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Original poster

Debt consolidation and remortgaging

33 replies

jalop · 17/09/2023 13:03

Hi
Advice please.
Our current mortgage deal ends in 6 months (5 year fixed on our first home).
Our house value has increased by around £50-60k
We are looking on borrowing more on the house to pay off some debts I.e loans, car finance (both have good credit, no missed payments/arrears on anything) to free up our outgoings as things are getting a little tight with cost of living increases.

We also would like to do an orangery at the back to add dining space but our priority at the moment is reducing the outgoings.

I'm looking for people's experiences/views on this. I'm speaking to a mortgage advisor in a few weeks so just preparing really. Has anyone remortgaged and borrowed extra to create some breathing space? Any advice?

OP posts:

Spacecowboys · 18/09/2023 22:16

I personally wouldn’t increase my mortgage amount to pay off loans or any other short term debt. Can you not consolidate the two loans into one and reduce the monthly payments that way?

BlueRabbitYellow · 18/09/2023 22:17

@jalop I reduced the amount of interest I was paying out each month by two-thirds. Yes, it has been a relief. I realise that by taking a longer loan it may cost more over the long term, but over paying on the additional mortgage will help this. There's a useful tool on Money Saving Expert called a mortgage overpayment calculator which is good for planning. Now I can put a small amount away in savings each month to pay for unexpected bills. I was even able to take the DC for a short break to the seaside this summer paid for with savings. Life is for living a little too.

However this thread is helping me understand how easily all the hard work can unravel and I'll keep coming back to it to keep me straight.

bouncydog · 19/09/2023 07:28

Do you live to a strict budget and regularly review everything to see if you are getting the best deals? Before you think of consolidation I would suggest that you do this. You mention you use a credit card for groceries - do you get cash back/points/vouchers depending on your spending. If not then suggest you look at changing card providers. Every penny should be accounted for. You may find that by reviewing all of your outgoings on a regular basis you can make changes so that you don’t have to think about consolidation, which is a bad idea. You need to build up an emergency fund and the only way to do that is either upping your income or cutting expenditure. Take a look at moneysavingexpert.com for pointers.

Gh12345 · 20/09/2023 16:33

Hmm I would probably agree it’s not a good idea as the collateral would be your home. Can you not just hammer away at your debts and maybe revisit your house plans when the debts have been reduced?

I’d probably take out more on the mortgage just for house plans and not to pay debt.

curious to know what you decide though either way :)

Outnumbered99 · 20/09/2023 17:37

People do do it OP, be honest with your broker. It will be more expensive in the long run, but if it leaves you with a monthly budget you can manage (and ideally make overpayments too) its not the worst thing in the world. your broker will do budget planner with you, you could prepare for this in advance too by doing one yourself.
Its all so dependant on circumstances too- going from 40% LTV to 50% LTV is a different enterprise to going to 95% for example. Going to 95% in this scenario would be much more worrying.

If you do do it, hold off the plans for extending, overpay as much as you can, see where you are in 2/3/5 years. Build up a buffer of savings too- go careful.

GogoGobo · 29/09/2023 07:17

Actually, borrow long and borrow low is my mantra. But I wouldn’t borrow to reschedule debt - only to acquire an asset or add clear value to an asset. So I would probably borrow if rates were low enough for the orangery, but I would out a short sharp plan in place to clear the consumer debt and would not do this.
Realising you’ve built up consumer debt and it’s then a bit of barrier to doing other, more meaningful things, is frustrating, but it’s a sign to get rid of it. Good luck with whatever you decide to do.

Hitchens · 29/09/2023 14:58

jalop · 17/09/2023 21:16

@Hiddenmnetter thank you

I get what most are saying (although most have made assumptions). We don't have particular spending habits. We don't have credit card debts. We both have 2 each and I use mine for food shopping and pay it every month just to keep it 'active'. Our other debts (2 loans) are due to external circumstances that were out of our control. The first one our dog had to have £7000 surgery on his leg that his insurance miraculously wormed their way out of paying. And the second one was due to my husbands accountant basically effing him over. It's funny how people are quick to judge though when they see we have loans and tell us to 'park the luxuries aside until we can afford them' when they don't know anything about our lifestyle whatsoever and have clearly misunderstood the question. We don't have a flash car. We don't buy expensive clothes/shoes/furniture so I don't know how much I'm supposed to put aside right now. Anyway, rant over. I guess I'll just speak with the mortgage advisor and see what's to offer

you seem a bit defensive about the situation and I think only want to listen to people that validate and support your plan.

Converting unsecured debt into secured debt on your home isn't advised and I'd go as far to say it is a very silly thing to do from a financial perspective.

What the the interest % on the unsecured debts and what term are they to be paid over for them to be cleared?

What is the likely interest rate you could secure at the moment if you did borrow more on your mortgage (I'd guess somewhere between 5 and 6%). How much would that additional borrowing cost you over the remaining term of your mortgage? Money Saving Expert has some good calculators to help worth this out.

At the end of the day you are likely to end up paying back a LOT more if you borrow more on your mortgage AND you are putting the security of your home at risk should you find that you can't pay your mortgage in the future for some reason.

LegendsBeyond · 29/09/2023 15:10

It’s a really bad idea. It’s not worth the risk of losing your home.

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