AIBU to not want to risk the house??

[Welshrarebitz]

Hello all.

dh and I were self employed up until 2022. Our business was already struggling pre-covid, however lockdown was the final nail in the coffin. We ended up losing our business and racking up serious debts, on top of some debt that we already had for renovations.

fast forward to now… we are both working full time bringing home a combined monthly income of about 7.2k. We still have 100k of secured debts which is obviously a huge concern. I have done all that I can to get the debts in as low interest as possible. We have a relatively low mortgage on our house which is width around 300k.

dh wants us to either remortgage, or sell the house,clear the debts and start again. I am dead against this. For me, our house is our security, I am very against securing unsecured debt against our home, or using equity etc.

currently our fixed monthly costs for absolutely everything are £4100. This also includes the mortgage and contractual debt payments. This means that we have about 3k that we can use to overpay the debts. I’ve worked out a plan where we can be completely clear of the unsecured debt in 4 years, without remortgaging or selling up. We would also be able to have a sensible amount of monthly Money for a bit of ‘life stuff’- I see no value in something overly punitive.

would you do it my way, or dh’s?

I’d not remortgage as it’s going to cost thousands more 🤷‍♀️

Your plan sounds good and worth a try. Why is your DH so against it?

I would do it your way, I don't understand why on earth he would consider re-mortgaging when you have 3k spare a month to throw at the debt.
If you just want the debts paid so it's off your mind quickly then by all means re-mortgage and then overpay the mortgage each month if your mortgage would allow you to do that.

I wouldn't remortgage as it will cost a fortune, and I wouldn't sell if I could avoid it as it'll take you forever to rebuild your credit rating and get back on the ladder - certainly more than 4 years if your plan is sensible.

If it was me I'd get advice from a debt charity like Step Change to get some impartial advice on the least risky way to clear the debts.

Mmmm, would need to do the math on the interest rates. Re mortgaging could work.

£100000 over 25 years at 5.5% is £614 a month works out at £184000

£3k x 36 month is £108k

both work but one is costing £80k more

How old are you? What is your state of health? By “starting again” does your DH mean paying off all debt and investing in a new business together?

Every overpayment is also going to generate a saving on interest not paid.

Your DH needs to set out the financials to make any assessment.

selling the house means paying an estate agent and then stamp duty on buying. That’s a lot to lose.

No way would I remortgage to pay off unsecured debts. I'd follow your plan.

Moving is so incredibly expensive. Estate agents, stamp duty, solicitors, removal firm, you can waste thousands you could be paying off the loan instead.

There is a third option that you should consider - a second mortgage.

If you have equity in your house, you can borrow against that on a second mortgage. The second mortgage does not have to be with the same lender as your first, and you can borrow over a short period. In your case, 100k over 4 years may be reasonable.

Typically, second mortgages are higher interest than first mortgages, but lower interest than unsecured borrowing. I don't know what the current interest rates are, but 100k at 6% would be £2350/month over 4 years or at 7% £1980/month over 5 years.

Do some homework - For an introduction see:
https://www.moneysupermarket.com/mortgages/second-charge/

Your way