have tried to tone it down...

You are saying that Barclays are not being helpful because they are not doing what you want. But you ran up your debt not just on the reserve but elsewhere to the point where you could not afford it and needed to enter a DMP. 

As a lender, if they did your mortgage and it went wrong they could be in a position with the financial ombudsman where they have a complaint and have to justify doing this mortgage. Why open themselves to that risk? 

jjiow

ACG said:

Sometimes I can be quite direct and it can come across badly. This is probably going to be one of those times even though it is not intentional but I have tried to tone it down...

You are saying that Barclays are not being helpful because they are not doing what you want. But you ran up your debt not just on the reserve but elsewhere to the point where you could not afford it and needed to enter a DMP. 

As a lender, if they did your mortgage and it went wrong they could be in a position with the financial ombudsman where they have a complaint and have to justify doing this mortgage. Why open themselves to that risk? 

That’s fair comment - I’m the first to say people have to take responsibility for their actions and I completely hold my hands up that I am solely to blame for my debt problems.  I wish I could go back in time and change my foolhardy ways, but I can’t.  I’m just desperate to pay the money back, but maybe I’ll just have to continue just paying the interest and then downsize when I am in a position to do so.

thank you to all on this thread for your comments/advice.

ACG

No point crying over spilt milk as my nan used to say. You just have to try and make the best of it.
If you have a spare couple of quid each month, make an overpayment. £10 a month is probably going to be around £1,500 less at the end of the decade. Not a lot but as the interest rates start to drop in a year or 2, you can keep your repayments the same and that £1,500 will come down quicker and quicker.