Remortgage Or Personal Loan?

lotstolearn

Hi,

I would like help to decide what is best to do though my problem seems very small compared to others.

My question is do I remortgage on a fixed rate, try to get a personal loan which also includes my mortgage (so my mortgage is, in effect, paid off), or leave things as they are?

I have been unable to work due to ill health for many years and have a repayment mortgage of less than £10,000 with 44 years left to pay it off! Last year I changed it to a base rate tracker with my present lender, there are no redemption fees and I can pay as little or as much off my capital as I wish as long as I pay the interest each month, though I can only afford to pay a few pounds of this.

It is necessary for me to have a car now and repair costs (and more needs to be done) combined with the increases in every day living has put me in a situation where I now have about £1,500 of debt on credit cards (though these are on low (5.9%) lifetime rates of payback) and an overdraft of £350. I am managing, this extra load just but I seem to be chasing my tail as one always does when in debt and am making slow headway in getting straight, nor do I have a safety net any longer if there is an emergency.

As I have seen on this site this amount of mortgage is too low for many companies even to consider lending on as a remortgage and even if I decided to consolidate my debt, with maybe a little emergency money as well the absolute most I would be looking at borrowing if I was able to would be £15,000. To be honest I would be looking more in the region of £12,500 (but should I get a newer car )

I am particularly concerned about mortgage rates going up, and when I look at some of the advertising material it would appear that getting a personal loan with a fixed rate over considerably less than 44 years would cost quite a bit less than I am paying now with all of my 'debt' payments combined. (I don't particularly wish to increase my current mortgage to consolidate my debt - with a variable rate this is just too much of a gamble for me)

I am sure there are other people out there who similarly wonder what they can do about their low mortgage, or maybe someone has decided to make theirs into a personal loan and pay the mortgage off. With the interest rates that are around at the moment for this type of loan would this be a good thing or good time to do something like this?

I would appreciate any experience or advice people have to offer and thank you for your time.

Oh, by the way, I'm in my fifties

[Deleted User]

I was just wondering about you saying you are in your 50s - how did you get a 44 year term on your mortgage?

If you are having trouble with debt creeping up on you then your home is the most valuable asset you need to protect.

If you are not working it is unlikely you will get a competitive rate for a loan from any of the usual lenders and you may be tempted into the 'sub-prime' products which means very high interest.

Don't even go there.

First of all you need to rule out that you positively definitely cannot get a better mortgage product than the one you have. For this - I suggest you contact a fee free broker such as London & Country on 0800 953 0304 (http://www.lcplc.co.uk/) - who will trawl the market and try and sort something for you.

(I have no connection to them other than I have used them before and their service is excellent).

It will cost you nothing but your time.

If you cannot change to a better mortgage then you need to consider whether to stay as you are - or switch to a personal loan (assuming you can get one at a non extortionate rate) whereby you can pay it off within your means AND not jeapordise your home. For this you will need to go for a NON secured loan. The interest will be higher than a secured loan but your home should be safe if you default.

Regarding the car, if you are fit and well enough to drive - are you not fit and well enough to work even some hours? This may just make all the difference to your financial situation in terms of giving you better options on more financial products.

If you are not fit and well enough to work then you may not be allowed to drive either and you should clear this with DVLA as it will affect your insurance. (Which means MORE expense due to higher premiums).

You have a lot to consider but all is not lost. Don't do anything hasty. Have a good look at WHERE your money is currently going. Can anything be cut back on or changed to something similar but cheaper? Small changes can be all it takes to make an overall bigger and better difference.

Consider trying to switch your credit card balance to one of the 0% deals.

Do you live alone? Can you rent out a room? Switch to a water meter? Do you have any skills you can advertise on an occasional basis?

lotstolearn

Deleted_User wrote:

I was just wondering about you saying you are in your 50s - how did you get a 44 year term on your mortgage?

Thanks Deleted_User for your detailed reply, I really appreciate it.

When I thought I might be able to buy this house (I downsized and bought a new house) I went to my original lender. At the time they had just made a bit of a blunder with my old mortgage, I wasn't out of pocket at all then (I would have been) but I think they decided to be nice and just make my life easier because of it! Of course I have always had a lot of equity in the house and I suppose it pays them somewhere down the line.

Deleted_User wrote:

If you are having trouble with debt creeping up on you then your home is the most valuable asset you need to protect.

If you are not working it is unlikely you will get a competitive rate for a loan from any of the usual lenders and you may be tempted into the 'sub-prime' products which means very high interest.

Don't even go there.

First of all you need to rule out that you positively definitely cannot get a better mortgage product than the one you have. For this - I suggest you contact a fee free broker such as London & Country on 0800 953 0304 (http://www.lcplc.co.uk/) - who will trawl the market and try and sort something for you.

(I have no connection to them other than I have used them before and their service is excellent).

It will cost you nothing but your time.

If you cannot change to a better mortgage then you need to consider whether to stay as you are - or switch to a personal loan (assuming you can get one at a non extortionate rate) whereby you can pay it off within your means AND not jeapordise your home. For this you will need to go for a NON secured loan. The interest will be higher than a secured loan but your home should be safe if you default.

