Debt consolidation - remortgage advice?

stressedette

I have about £18k of unsecured debt that is really on top of me - poorly managed and with terrible interest rates, so costing me approx £1300 monthly just to service without really being able to pay much down. 

I also have an existing (fixed rate) Nationwide mortgage which notes an estimated property valuation of £142,842, and an outstanding mortgage balance of £84,251 - so a decent amount of equity. My fixed rate (2.34%) is due to end in spring next year. 

I'd like to move house, and I earn what I consider to be a good salary (£38k,) but know I can't afford it at the moment with all these debts to pay.

My Equifax rating is 961 (Excellent), and my Experian rating is 906 (Good) - so I am paying everything monthly, I just have little spending money or room to breathe or properly plan to tackle anything. 

I've considered (drastically!) selling my house, using the equity to pay off the £18k and remaining equity to start again as a new deposit for a new home, debt free. But I'd then possibly have to rent somewhere in between, which will be difficult and quite an upheaval with a small child and pets. 

I've also considered remortgaging / additional mortgage borrowing - which I spoke to Nationwide about, but they've said as it's unsecured debt they'd consider this as a second mortgage rather than equity release, with a different account / interest rate. Not sure if that would be the same if I went to another bank or building society? I'm a bit wary of doing this as I've made terrible decisions previously with debt consolidation etc, but running out of options. 

Has anyone been in this situation? Can anyone offer any kind advice? 

stressedette

Also not sure if an additional mortgage account would affect my ability to move house...

stressedette

I completely appreciate that advice - and it's something I've done before, so I accept it.

However, would say that this time, I've already been living a very minimal lifestyle for a number of years, just to make sure I'm servicing all the payments I already have to make - I work full time plus overtime, and have two pre-school kids, so can't take on anymore in terms of earning. To the point lots of people do comment about why I always seem to be watching what I'm spending, despite how hard I work and in a relatively decent job.

The house move would really be for schools / into a better area to give them a bit of a better start and ideally separate bedrooms. Anything I racked up previously was always thinking of me on my own - I've not spent anything on credit since before my kids were born. 

I'm completely out of the habit of using cards / credit (as none of them are really useable anymore!) so I feel like my behaviours are already changed - and it's just dawned on me really that I'm struggling hugely month to month and living really frugally in a small house, despite having a fairly substantial whack of equity which might help change my kids quality of life day to day.

It is obviously a last resort! 

bluelad1927

mortgageFTB said:

I wouldn’t convert unsecured debt to secured.

You’ll likely run up the same amount of unsecured debt in the future, because you’re not changing your behaviours, I.e. you’re theoretically ‘taking the easy way out here’

If you don’t need to move house, I’d focus on a very minimal lifestyle, pickup a second job or work all the overtime you can get and attack your debt.

Doing that, changes behaviour and thus is unlikely you’ll rack up the same levels again.

If you consolidate this into a future mortgage, I’d absolutely bet on you racking up similar levels again in the near future. A hard opinion to hear I’m sure.

Check out the debt free boards on this forum for help and post a SOA with all your income and expenditure details.

Considering the OP had not mentioned reasons for debt that was a very harsh reply.

Absolutely unsecured debt should not be converted to secured debt.

Having opinions about behaviours thar are unknown or "betting" that they will do it again is totally uncalled for.

Martico

Hi there - many of us have been in a similar position and can offer advice.
Firstly, it'd be good to understand your position better. 1,300 per month on 18,000 unsecured debt sounds like there's a high monthly loan in there, along with the usual CCs. 
To give people here a better idea of your position, we'd normally advise you fill out a Statement of Affairs, format it for MSE and copy-paste it up here.
Be honest about where your money is currently going, not what you'd like to see.
I realise that you've already cut back to the bone, but there are often expenses that forum users spot that can be cut further. Typical ones are water / mobile phone bills. But an overall view of your position would help people to give you some guidance. 
And yes, as a general rule converting unsecured debt into secured debt is normally not a great solution. 
Good luck

Floss

bluelad1927 said:

Considering the OP had not mentioned reasons for debt that was a very harsh reply.

Absolutely unsecured debt should not be converted to secured debt.

Having opinions about behaviours thar are unknown or "betting" that they will do it again is totally uncalled for.

It is a well-known fact that a lot of folk who remortgage to pay off debt end up in the same situation again, as the lessons have not been learned.

bluelad1927

Floss said:

bluelad1927 said:

Considering the OP had not mentioned reasons for debt that was a very harsh reply.

Absolutely unsecured debt should not be converted to secured debt.

Having opinions about behaviours thar are unknown or "betting" that they will do it again is totally uncalled for.

It is a well-known fact that a lot of folk who remortgage to pay off debt end up in the same situation again, as the lessons have not been learned.

I clearly wasn't disputing the point of unsecured/secured debt.

