Your home may be repossessed if you do not keep up repayments on your mortgage.

Let’s start with the most important thing to mention first of all:

CONSOLIDATING YOUR SHORT-TERM DEBTS IN TO A LONG TERM DEBT LIKE A MORTGAGE WILL MEAN YOU END UP PAYING MORE OVERALL.

That being said, there are some advantages that may mean you still want to move ahead with consolidation.

  • Potentially lower monthly payments overall.
  • All your payments are in one place, reducing the risk of missing a payment.
  • It may improve your credit score.

Many lenders will allow debt consolidation with some allowing it up to 90% of the value of your home. Finding the best lender though can be a struggle due to the way they look at the debts at application. For example, regardless of whether you are clearing the debts some lenders will factor the payments in at application and may not lend you as much as you would think. Others will look at your credit score as it is at application and may not be happy to lend due to the amount of debt you have. It can be a mine field.

Let’s look at a working example of how debt consolidation can help a client.

A family have the following debts:

  • A mortgage of £120,000 on their property worth £200,000. Monthly payments £665.
  • A Personal Loan with £10,000 outstanding, used to buy a family car. Monthly payment is £370 per month.
  • A credit card debt of £6,000 built up from a holiday and some large purchases.
  • A family loan they are paying back to their parents per month at £250 per month. Outstanding balance £12,000.

This meant their total monthly commitments for their debts came to £1,285 and they were struggling to make anymore than the minimum payment on the credit card debt.

Although rolling the debt into the mortgage would mean more interest overall, we helped with arrange the following solution.

New Mortgage: £148,000 (The current mortgage balance + all debts)

Interest Rate: 1.29% (Lower than their current interest rate)

Monthly payment: £936.76

Not only did they reduce their monthly outgoings by £348.24 per month but they also cleared their credit card debt fully AND paid back their family 4 years earlier than planned.

I’m tied to my existing mortgage product with an Early Repayment Charge, can I still remortgage?

The simple answer is yes. If you are struggling with your debts and want to remortgage you don’t have to wait until your current mortgage product ends.

The first thing we’d advise is contacting your existing lender, or us, to see if you are able to arrange Further Borrowing. This is sometimes called a Further Advance and simply put means taking out another mortgage alongside your existing mortgage. Borrowing extra this way would mean avoiding paying the ‘Early Repayment Charge’ that is often attached to your mortgage.

If you are unable to borrow this extra and you are worried you will start missing payments you have two options.

  • You can contact each of your providers for your debts to see if you can arrange lower payments. Be careful to ask whether renegotiating your payments will impact your credit score.
  • You can remortgage early and look to consolidate your debts. This would not only mean turning the short term debts in to a longer term debt but would also mean you’d incur the Early Repayment Charge for leaving your existing mortgage lender early.

If you were to go with Option 2 and remortgage many lenders will allow you to raise a little bit extra so that you roll in the Early Repayment Charge to your new mortgage so you don’t necessarily need to find the money for this.

Falling behind on your payments can have a really big impact on your credit and finances for a long time so if you are worried about this happening please contact your existing providers or the Money Advice Service (https://www.moneyadviceservice.org.uk/en) sooner rather than later to find your options.

If you want to know if you can remortgage to help, contact us.

Next Steps

Consolidation is something that should be carefully considered before moving forward but it is hard consider without knowing all the facts first.

We are happy to talk through all the options with you, find the right lender and demonstrate how much you’ll save per month but also how much extra this will cost you in the long run for stretching the debts out.

If you are thinking about consolidating your debts and looking for a mortgage broker in Manchester, then do give us a call on 0117 332 5197. Our initial conversations usually last around 15 minutes.

Alternatively, you can email enquiry@lloydwellsmortgages.co.uk and let us know how we can help you.

We will discuss:

  • How much you can borrow
  • What that will cost
  • What fees can you expect
  • How Lloyd Wells Mortgages work
  • What insurances you will need
  • What documentation you will need to provide
  • Next steps

Your home may be repossessed if you do not keep up repayments on your mortgage.