Remortgage or debt consolidation?

EssexHebridean

I suspect your financial privilege in terms of income is rather clouding rational judgement here. Sure - right now you are in an incredibly fortunate position with your income - however, you are also seeing that a high income doesn’t necessarily mean that things will always just fall in to place for you at the click of a finger. Sometimes money - or the perception of money anyway - can do that. Not always though. Affordability rules are there for a reason - your lender are sending you a really powerful warning here. I completely understand that you might not feel that advice from a bunch of random strangers on the internet is to be taken seriously, but that warning from your lender should be ringing alarm bells. 

To summarise - you have spent money you don’t have on a gamble - gambling that the perceived increased value of your house will mean that lenders will be happy to allow you to increase the borrowing against it. If you look outside any betting shop on any day of the week you will find others doing exactly the same - although probably mostly with smaller sums - gambling that the horse they are backing will win the race, the team will win the league, or whatever other chance event they feel is a “dead cert” will come to pass. You’re doing the same thing, but considering gambling with the roof over your family’s head - which to most of us here (many with years of experience of seeing people in your position forced into having to make decisions they would sooner not) is very much a gamble too far. 

So - you realise that the route you are looking to take will actively cost you a huge amount extra over the years? In real terms - that will in itself eat into the lifestyle you aspire to, or the alternative is you will continue to live that lifestyle and further debt will be accrued.  

You understand that what you are doing is pinned on interest rates remaining low - and that in itself is a further gamble. Just do one sum - work out what will happen to your plans if the best mortgage rate you can secure is 7%+ - it’s not inconceivable that rates COULD go that high - indeed, when I checked our affordability for our recent mortgage I used 8% as my “likely worst case scenario” figure.
What is your plan for if something should happen to either you or your industry to mean that you can no longer work in your current role/ work at all/have to take a change of roles and a much reduced salary?  

Below paragraph is general advice and does not relate to the OP as they have indicated they are unhappy with the wording. Wording has now been edited to remove reference to the OP directly, and to explain the reason for the paragraph being included. 

To anyone else reading this subsequently who may be in a similar position to the OP.  Please ensure that any children you may have understand as they grow up that they are in a privileged position - that it’s not “normal” to spend the amount the family does on discretionary spending and luxuries - otherwise they will grow up with the perception that is just how life is, and when they head off into the world to make their own way, they will be hugely at risk of ending up in debt themselves because they just do not understand any different way of living.  We have seen plenty of times here young people arriving with a perception that certain levels of spending are simply part of a normal household budget, and as a result they have ended up in debt because they have treated those areas of spending as essential, rather than luxury, and have prioritised them in spite of not having sufficient income to allow for it. Much the same as children from households where use of credit cards is normalised tend to end up taking credit cards themselves at a very young age. Explain privilege, and explain the risks associated with debt. 

stymied

To be fair the OP has already acknowledged that the holiday and presents costs are currently unusual due to an upcoming family wedding abroad.

Andyjflet

Well done for posting, your whole situation is stressing "me" out let alone you. In simple terms stop borrowing, every post has a twist and turn on how to borrow your way out of debt, you cant, as proven on here hundreds of times, even this week I am reading a thread where the OP thinks they can cheat the system and borrow yourself happy. One wrong move and it can all come tumbling down.

Get yourself a £1000 emergency fund stashed in a non related easy access account and stop borrowing, for anything. 

EssexHebridean

Andyjflet said:

Well done for posting, your whole situation is stressing "me" out let alone you. In simple terms stop borrowing, every post has a twist and turn on how to borrow your way out of debt, you cant, as proven on here hundreds of times, even this week I am reading a thread where the OP thinks they can cheat the system and borrow yourself happy. One wrong move and it can all come tumbling down.

Get yourself a £1000 emergency fund stashed in a non related easy access account and stop borrowing, for anything. 

I suspect I know the thread! 

Ultimately once someone has said they don’t want help to get out of their situation, they just want to do things their own way, we’re really shouting into the void so far as that individual is concerned. All we can do is continue to ensure we say the right things as that might help someone else along the line. 

kimwp

To go back to the original question, you are probably not able to borrow more money against the house because you currently have such a large debt and from the point of view of the lender are trying to double it. You know you want to use the remortgage to pay off the debts, but they don't know that will happen. It would be irresponsible of them to increase your borrowing when you already have a debt which is large compared with your income, particularly in view of stress testing your finances.

DonFog

Veteransaver said:

Your current mortgage is at a lowish interest rate and is still 5x your take home. You are talking about making that 6x your income and remortgaging at a far higher interest rate.

Our income is £151,000 and we want to borrow £600k on a £735,000 house.

DonFog

kimwp said:

To go back to the original question, you are probably not able to borrow more money against the house because you currently have such a large debt and from the point of view of the lender are trying to double it. You know you want to use the remortgage to pay off the debts, but they don't know that will happen. It would be irresponsible of them to increase your borrowing when you already have a debt which is large compared with your income, particularly in view of stress testing your finances.

Yes this is exactly it and so my question is asking for advice on whether we should remortgage or debt consolidation.

i understand why people advise us to reduce outgoings and clear the debt but came here to see if we have other options more immediately to free up cash flow.

TheAble

DonFog said:

kimwp said:

To go back to the original question, you are probably not able to borrow more money against the house because you currently have such a large debt and from the point of view of the lender are trying to double it. You know you want to use the remortgage to pay off the debts, but they don't know that will happen. It would be irresponsible of them to increase your borrowing when you already have a debt which is large compared with your income, particularly in view of stress testing your finances.

Yes this is exactly it and so my question is asking for advice on whether we should remortgage or debt consolidation.

i understand why people advise us to reduce outgoings and clear the debt but came here to see if we have other options more immediately to free up cash flow.

The answer basically is to do neither. Cut your outgoings substantially and pay the money back out of excess income.

Hoenir

DonFog said:

MattMattMattUK said:

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.

That consolidation loan sounds so horrific it is likely to make things worse.

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. 

Hello, I’m not sure the debt free wannabe section is best for our goal here. 

We want advice on how to move from have a mortgage of £500k with unsecured debt of £100k to have a mortgage of £600k.

The debt advice is good and appreciated but it’s not our goal to be debt free. As sad as it sounds, our goal to have a long expensive mortgage that is affordable.

You answered your own question in your original post. 

We can consolidate all debts with a fixed term agreement for 2 years at 11% with a £4K fee.

Floss

DonFog said:

Veteransaver said:

Your current mortgage is at a lowish interest rate and is still 5x your take home. You are talking about making that 6x your income and remortgaging at a far higher interest rate.

Our income is £151,000 and we want to borrow £600k on a £735,000 house.

That is a high LTV at 81% and you have already been told what your lender is prepared to go to. Any lender would be either irresponsible or unscrupulous to agree to a remortgage to include unsecured consumer debt of an extra 20% of your current mortgage.