Using equity to pay debt?

Dk1989

Hi I have a new build property I’m in now two and a half years and have just got a new 2 year fixed rate. Is it possible to use the equity on my home to pay off my debts? Our property is valued at £217,000 remaining mortgage £160,000 and equity of £55,000. We have debts of 32,000, we are literally living off debt. Any advice? 

DullGreyGuy

Dk1989 said:

Hi I have a new build property I’m in now two and a half years and have just got a new 2 year fixed rate. Is it possible to use the equity on my home to pay off my debts? Our property is valued at £217,000 remaining mortgage £160,000 and equity of £55,000. We have debts of 32,000, we are literally living off debt. Any advice? 

If you've just gotten a new mortgage why didnt you discuss extending it before signing up to another fixed period?

Generally it's not great advice to move unsecured debt to secured debt given it gives the creditor much more leverage if things go wrong. 

Dk1989

I honestly don’t know. My husband deals with the mortgage payments ect, and I didn’t realise this was something that could be done until I was researching a bit today online. This is all new to me and I thought I would ask actual people on here if this is something that’s possible. We have never missed any payments on our mortgage or any of our debts but it’s getting out of hand very quickly

MWT

Dk1989 said:

We have never missed any payments on our mortgage or any of our debts but it’s getting out of hand very quickly

The bigger question is what is going to stop you running up more debt after dealing with this debt?

I would strongly suggest heading over to the 'debt-free' forum on here and ask for help before moving this amount into the mortgage...

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

sheramber

If you increase your mortgage to cover the debts your mortgage payments will increase. 

How do you intend to stop living off debt?

Dk1989

I have been quoted a secure loan which would reduce my monthly payments by about £800 which means I would actually have money leftover from my wages/bills to live on. But when I realised about using equity I wondered if that would be the better option

Dk1989

MWT I got into this debt for reasons which haven’t been explained on here. Getting debt free is my goal here, so back to my question was to ask is it possible to use the equity I have on my home to pay my debt. 

Niv

Dk1989 said:

I have been quoted a secure loan which would reduce my monthly payments by about £800 which means I would actually have money leftover from my wages/bills to live on. But when I realised about using equity I wondered if that would be the better option

Using equity isnt 'free' money. To use equity you are borrowing against the house and your mortgage payments will go up (or you will have a second mortgage). It is generally not considered the best option for reducing debt as it puts more risk on you losing your home if you struggle to repay your higher / second mortgage. 

I would suggest you go over the the debt free wannabe board look at doing a full SOA and see if you can find some savings in your current outgoings to overpay your most expensive debts and snowball from there.

fatbelly

Dk1989 said:

Hi I have a new build property I’m in now two and a half years and have just got a new 2 year fixed rate. Is it possible to use the equity on my home to pay off my debts? Our property is valued at £217,000 remaining mortgage £160,000 and equity of £55,000. We have debts of 32,000, we are literally living off debt. Any advice? 

Yes

Don't do it

You are not clearing your debts, just moving them to a more dangerous place

Head over to debt free wannabe

MWT

Dk1989 said:

MWT I got into this debt for reasons which haven’t been explained on here. Getting debt free is my goal here, so back to my question was to ask is it possible to use the equity I have on my home to pay my debt. 

'Using the equity' sounds less concerning than it really is... yes, you could possibly get a further advance on your mortgage, but depending on which lender you are with, you may find that you can't take enough to fully clear your debts as they will often limit the advance available when it is for debt consolidation.

That may mean that you cannot take the total borrowed above say, 80% LTV, or whichever limit your lender has.

ACG

Dk1989 said:

MWT I got into this debt for reasons which haven’t been explained on here. Getting debt free is my goal here, so back to my question was to ask is it possible to use the equity I have on my home to pay my debt. 

yes.
It would have been cheaper to do it with your lender. It might still be possible to go to your mortgage lender and get a further advance for debt consolidation - some lenders will, some wont. It will likely be cheaper than a secured loan.