Extra Borrowing

[Henrietta75]

I have accumulated quite a bit of debt - small personal loan, credit cards, furniture on monthly repayments almost £30k. I am ashamed its got out of hand and getting some financial advice on saving and cutting back. I can afford the monthly repayments but leaves me with little left over. I am thinking of getting some extra borrowing on my mortgage to clear some of it, would they look unfavourbly on my application if I said the purpose was to clear some debt or better to say Home improvements and then use it to clear it?

Hi, MSE have lots advice other debt free wannabe forum.
the main advice is never borrow against your home as this risks losing your home in case it all goes wrong. So what you are suggesting is not a good financial decision and is not recommended at all.

They will recommend you do a proper budget called a statement of affairs, and you have to stop the overspending first, and then tackle the debt.
you have to only spend what you actually have and only on essential needs. You have to stop spending on wants

You can snowball your debt and pay off the highest interest one first, or the smallest one first, but do one or the other.

Good luck, getting out of debt is tough, and telling people is the hardest step, so yo7 have made a good start today

You would need to say you intended to consolidate and pay off the debt because the debt is going to need to be declared in affordability calculations and will show up upon credit check: if you’re already struggling with repayments then it’s very unlikely they’d allow you to borrow yet more money which you’re telling them is in addition to the £30k you already owe.

If you’re finding repayments then it’s an option to explore. I’d suggest taking advice from an organisation like Step Change first. You’ll need to consider whether you’ll end up repaying far more in interest over the course of the term if you add to your mortgage.

A lot depends on you existing LTV and mortgage affordability. How much equity do you have?

current LTV is 59% - mort is 269k and value of house is 459k

Bear in mind that while the mortgage rate might look lower, the debt could get very expensive if it runs for a long time.

You shouldn't do anything like this without a complete mindset change regarding budgeting, prioritisation and financial discipline. Plus you need to be sure you can afford a bigger mortgage and all your other expenses, including things like car replacement.

Otherwise you risk running up more debt alongside your new bigger mortgage.

The other question would be how much you earn and whether you earn enough to qualify for a £300k mortgage.

Then there's rising interest rates to consider. What rate are you currently paying, if you are on a deal, when does it end, and what rate will any extra borrowing/a remortgage be at?

Rates for new lending are higher than they've been for over 15 years. If you've got into debt at a time of historically low interest rates, you could really struggle as rates rise, and other essential costs like food and utilities have risen.

Or has your income dropped since you last took out a mortgage or expenses risen beyond increases in food/utility costs - eg childcare? Do you have any dependents?

Lots to consider before you take such a potentially big step, but it's likely not to be the answer anyway. But you shouldn't even think about it without a really thorough review of your income, outgoings, and a look to see what spending you can reduce/cut out completely. Start by having a look at:

https://www.moneysavingexpert.com/family/money-help/