Remortgaging and credit score dilemma - will a debt consolidation loan hurt our application?

Beccy321

Hi,

my husband and I wish to remortgage and need to borrow more to renovate our manege and barn. I’m switching jobs end of October and will need 3 months from then to show my income. Essentially our joint income will be the same as it has been for 18 months and is sufficient to borrow what we need in principle.

We have around 25k of credit card debt from several years ago and are paying them off. We never get 0% transfer offers which would be useful and are paying a lot of interest. Both our credit scores are perfect.

My question is this - should I take out a loan to consolidate the Cc debt and get rid of them (except for using them a little and paying them off in full every month to maintain good credit score), OR borrow on the mortgage and pay less monthly overall (yes I understand we will pay more in interest in the long term). The main thing which concerns me is the hard search on my credit score and the impact this might have on a mortgage application. I need to remortgage in January, so any loan application made now will still be there. How damaging is a hard search on a mortgage application and is it better to have a 5 year loan to pay off high interest debt? Or is it going to actually damage the application as the 5 year debt consolidation loan could reduce affordability. Or will it actually help us as the ‘risk’ would be maybe perceived as lower if we just have the one loan. I think paying them off slowly as we are will damage affordability aspect for the remortgage.

i just don’t know what to do for the best. My mortgage is with Coventry, and I have found them excellent on the whole. Perhaps I could ask them directly? 

Any help, warmly received 😊 

fatbelly

Definitely don't put the credit card debt on the mortgage.

If you have a perfect credit record then you should be able to do 0% bts

https://www.moneysavingexpert.com/eligibility/credit-cards/search/?goal=CC_BALTRANSFERV2

If you can't then post on debt free wannabe cos there's something going on.

Don't remortgage to get the moneyr the renovation if you can avoid it. How much are you looking to raise?

MorningcoffeeIV

Beccy321 said:

We have around 25k of credit card debt from several years ago and are paying them off. We never get 0% transfer offers which would be useful and are paying a lot of interest. Both our credit scores are perfect.

The problem you have is that the credit scores are just for fun. They're not used in lending and don't indicate your credit worthiness.

Your issue is the interest bearing debt you're carrying, and that's making you high risk. Lenders won't want to give you access to more borrowing while you can't repay what you already have.

You need to focus on paying down the existing debt.

ACG

There is no right or wrong, its what works best for you. 

First thing, there is no such thing as a credit score. Every mortgage lender either does a credit check (no score) or those who do score use their own algorithm so score you differently to the next lender. 

If you are going to wrap them up into a loan, the credit check itself is unlikely to be an issue as it would have been around 5 months since the credit check was carried out. A one off check is unlikely to cause that much (if any) damage. But even if it does, after 5 months it would have more or less repaired anyway. 

If you want to do it, do it sooner rather than later.