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Remortgage or debt consolidation?
DonFog
Posts: 27 Forumite
We borrowed to extend our home which has increased its value as well as provided us with the space to live here forever.
Our original 5 year mortgage ends in 8 months (November 1st 2024).
Due to the payments required on loans and interest free credit cards we have a negative monthly balance.
We can consolidate all debts with a fixed term agreement for 2 years at 11% with a £4K fee.
We can try to remortgage but despite our promises, they are likely to avoid the risk that we don’t pay off these debts with the increased borrowing in the remortgage. We would also incur a £3,000 fee on our current mortgage to leave early.
I would rather remortgage but can’t see a way around their underwriters thinking we have too much debt despite the reason for it and intention to clear it.
Our original 5 year mortgage ends in 8 months (November 1st 2024).
Due to the payments required on loans and interest free credit cards we have a negative monthly balance.
We can consolidate all debts with a fixed term agreement for 2 years at 11% with a £4K fee.
We can try to remortgage but despite our promises, they are likely to avoid the risk that we don’t pay off these debts with the increased borrowing in the remortgage. We would also incur a £3,000 fee on our current mortgage to leave early.
I would rather remortgage but can’t see a way around their underwriters thinking we have too much debt despite the reason for it and intention to clear it.
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Comments
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That consolidation loan sounds so horrific it is likely to make things worse.DonFog said:We borrowed to extend our home which has increased its value as well as provided us with the space to live here forever.
Our original 5 year mortgage ends in 8 months (November 1st 2024).
Due to the payments required on loans and interest free credit cards we have a negative monthly balance.
We can consolidate all debts with a fixed term agreement for 2 years at 11% with a £4K fee.
We can try to remortgage but despite our promises, they are likely to avoid the risk that we don’t pay off these debts with the increased borrowing in the remortgage. We would also incur a £3,000 fee on our current mortgage to leave early.
I would rather remortgage but can’t see a way around their underwriters thinking we have too much debt despite the reason for it and intention to clear it.
Can I suggest that you complete and post an SOA as there are lots of people on here who will be able to help.
https://www.lemonfool.co.uk/financecalculators/soa.php
I have also asked that this be moved to the Debt Free Wanabe section of the forum as I think that will be where you would get the most appropriate help.1 -
"11% with a £4K fee" sounds crazy. What sort of 'consolidation' is it?
If the value has really increased, it's worth trying to remortgage.
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Have you looked into an additional mortgage with your current lender?0
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Yes, unfortunately they can only add £50k for debt consolidation and we need double that. Plus it’s not actually a consolidation service so they consider it as additional borrowing which takes us to a LTV they’re not happy with.penners324 said:Have you looked into an additional mortgage with your current lender?0 -
It reduced monthly outgoings by £1,000 and would be paid off by remortgaging in the near future. It’s called a second mortgage product and the fee is for a broker.grumbler said:"11% with a £4K fee" sounds crazy. What sort of 'consolidation' is it?
If the value has really increased, it's worth trying to remortgage.0 -
Wouldn't it be cheaper to pay the £3k and refinance everything in one go. Reduction in monthly outgoings only works if mortgage interest rates don't head higher in the future. Always a risk that they will.0
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‘A fixed term arrangement for two years at 11%’
What is the rate after two years?2 -
OK - firstly - the loans you are are all unsecured I assume? The credit cards certainly will be. If you are unable to pay those debts, then you will get a few letters, some uncomfortable phone calls, perhaps a threat or two of legal action which is highly likely to ever materialise. Then the debts default, the interest stops, and you can make headway into clearing them off.
If you load that currently unaffordable debt onto your mortgage however, and then find yourself unable to pay TAT, then what happens is you get some rather MORE nasty letters, and eventually the bank repossess your home. Now, call me bold, but given those two options, I know which I prefer the sound of? (Clue - not the second one).
The consolidation loan sounds exceptionally horrible - and regardless, consolidation rarely works in any event. It's seen as a way of fixing a problem, but it fixes nothing in most cases - it just shifts a problem, and makes it cost more.
You've already been given the link above to the SOA calculator we recommend, so the first step it to sit down and complete that. Make it open and honest - it needs to reflect the situation you are in right now, not what you think you should be spending. Don't guess figures either - check. You might find a years worth of bank and card statements handy.
