To remortgage to pay off debt?

[Helpwithfinances]

I have around 7k in credit card debt after a couple of big house purchases (roof repairs / boiler not silly things).

I earn £2,500 per month and have monthly mortgage £700, plus £200 gas and heating, £200 council tax, £300 car payments. With cost of living, credit card payments etc I’m in the red every month and barely making the minimum payments.

£450 overdraft for eg.

has anyone remortgaged to consolidate debt?

Oh I’m a single parent with two teenagers.

Haven't done it, but in your position would consider it. It may be cheaper though to get an unsecured loan after the costs of remortgaging are factored in.

We did a loan to consolidate debt, it helped us to have a set figure to pay each month (over a long term). If you would consider that it might be worth looking on money saving expert. I would expect remortgaging is probably an expensive solution at todays interest rates although I'm not sure if loans are worse too (we did ours a couple of years ago)

It would depend on the interest rate being charged on the credit card debt Vs the interest rate on the mortgage. Might be worth considering but could you swap to a lower interest/no interest credit card ?

Remortgaging would probably be the most expensive way to do this - the arrangement fees alone will likely be almost as much as the interest on an equivalent unsecured loan.

However, on the flip side, it'll probably result in the lowest monthly payments.

While your priority is getting your monthly outgoings down, it might be worth calculating the total cost of each option available (remortgage, unsecured loan, guarantor loan, balance transfer card) and trying to strike a balance between comfortable monthly outgoings, total repaid and time to repay.

I would look to move to interest free CC first. Remortgaging will attract fees and be over a lot longer so you'll end up paying quite a bit more.

OP can you get a 0% credit card or a loan to do this? I have done both in the past. 0% credit card in particular is a good option - if you're organised and definitely pay the minimum payment every month (otherwise it'll no longer be 0% interest) I've used it for larger purchases eg a car and that way have financed my car with 0% interest ie divided the sum by whoever many months the interest was for free, calculated how much I need to pay every month, set up a direct debit and that was it.

I’d go for moving to an interest free card first. There are some you can get that are interest free for about two years and you could probably switch again after that. As PP says, you set up a direct debit and decide what you can afford each month.

Converting unsecured debt to a secured debt should be thought about VERY carefully. It means that people pay more over the entire term of the mortgage, decrease their equity and because the debt feels like it has "disappeared" - people spend more, and invariably end up with more debt.

Move the amount to a 0% CC.
Develop a very fine tuned budget, divided into separate spending pots (numerous online bank accounts that offer this facility like starling, monzo etc)
Pay off the debt monthly on the 0%

That's what I'd do.

Is the 300pcm for the car just the fuel/insurance/mot etc? Or is it like PCP/loan?

I am not sure that turning a non-secured debt (such as a credit card, where the creditors can take limited forms of action against you) into a secured debt (where your house is at risk if you don't keep up with payments) is such a good idea. It might be good to look into the option of a bank loan, at a good low (and importantly set) interest rate, with which you could pay the (presumably increasing with interest) credit card debt off. Edit - or, as others have said, a 0 (or very low percent) rate credit card and do a balance transfer.

Interest free cards are often mentioned on here but no-one actually links to one that it free. They are typically not interest free but you might get between 4-7% over 16-24 months at the moment. You either pay the interest upfront (so you debt increase short term) or have a monthly interest rate- which is best depends on how quickly you can pay it off.

Here is a list of the longest 0% cards. www.moneysavingexpert.com/credit-cards/best-0-credit-cards/

If you're eligible, you will absolutely get 0%. However, if your credit rating is lower, you might get a shorter 0% period, or have the credit denied.

You will categorically NOT get 7% or 8% or whatever. The 0% is not a representative APR, it is an introductory offer.

None of those are cards to do balance transfers too
They are all for a new spend ie purchases- so not relevant to the OP

Most existing cards allow you to do a balance transfer or a money transfer- so you will get between about 3.5 to 7% on those if your credit is ok.

Just do a balance transfer? NatWest do a card that is 0 for 23 months

I think it is more typically about 14 months- and is fee free
Natwest are quite strict on credit ratings and the amount they lend though

Yes I always had a very good credit rating but been paying this debt, or trying to for 8 months. Not sure how badly I would be affected?

I really rate the money saving expert credit club, it can suggest cards or loans you'll likely be accepted for based on your credit rating. 0% cards is cheapest way but you will have to remember to balance transfer again when 0% period ends otherwise it won't be cheaper!
I did the 0% credit card thing for a while but we then decided to just clear it all with a loan for simplicity and try not to get into the same debt again (so far so good 2 years later)
www.moneysavingexpert.com/creditclub/

Does credit card debt affect credit rating? (probably a stupid question)

Move onto 0% credit card. Then dispose of cards. Mortgages have so many fees etc I would be careful.

Yes - positively up to a point (depending on the credit agency, it's 25-50% of your limit), and then increasingly negatively after that. Paying off more than your minimum every month is positive, but minimum payment or missing a payment is negative.

It's more complex than that in reality, but it's a reasonable simplification.

List of 0% Balance Transfer cards.
https://www.moneysavingexpert.com/credit-cards/balance-transfer-credit-cards/#longest
Yes, there is a fee but if you get more than two years for a 3% fee, that is cheaper than most other forms of borrowing.

OP look into the 0% balance transfer (I’ve transferred medical cost balances before) as it’s usually a cheap way of financing (years back I used a 0% transfer card to buy a car almost interest free).

BUT bear in mind minimum payments aren’t always less that what you might be paying now.

Definitely look at the 0% cards. I'm very similar to you, single parent, two kids. I have used them for years. I have one "normal" credit card that I use when my salary simply won't stretch to a needed purchase (and even on occasion, a wanted purchase like a holiday for us all) and then transfer it to a 0%. When the term ends I swap to another one. I pay what I need to each month but don't really see me clearing it until the kids are grown. My credit rating is excellent. I have the "back up" of reasonable equity in my house and knowing that in about 5 years, if I needed too, I could sell and downsize slightly or move out of town and clear it all. I'm very into "long term" planning financially.

I would look for a 0% card that will allow you to pay off your overdraft by transfer as that's one of the most expensive ways of borrowing. Then get your bank to put a nil overdraft limit on your current account.
Can you give us a full breakdown of expenses? We may be able to see where you can make savings.

Other than than that you need a 3 pronged attack. Maximise income, reduce outgoings, address debt.