Remortgaging/debt

[vicki2010]

So just want some advice from you money savvy mumsnetters!

Long story short.

We have a mortgage of 146k live in London so pretty low, house valued at £450 this month ( only been here two years so house has doubled in value)

We have debts of around £15k on 0% cards/cataloguesfor now...

My question is, we would like to borrow against the house to extend the property next year, perhaps take out £60k ish. Would you recommend borrowing £75k now and pay off debts and leave money for extension in the bank till we are ready or should we keep putting all our excess money into paying the debts before remortgaging?

Trouble is now, I'm loosing sleep with the debt taking up nearly all our spare cash a month and would feel so much happier knowing they've been paid and we could then actually over pay the mortgage quicker as we could have borrowed the money a year earlier if that makes sense? Sorry for the ramble but it's driving me mad and a bank won't give me such advise!
It's making me feel so anxious as I'm worrying of we apply now they'll think we have problems as we did borrow £15k last year to pay off a really stupid car loan we had

Thanks for any relies!

Sorry for spelling and typos!

If the current debt is at 0% then you would be mad to swap it for debt with interest.
Hammer through as much of it as you can while the rate is 0%
the second
the card / loan rates kick in, borrow the building work money and round up to include all the sundry debt
as secured rates are cheaper than unsecured.

THen, get the work done. Do not skimp. Do it right.
Once its done, hammer down on the mortgage debt.

Do not lose sleep or feel anxious. Do the maths (my spreadsheet thread might help) and have all your ducks lined up.

Agree with PP that it's a bad idea to swap 0% for paying interest!
Have you actually worked out what that means you'll pay back?
Assuming a 23 year mortgage (fairly standard 25 year term less the 2 years you have been there) at 2% that would be £18729 repaid. You want to chuck away nearly £4K?

Also, it's usually considered a bad idea to swap unsecured debt for secured debt. If you have an accident and lose your job tomorrow... you'll do a DMP and your creditors can get the bare minimum whilst you prioritise the affordable mortgage to keep a roof over your head. But if you've lumped it all into a mortgage and now have a higher payment you can't meet, you might lose your house.

Money advice sites also often advise against consolidating debt like this. Not because it won't be cheap potentially (after 0% ends) but because sometimes there is problem spending that hasn't been addressed. You need to look at how you have got into a position where you have £15K debt and not enough money to pay against it each month to stop your anxiety. It's a common pattern that people extend their mortgage, carry on using those cards now they have no debt and... 2 years later you're now £30 in debt, cards run up again and higher mortgage too. Might not apply to your situation but it's worth considering.

Finally... If you're in debt now, why £60K of building work? Do you really need that? Why not hammer your debt with all spare money, then save when it's paid off - then do the building work?

Are you falling into a bit of a trap of feeling rich because suddenly you have loads of equity which just fell into your lap through luck? I'm not going to be doom and gloom and predict a crash - not in London, and not dramatic. But it's useful to be aware that it might make you feel richer than you are - this safety net against which you can borrow more. Well, fine... but borrow more from the house when you need to, not simply want to. Good news if an extension will add value - though will it add what it costs? But don't go full pelt spending £60K when you've got £15K debt.

No way would I be switching that £15K to the mortgage!

Thank you so much both for replying.

You are absolutely right, I would be foolish to swap 0% debt to add to the mortgage which obviously would cost more in the long run.

Also, valid points about addressing the issue of why we are in debt and to perhaps push all our spare money into the cards so we feel what it's like to pay back our earnings onto our foolish decisions and getting into debt in the first place and we need to learn from them.
I just can't help but feel that I would be happier having it all in one place ie the mortgage but on paper I know it makes sense not to add it.

I appreciate your input, I am never taking for granted that we have been 'lucky' in how much the property value has risen and guess I have been burying my head knowing it's our security having the property that has probably deep down made me foolish with money knowing its there as a back up.

Do you know if the bank would be less likely to lend us the money with this debt?

Most banks will have a restriction on the loan to value for debt consolidation. Also even though you are intending to pay it off some banks will still look at your monthly repayments for affordability. Tbh if I was your mortgage advisor I'd be telling you to repay unsecured debt before taking out a larger mortgage.

Yes having debt will reduce the amount they will lend you.

You need to look very hard at your financial circumstances - can you actually afford to increase your mortgage if you can't afford the minimum repayments at 0%?

Start budgeting and cutting back now so you can reduce those debts asap.

Random mess
We are paying so many different cards that we are paying around £500 a month in repayments, it's just all feels so messy....I know it's stupid to have got into this situation but anyone in debt will understand how easily it can happen.

We do need to the building works as we bought the property based on the fact we could extend as we have two growing teens and would work out loads cheaper to stay here then to move.

We can easily afford the repayments I had meant to say,if one of us lost our jobs we would still get by

Pay the credit cards off first even if they are 0% and then go for your remortgage.

Bear in mind the equity in your property doesn't mean anything unless you want to sell. It's only on paper your better off. Bang all your £££ to the cards. If your house isn't leaking from the roof wait till you can afford to update it.

Thanks for all the replies, appreciate the input.

Just to add, just because house prices have gone up does not mean your mortgage provider will go with your say so. Some will use a system for valuing hour house when further lending, some will not revalue your house after what is considered a shirt period of time, unless you have had significant alterations carried out. It is worth checking this as if it is the latter you will have to change lender to get it valued.
As pp have said, your debt will reduce hiwuch you can borrow. It doesn't matter how much equity you have. Even if you are telling them you are consolidating those debts, they will still take the payments into consideration when looking at your monthly expenditure.

Thanks delilah....we have done work to the property and had it valued in the last two months so we know how much it's worth. The mortgage guy at the estate agents said the bank will take their valuation into account if we wish to pass it on.

Have decided to push any extra cash into the debts, stopped spending what I don't have! Have started saying no to my children unless I can afford it and really have decided enough is enough and time to sort my finances out before we move forward.

Thanks again for your replies, it helps to say things out loud and gets other people's views as its something people don't generally discuss everyday!