Moving credit card debt onto mortgage

[lisbapalea]

Hello - I am trying to do an audit of our family's finances and wondered if anyone can help.

Embarrassingly, we seem to have turned into a credit crunch stereotype amd have racked up a rather monster credit card debt which we're paying about £500 a month to pay off - a massive sum which I would prefer to be going into savings every month. The debt is spread across two cards, one of which is 0% and the other is about to switch over to 0% to less then pain a bit.

But I am now wondering if it would be wiser, and whether we're likely to be allowed, to add the debt onto our mortgage? Currently our mortgage is about 61% of the value of our house - would this allow us enough leeway to add an extra chunk of debt on, taking it up to about 66% loan to value?

Just wondered if anyone could help with this?

Needless to say, we are cutting up all credit cards and living on gruel /humble pie as we try to dig ourselves out of this hole...

Ok. You are very hard on yourself...

On the face of it there is no reason you can have additional borrowing against your house. Proved that your income is still in line and the % debt is not two great. However if you can pay off the card whilst the 0% is in place or you are going to credit hop when it end it would be better. You say you want to save but at the moment the interest you would be paying on additional borrowing would be fare great than you would receive on your savings.

Know for the boring bit!!! (yes it does get more boring). Write ALL your out going down be realistic about things like food shopping etc your bank and credit card statement could tell you the truth in this area.

Hope this helps

It is possible to take out additional credit by remortgaging your home. Lenders don't ask what the extra money is for typically, just that you can afford the repayments, your credit score is good and the LTV ratio is acceptable.

And that's the crucial bit, of couse, that you can keep up the repayments. If you can't, you'll lose your home. If you are paying off your 0% cards it may be better taking the short-term pain for long term gain than lumping it on the mortgage and risking not being able to keep up with the payments there.

I personally wouldn't do that. I don't know what interest you're paying on your mortgage but I bet it's more than 0%. If you add cc debt to your mortgage you'll pay more interest on it over a longer period. Keep hopping to 0% deals and be disciplined about moving cards when the 0% period ends. Much much much better way of doing it.

plus you are securing more debt on your home - a 0% debt which is unsecured is considered much 'safer' isn't it?

it might be worth calculating how much in total you will end up paying if the debt is added to the mortgage - it is a lower interest rate than a personal loan, but if your mortgage is over 10/15 years - thats still a lot of interest you will accumulate and have to pay on the debt. The longer you can keep reducing the debt using the 0% interest cards the better - as long as you can afford the monthly repayments though.

Also the £500 a month you would prefer to be going into savings - the interest rate of any saving account will be lower than your mortgage interest rate (long term at least), so overall you would save money by reducing the debt first and then looking to save.

www.moneysavingexpert.com is a great site for advice on money saving and reducing debts, with really helpful forums on just about every aspect of money, which might also be of use to you. (I had large debts in the past and this site really helped me turn around my finances & pay everything off).

Thanks everyone for this advice.

I think I just hate knowing that we have this monster debt, even if we are paying it off. I hate that we are basically looking at 3yrs of paying this debt off and in that 3 years I would like to have another child, which means losing some income when I am on maternity leave, which will make it harder / impossible to make the same sized payments.

To me, adding it onto the mortgage makes it feel like it's taken away from our day to day money management, and the fact that it'd be spread over c.20yrs would mean that the monthly repayment would be much smaller (even though interest would be greater than 0%). We would be able to afford the increased monthly payments that the increase in mortgage would result in.

But that said, all of your points about the 'safety' of the unsecured debt vs. the risk of adding it to a secured debt are really valid. As well as the ones about the 0% vs. the mortgage interest rate (part of our mortgage is on a brilliant tracker, which isn't far off 0%, but the other part is on a higher rate - still low, but higher than 0%!).

I am very anal over our finances and have a spreadsheet which tracks all of our expenditure from our current account, and I check it religiously. Just a shame I didn't check the credit card balances quite so religiously....! Lesson learned.

how did you run up the cc debt? was it just general overspending or did you buy a large item.

if it was just general overspending you may find that you run another credit card debt up again and have the extra borrowing on the mortgage. this is a common theme for people who consolidate. i have done it myself a couple of times!! the posters on moneysavingexpert forums always advise against consolidating for this reason - you haven't sorted out the root of your problems and will overspend again.

if you just bought a car/kitchen etc then the bad habit isn't there and consolidating might make things easier for you. you are going to pay a fortune in interest though over the term of you mortgage.

mortgage companies look at affordability now to determine how much you can borrow. having a large credit card debt will affect your affordability and they might not lend you as much as you need.

i would put it on 0% and suffer for a couple of years to get it paid off - once it's gone it's gone! and you will have learned some new life skills and hopefully not get in debt again.

Thanks, I think we will go down the 0% CC route and just deal with it! It will be a good way to incentivise us not to fall in that trap again.

The debt was racked up by a combination of overspending and using personal credit cards to cover work expenses over a long period without claiming back regularly. When work expenses were eventually paid back into the current account they were more likely to have been used to pay for big ticket items such as car repairs, new furniture, improvements needed to the new house etc, rather than being used to pay off the debt, so the credit cards were effectively forgotton about.

On the plus side, I've just realised our kitchen payments (bought on 0% about 4years ago) end in September, so the money that has been used to pay that off, can now go onto debt repayment, which will hopefully help to shift it a bit faster.

I'm also going to have a good look at our other 'essential' expenditure, as I am sure we can shave off some money from that - starting with downgrading groceries etc.

I really appreciate the replies, thank you everyone!

sounds like you have a good plan to get it paid off. much better than sticking it on the mortgage and running it all up again.

have a look on moneysavingexpert forums. they have loads of good challenges and ideas to get the debts paid off.