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Original poster

DEBT CONSOLIDATION

22 replies

stillnotgettingit · 08/05/2017 12:06

I know most people will say it's a bad idea and whilst I agree it's not the best it's what we're trying to do.

So my question is we want to borrow a loan against our mortgage to pay off other debts so if we admit it's for debt consolidation will it be a straight no so will we be better off saying it's for something else such a home improvements, new car etc.

OP posts:
Ferrisday · 08/05/2017 12:26

Not necessarily
Your payments for the debt will be take into consideration for affordability.
If there's plenty of equity in your house it should be ok I think

Badders123 · 08/05/2017 12:33

So you want to remortgage?
If you go on the moneysavingexpert website they give good advice

Original poster
stillnotgettingit · 08/05/2017 14:47

Thanks ferris so what you're saying is that I would probably need to tell them it's for debt consolidation so that they will know we will have that money as well to pay the loan??

OP posts:
Empireoftheclouds · 08/05/2017 14:49

Please don't turn an unsecured debt into a secured debt - it makes NO sense

Original poster
stillnotgettingit · 08/05/2017 14:49

Not sure if it's classed as a remortgage badders because we don't want the loan to run the full term of our mortgage only for 5 years so it's sort of a loan against the house but usually cheaper interest rate.

OP posts:
Badders123 · 08/05/2017 14:51

Secured debt?
I wouldn't

Original poster
stillnotgettingit · 08/05/2017 14:51

I know what you're say empire but this will make the amount we have to pay out each month a hell of a lot less so we can't see any other way.

OP posts:
Original poster
stillnotgettingit · 08/05/2017 14:57

Whilst I appreciate that a secured loan on my house isn't good due to them being able to repossess if we don't pay but if we couldn't pay the other debts we have, i.e. loans and credit cards wouldn't that eventually force us to either sell the house to repay or go bankrupt and lose the house anyway?

OP posts:
Ferrisday · 08/05/2017 19:52

Yes.
If they look at your outgoings they will take into consideration those debt payments which reduces your available funds for repayment of new loan.
I don't think it's a bad idea to consolidate your debt and put in on your mortgage, I did it once to consolidate debts(2nd mortgage) and again when we overspent on loft conversion(increased mortgage)

TalkinPeece · 08/05/2017 21:37

PLEASE do not do it.
THere are ways to clear your debts without bankruptcy.
Securing it onto your house will end up costing you MUCH more over the long term

ImYourMama · 08/05/2017 21:42

Tell them it's for debt consolidation, your affordability will be far better for it.

secured debt is a risk but you need to ensure once these debts are consolidated you won't run up more in the future and need to do it again

Make sure you're not planning to move in the next couple of years as this will be almost impossible

Original poster
stillnotgettingit · 09/05/2017 07:37

To be honest without declaring the debt consolidation we probably won't get the loan due to lack of affordability, whereas we have a lot of equity in the house.

OP posts:
Empireoftheclouds · 09/05/2017 08:09

Reality is you probably need to speak to a debt specialist, taking on more in your position doesn't seem like the answer. There are ways of reducing your payments without securing another loan on your house. Add to that the rate is likely to be very high given you have lots of existing debt.

Ferrisday · 09/05/2017 10:34

What rate would be high? The interest rate for mortgage?

Empireoftheclouds · 09/05/2017 10:54

Loan/ remortgage/equity release. Whatever avenue is likely to cost because the OP has a lot of debts already. Higher risk, higher interest

delilahbucket · 09/05/2017 13:06

Even if you say it is for debt consolidation your current debt payments will be taken into consideration for affordability. This is because the lender has no control over you paying off those debts.
Also, most lenders will only allow up to maximum loan to value for debt consolidation. This is usually no more than 75%.

Ferrisday · 09/05/2017 13:07

Well no, you'd get a low mortgage rate rather than the 15% or more you'd be paying on credit cards.

Ferrisday · 09/05/2017 13:08

The mortgage is at a set rate, it's not higher rate depending on what you're using it for

Empireoftheclouds · 09/05/2017 13:39

I think there is some misunderstanding. People who want to remortgage DO pay higher rates if they have a lot of debt and are doing it to consolidate. I understand the rate overall will be less than the individual rates right now; but that is securing the debt against the house. Much easier to speak to a debt charity.

Empireoftheclouds · 09/05/2017 13:40

And by higher rates I meant higher mortgage rates compared with the rate they are paying now. Because a new lender or even the same lender will assess the risk from scratch

Ferrisday · 09/05/2017 17:13

That didn't happen in my case, just a regular mortgage

Empireoftheclouds · 09/05/2017 17:27

You did well then.

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