This has been my main concern. My house is everything, my home, my pension, my security - I cannot and will not put this at risk for a relatively short term problem.

I shall contact your suggested company, thank you. Would you say that if I could get a personal loan which is NON secured at a reasonable fixed rate, that that would be better than a mortgage anyway? What are the benefits of a mortgage really when you take into account that they are secured on your home?

Deleted_User wrote:

Regarding the car, if you are fit and well enough to drive - are you not fit and well enough to work even some hours?

Deleted_User wrote:

If you are not fit and well enough to work then you may not be allowed to drive either and you should clear this with DVLA as it will affect your insurance. (Which means MORE expense due to higher premiums).

My illness is not a DVLA notifiable illness at the moment so I am lucky there with insurance. The illness affects one in such a way that I am able to make a judgement like anyone else would be as to whether they are fit and well enough to drive at a particular time, thank goodness!

However, though it is possible at times for me to do some work and I do have numerous, useful skills unfortunately I am unable to guarantee virtually from hour to hour whether I will be able to perform tasks or not - driving to the supermarket doing my grocery shopping and returning home taking no more than say an hour or so, regularly leaves me unable to do much (even personal care) for at least the rest of the day. I have tried many times over the years to find something I can do regularly but to no avail and each time it has taken months to get my health back up to a reasonable though reduced level again, employers aren't interested on this basis. Sadly renting out a room is not possible.

In recent times ebay has proved to be helpful in bringing in some extra pennies, but even with this I have to sell a few things, take a few weeks break away and then do a few more. This is something though and I have more to get rid of and bit by bit I now 'work' at this. Without the car though not even the level I am selling at now would be possible.

Gosh, this makes me sound like a right miserable whining so-and-so believe me I am not - I am very aware how lucky I am in many ways.

I am presently looking at whether I can cut my day to day costs back again further. I do know though that anything I can save here will be limited and a drop in the pond to stem the creeping debt. In a sense, this is why I am wondering if it is possible/a good idea to use a little of the equity in my house to reduce this though I am loathe to owe more. I have considered moving and trying to find something which I can buy outright but nothing comparable to my present home has presented itself so far ............ oh I am so frustrated I have debt and am wasting money paying interest on it again :mad:

Deleted_User, thank you so much for your comments and advice I appreciate it and your time enormously and will update this when I have contacted London & Country as you suggested.

[Deleted User]

Your main concern is to keep the roof over your head and not take on more debt. The equity you have in the house could be used to pay off your existing other debt BUT - you then effectively transfer those debts onto the house as well - and you are signing an agreement that means that if you default then they can take away your home.

You best course of action at the moment would be to look at the mortgage first. If you have 44 years on it and you are 50 now - it won't be paid off till you are 94!!

However - in looking at alternative mortgages (with or without the help of a broker such as L&C) obviously reducing the term will increase your monthly payments.

This is likely to be problematic for you if you are already struggling with other debt.

You MUST look at the bigger picture. WHERE is all you money currently going? WHY is other debt (not the mortgage) creeping up on you? Can you cut up ALL your cards and still pay the essential bills?

Your priorities should be - your mortgage, your council tax, any inland revenue, customs or other tax arrears or child support (you can go to jail for all these but not the mortgage), then your next priorities are any secured loans and your utility bills.

Can you spread the utility bills with monthly direct debit payments? Often the company will give you cheaper energy in return for this. Have you checked on https://www.uswitch.com to see if you can get your utilities cheaper?

Way down the list and coming in last on the list of priorites should be any unsecured loans and credit cards.

It sounds like your mortgage is very small so IF you can get an UNSECURED loan for the amount required to pay off your mortgage - AND it is from one of the main high street lenders at a competitive rate, then you should.

The advantage to this is that your home is then your own -even if you default on the loan it is unlikely your home will be affected (although the contents can still be at risk of seizure from bailiffs but that's another matter).

Bear in mind that your loan repayments are likely to be higher than what you are paying for your mortgage becuase the term will undoubtedly be for less than 44 years.

For the time being I would forget the car. (I assume you don't have one at present). Concentrate on sorting out the existing matters first - then when you have got things sorted you can look at what you have left to buy and run a car with.

If you MUST have transport for medical appointments and things - use whatever is on offer from your local NHS. There are usually volunteer drivers who can take you for appointments.

Consider joining whichever charity or society caters for your particuara illness. They often have volunteer drivers as well.

And if you old enough - don't forget Age Concern! They have a whole host of advice and help on offer for persons of a more senior disposition!

By the way - these days many supermarkets deliver shopping so as you have access to the internet you could consider doing your shoppijng that way.

Other parts on on this site have discount codes for online shopping which can help cut costs too.

lotstolearn

Thank you, you have given me a lot to work on, a structure within which to work and information I needed to know this helps a great deal. I have only recently discovered this site so am still exploring it but already I have saved money on phone call costs. Most immediate research next are buildings and contents insurance which are due next month then utility bills whilst I am looking more deeply into the mortgage and debt problem - I certainly won't be rushing in to anything on that score.

As it happens I do have a car, I inherited it when Mum died several years ago. This certainly hasn't helped financially, but has helped a great deal in other ways.

I'll let you know what happens and if needs be, and if I may, ask your opinion if I become confused with what might be on offer?