Remortgage to pay debt off help

[Mortgagehelp2020]

I want to remortgage and take 30k out the house giving it a 79% LTV to pay my debt off. I’m on a annual income of 40k with bonuses of circa 4K annually and sharpies due to kick in next year which will give me around about her 1k cash lump sum.

This would make me debt free with one commitment outside house bills of £250 a month. Mortgage amount is around 145k and giving me a monthly payment of 625.

What I need help is on having to get the mortgage agreed with the debt in my name on the basis I am paying it off with the remortgage. Anyone know how this will be viewed or any advice? Mortgage is currently with HSBC.

Thanks for any advice or help in advance

Oh gosh shares not sharpies!

Hi
Its generally seen as a bad idea to move unsecured debt to secured debt.
You generally can't lose your home if you can't pay unsecured debt.
Neither will you be debt free and nor is the debt paid off.
Your mortgage will be larger.

I was advised not to do this because I would end up paying more in the long run if the debt was being repaid over a long period of time. The interest rate on my loan was quite low.

I mean debt free outside the mortgage of course. It makes sense in terms of me actually repaying the debt instead of it sat there and just covering interest payments.

Also given the equity it would mean my outgoings reduce significantly.

So from what you’re saying it’s viewed negatively?

I get it will take longer to pay off but at least I would have an end date. And can use the extra momentous income to overpay on the mortgage if I wanted, I can pay up to 10% without penalties so it brings the terms down.

Mortgage rates are low at the moment so now would be a good time. Unfortunately they will not take your bonus into account at the moment (we are remortgaging and I'm on furlough so they will only take 80% of my wage into account). It may mean longer to pay off but you'll be paying off less in the long run as I don't know any credit cards/loans that are on as low a rate as a mortgage. A loan could be the next option if you decide you don't want to secure it against your home.

Thanks. Luckily not affected by furlough but that’s interesting to know. Ok thanks regarding bonus, I using save it and it goes on a holiday. I’m just concerned how they will review to accept me when the unsecured debt is sat there but that’s the whole reason for the application.

No problem. I hope you get it sorted. They will be used to people consolidating debts and know it is a cheaper way for people to do it shouldn't be a bad thing and they won't take into account the monthly payments you have to make on the debt as they know it will be cleared.

That’s what I’m hoping to be honest. It’s just so daunting but that’s because I feel terrible about the debt. Good luck with your remortgage

People are advising against this because, while the mortgage interest rate is much lower, it's not necessarily cheaper to pay off a debt at 2% for 25 years than it is at 20% for a few years.

Also, experience shows that a very large percentage of people who do this don't address the issue that got them into debt in the first place, they run the credit cards up again, while having a bigger mortgage.

If you're in a position where you can only pay the minimum and it's barely covering the interest, have a look at MSE debt help and do everything that's relevant.

www.moneysavingexpert.com/loans/debt-help-plan/

Do you know why you're in debt? Have you stopped spending on the cards? Have you done a budget? If not, why not, how do you know you can afford a bigger mortgage? If yes, does your budget suggest that you should have spare money and if yes, do you? If you're overspending, can you cut back? Have you tried transferring the credit cards to low interest offers? Have you tried a a lower rate personal loan?

If your job is secure, you can commit to not use credit cards again (except perhaps to pay off in full every month), you can overpay the mortgage to pay it off quicker and your budget shows you can afford a bigger mortgage, it might be a good idea. But you'd have to be more discipline than most to see the plan through.

@BarbaraofSeville hi thanks for the advice. Yes I’ve done all that and transferred where can. I’ll actually be a lot better off monthly in disposable income and can afford to pay the 10% overpayments on the mortgage to bring the term further down. This just seems to be the only way to get rid of it and it’s historical and just sat there. With the mortgage I would be paying it back, over a longer term but without whacking it onto a loan which I can’t do I’m not paying it back quickly with a plan as it stands.

Why do you want to do this?

Is it because you can't afford the current repayments?

Sorry to add. If you do this and you can then overpay on the mortgage then I'd say it's a good idea. But you need to examine your outgoings, if the debt has crept up because you are living above your means, you'll end up in the same position in a few years time, but with a bigger mortgage.

I’m not really hitting the debt just the interest, this way I would pay it back. It saves more than the mortgage would cost going out so I would look to pay the extra off too therefore bringing the term further down. Also if I’m looking at a 3-5 year interest deal and 22 year mortgage to start off with so after the initial interest period would be able to review and see what savings I had. Don’t get me wrong I can see it still for the long term but it’s a wash to free up cash flow, actually repay the debt then use what’s left to save and overpay. Even if it wasn’t the 10% but say 150 a month it just makes more sense to me. I just don’t now how a bank will review? It looks crap I have that debt!!

Very true about the debt creeping up but in this case I don’t use the cards to live by just my salary. The debts to big for an unsecured loans for all of it. This way it wipes that off and yes I end up with a bigger more that’s but the payments are 130 more a month versus the debt which is 800, then a loan is due to be cleared which is another 220 a month. So cash flow would be freed up a lot!

I cannot see another route but open to any advice. It makes sense to me this way but I would need to convince a bank and I have reviews the budget planner etc and the facts which make sense to me but I’m not the one lending clearly

What's the interest rate on your debt?

Standard interest rates in the main. Have a small bit on balance for life 7% ish

The Debt after Wannabe talk forum on Money Saving Expert has lots of advisors and brokers who can help. The general advice is not to make unsecured debt, secured as pp have pointed out. Also you need to address the issues of why you ran up the debt.

Sorry, typo - should read Debt Free Wannabe forum

The major issue you are going to find is getting the affordability approved. The mortgage company cannot control where you spend the money you are borrowing, and so they will still take into account your monthly debt repayments when working out if you can afford the mortgage. Also, you usually need a very low loan to value, and some lenders don't offer debt consolidation at all.
You could try speaking to a broker.

Do you know exactly where the debt came from op and why it won’t happen again?

It’s a really bad idea to convert unsecured debt into secured debt. If you get into difficulties paying the secured debt you could lose your home. Currently if you get into difficulties you just trash your credit history.

HSBC are notoriously conservative I can’t see them going for it.

What about a balance transfer? Could you throw your bonus at the debt for a few years instead of spending it on a holiday?