How is this for a plan? Remortgage & NR q...

jane.canterbury

My sister has come out of a 2 yr fixed with NR and obviously her rate has shot up. She can't get a better rate as she doesn't earn enough for lenders that use multipliers and due to a large credit card debt (15k) she is over committed for those that work off of affordability. The only glimmer of hope is that she does have 80%LTV and an absolutely spotless credit history (lots of it but never missed a payment on anything, been a mortgage holder for 12 years)

So the family plan at the moment is to stick with the NR variable for now (as little choice) but another family member is going to take out a personal loan to clear Sis's CC debts (and sis will then pay family member the loans repayments each month.

It will be tight but she can just about do it. Now the above doesn't actually make her much better off at the moment but the thinking is that if she gives it a few months / a year or so when (hopefully) there is a wider choice of products out there, and obviously on paper she won't have the CC commitments anymore she can either consolidate, or at the very least get a better rate on her mortgage again.

Any thoughts / tips appreciated

Thanks

luckyfool

1. The family member is obviously taking a risk here, and also restricting their borrowing/mortgaging capacity in the future

2. I'd be concerned that this doesn't put her in a stronger position. Unless she has managed to juggle these all on low rate or zero percent deals then the likely interest rates on the cards should be higher, and the monthly payments should also be higher than they would be on an equivalent personal loan.

The strategy should work ok though subject to the above. I assume the mortgage and her income are relatively small/low? Otherwise she should be able to consolidate the credit card debt within the mortgage under 90%, which would obviously involve a lower rate of interest than a personal loan, and would avoid the need for a family member to get involved.

jane.canterbury

Thank you luckyfool

Sorry, I wasn't very clear. It does make her a little better off a month, about 100quid. The personal loan is unsecured and will be run over 5 years with the aim of paying off the debt as quickly as possible, hence it not making an enormous difference to current monthly outgoings. Although she's thinking consolidation may be an option in the future I think she's realised that some severe belt tightening may be the best bet and get the damn things cleared. Would having 80% LTV rather than 90% be likely to give her a much better mortgage rate? I was sort of thinking that if she could get a better rate on the mortgage it would free up enough cash to clear the 15k debt quicker.

Does any of that make sense?

Her current m/g is 115k. She's basically gone and got herself in a right pickle :rolleyes: with the CCs

And if she doesn't pay the loan, mum will kill her end of problem.

luckyfool

Makes sense then.

A 90% mortgage would not be enough to clear the credit cards anyway. Generally speaking an 80% remortgage will get you a better rate than one at 90%.

jane.canterbury

Thanks again

We've all been going over and over it trying to work out what to do to help and this is the best we could come up with between us. Hopefully she's learnt her lesson with the CCs anyway

Family eh? can live with em, can't shoot 'em, as they say.

homer_j_3

what is her income?

jane.canterbury

Her basics only 20k. She get bonus + overtime which bumps it up to about 26k and her pay slips / bank statements obviously show all that but it seems lenders are more picky than they used to be about such things.

Unfortunately she has spent her entire adult life living beyond her means but always making good money on property and being able to refinance. As she has never missed a payment on anything this is the first time she has not had people falling over themselves to lend her money and like so many others is now stuck. It had to happen I guess but hopefully we can help her weather this particular storm and she'll be more careful from now on.

Thanks

chappers

homer_j wrote: »

what is her income?

Indeed alittle bit more information such as income , mortgage amount , house value and maybe one of the brokers will be able to tell if she can re-mortgage and maybe consolidate.
She could always overpay if she wants to pay the extra she has borrowed off quicker.

homer_j_3

does she get any tax credits?

jane.canterbury

Thanks again

we're on IFA no3 at the last count. Oh and she has a 10k car loan, did I not mention that :rolleyes: runs for another 3 years but is on a good rate (5.9) so is staying.

Tax credits no. Could she? I thought they were only for families?

homer_j_3

tax credits are normally for families yes but people often forget about them so I just asked in case.

It seems to me that you are on the right direction due to the amount of credit she has. It would have been a real stretch on that income but with the car loan, its not likely at all.