If you can't afford your debt payments on the unsecured stuff now, having paid all your priority bills, then stop paying it. Don't leave yourself using more borrowing to cover priority bills because you are paying debt first.🎉 MORTGAGE FREE (First time!) 30/09/2016 🎉 And now we go again…New mortgage taken 01/09/23 🏡
Balance as at 01/09/23 = £115,000.00 Balance as at 31/12/23 = £112,000.00
Balance as at 31/08/24 = £105,400.00 Balance as at 31/12/24 = £102,500.00
£100k barrier broken 1/4/25SOA CALCULATOR (for DFW newbies): SOA Calculatorshe/her0 -
Were you only given a 5-year mortgage because you were of (ahem) advanced age? Or are you saying that the fixed interest period comes to an end after 5 years? There's a huge difference between the two.1
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MattMattMattUK said:
That consolidation loan sounds so horrific it is likely to make things worse.DonFog said:We borrowed to extend our home which has increased its value as well as provided us with the space to live here forever.
Our original 5 year mortgage ends in 8 months (November 1st 2024).
Due to the payments required on loans and interest free credit cards we have a negative monthly balance.
We can consolidate all debts with a fixed term agreement for 2 years at 11% with a £4K fee.
We can try to remortgage but despite our promises, they are likely to avoid the risk that we don’t pay off these debts with the increased borrowing in the remortgage. We would also incur a £3,000 fee on our current mortgage to leave early.
I would rather remortgage but can’t see a way around their underwriters thinking we have too much debt despite the reason for it and intention to clear it.
Can I suggest that you complete and post an SOA as there are lots of people on here who will be able to help.
https://www.lemonfool.co.uk/financecalculators/soa.php
I have also asked that this be moved to the Debt Free Wanabe section of the forum as I think that will be where you would get the most appropriate help.[font=courier new][b]Statement of Affairs and Personal Balance Sheet[/b][b]Household Information[/b]Number of adults in household........... 2Number of children in household......... 2Number of cars owned.................... 1[b]Monthly Income Details[/b]Monthly income after tax................ 5600Partners monthly income after tax....... 2900Benefits................................ 0Other income............................ 0[b]Total monthly income.................... 8500[/b][b]Monthly Expense Details[/b]Mortgage................................ 2014Secured/HP loan repayments.............. 0Rent.................................... 0Management charge (leasehold property).. 0Council tax............................. 203Electricity............................. 115Gas..................................... 115Oil..................................... 0Water rates............................. 57Telephone (land line)................... 0Mobile phone............................ 70TV Licence.............................. 13Satellite/Cable TV...................... 90Internet Services....................... 55Groceries etc. ......................... 450Clothing................................ 100Petrol/diesel........................... 70Road tax................................ 14Car Insurance........................... 70Car maintenance (including MOT)......... 5Car parking............................. 10Other travel............................ 400Childcare/nursery....................... 1350Other child related expenses............ 200Medical (prescriptions, dentist etc).... 20Pet insurance/vet bills................. 0Buildings insurance..................... 45Contents insurance...................... 0Life assurance ......................... 73Other insurance......................... 0Presents (birthday, christmas etc)...... 167Haircuts................................ 133Entertainment........................... 167Holiday................................. 500Emergency fund.......................... 0Cleaner................................. 140[b]Total monthly expenses.................. 6646[/b][b]Assets[/b]Cash.................................... 0House value (Gross)..................... 735000Shares and bonds........................ 0Car(s).................................. 8000Other assets............................ 0[b]Total Assets............................ 743000[/b][b]Secured & HP Debts[/b]Description....................Debt......Monthly...APRMortgage...................... 498800...(2014).....3[b]Total secured & HP debts...... 498800....-.........- [/b][b]Unsecured Debts[/b]Description....................Debt......Monthly...APRTesco Loan.....................25961.....365.......5.75Monzo Loan.....................18183.....350.......15.4AMEX...........................5858......300.......35.2Overdraft......................2000......0.........0MBNA Credit Card...............5954......158.......0MBNA Credit Card...............7810......200.......0Lloyds Credit Card.............14997.....375.......0HSBC Credit Card...............7739......200.......0Paypal Credit Card.............2421......60........0Virgin Credit Card.............2973......30........24.1JohnLewis Credit Card..........2368......100.......25.9[b]Total unsecured debts..........96264.....2138......- [/b][b]Monthly Budget Summary[/b]Total monthly income.................... 8,500Expenses (including HP & secured debts). 6,646Available for debt repayments........... 1,854Monthly UNsecured debt repayments....... 2,138[b]Amount short for making debt repayments. -284[/b][b]Personal Balance Sheet Summary[/b]Total assets (things you own)........... 743,000Total HP & Secured debt................. -498,800Total Unsecured debt.................... -96,264[b]Net Assets.............................. 147,936[/b][i]Created using the SOA calculator at www.LemonFool.co.uk.Reproduced on Moneysavingexpert with permission, using other browser.[/i][/font]0
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