Grumpelstiltskin

Your SOA  ( totally honest ) is the way forward. Make sure you include the interest rates on the debts then the good people on here will be able to advise you on the best way forward without remortgaging.

fatbelly

I've subscribed so I can make suggestions on the soa when you post it.

You should be able to get rid of that debt rather than shifting it to a more dangerous place.

Let's have a look at the detail

stressedette

Ok so for those asking for SoA, see below.

Some context notes:-

House and debts are all in my name. Partner pays £500 towards mortgage and bills, and pays for car and related car costs separately, so I've left those off as they're not relevant to my budget. He also contributes separately towards half childcare costs. (And I'm in Scotland, so no water rates.)

Both mega interest loans are due to be paid off January 2024, so that will help a lot with monthly budgeting... but these have been 5 and 7 year terms respectively. So I have been frugally meeting payments for a loooong time! And most of the credit cards have been stopped due to 'persistent debt' and so I couldn't use them to rack up more debt even if I wanted to - I just want them cleared, the monthly repayments to reduce, and to actually be able to save and spend my current earnings.

I know I could live frugally for another five to ten years to pay all this off slowly as I've been doing, but I'm honestly miserable and struggling to provide for two kids while meeting all the payments and still having a life. So even if it may cost more in the long term, I can see a huge benefit in refinancing this as part of a mortgage. 

My query really was more about how best to do this - my current provider (Nationwide) will only offer a 'further advance', which is essentially a separate mortgage account, different interest rate etc. I'm not sure what effects this is likely to have on my credit rating (assume this is just like another loan?) or my ability to move house. 

Statement of Affairs and Personal Balance Sheet

Household Information

Number of adults in household........... 2

Number of children in household......... 2

Number of cars owned.................... 0

Monthly Income Details

Monthly income after tax................ 2389

Partners monthly income after tax....... 0

Benefits................................ 85

Other income............................ 500

Total monthly income.................... 2974

Monthly Expense Details

Mortgage................................ 340

Secured/HP loan repayments.............. 0

Rent.................................... 340

Management charge (leasehold property).. 0

Council tax............................. 170

Electricity............................. 85

Gas..................................... 85

Oil..................................... 0

Water rates............................. 0

Telephone (land line)................... 0

Mobile phone............................ 30

TV Licence.............................. 14

Satellite/Cable TV...................... 30

Internet Services....................... 30

Groceries etc. ......................... 300

Clothing................................ 50

Petrol/diesel........................... 0

Road tax................................ 0

Car Insurance........................... 0

Car maintenance (including MOT)......... 0

Car parking............................. 0

Other travel............................ 150

Childcare/nursery....................... 250

Other child related expenses............ 100

Medical (prescriptions, dentist etc).... 50

Pet insurance/vet bills................. 50

Buildings insurance..................... 15

Contents insurance...................... 10

Life assurance ......................... 30

Other insurance......................... 0

Presents (birthday, christmas etc)...... 50

Haircuts................................ 50

Entertainment........................... 50

Holiday................................. 0

Emergency fund.......................... 50

Total monthly expenses.................. 2329

Assets

Cash.................................... 0

House value (Gross)..................... 140000

Shares and bonds........................ 0

Car(s).................................. 0

Other assets............................ 0

Total Assets............................ 140000

Secured & HP Debts

Description....................Debt......Monthly...APR

Mortgage...................... 84251....(340)......2.5

Total secured & HP debts...... 84251.....-.........-   

Unsecured Debts

Description....................Debt......Monthly...APR

RBS Loan.......................1400......425.......20.1

Lendable Loan..................1000......270.......23.65

Santander Card.................1970......60........23.9

Next Storecard.................300.......20........29.9

Capital One Card...............170.......15........34.9

Aqua Card......................230.......35........23.9

RBS Card.......................4900......135.......18.9

Overdraft......................2000......0.........39.9

Very Storecard.................1000......160.......44.9

Barclaycard....................3450......170.......24.9

MBNA Card......................1590......60........23.9[b]

Total unsecured debts..........18010.....1350......-  

Monthly Budget Summary

Total monthly income.................... 2,974

Expenses (including HP & secured debts). 2,329

Available for debt repayments........... 645

Monthly UNsecured debt repayments....... 1,350

Amount short for making debt repayments. -705

Personal Balance Sheet Summary

Total assets (things you own)........... 140,000

Total HP & Secured debt................. -84,251

Total Unsecured debt.................... -18,010

Net Assets.............................. 37,739

Created using the SOA calculator at www.LemonFool.co.uk.

Reproduced on Moneysavingexpert with permission, using other browser

stressedette

Also @bluelad1927 thanks for your response - I do totally get the warning that people fall into a trap of spending again after consolidation, I have done it in the past. But it is a bit disheartening to have people bet on you doing it again when you're trying to make a change!