Remortgage to pay off debt? Concerned about Affordability...
Discussion
A year ago, I purchased my house for £215,000. It was your typical deceased estate requiring full renovation. With the addition of two extensions, one loft (already completed) and kitchen (next spring) the house will easily be worth over £300,000 and possibly as much as £330,000.
Since last year, two other houses, semis like mine that aren't to the same standard as mine will be have sold for over £300,000. It's not a big road either so it's not as if they're the good end and I'm the crap end. Other than the event of political chaos or other factors beyond my control, there's no reason why my house won't be worth just as much, if not more.
With all that out of the way, I'm worried about remortgaging next summer (work will be completed by then) because we (myself and wife) have accumulated a lot of debt in doing this work.
Personal loan for me - £10,000 will be outstanding by the time we remortgage, £350 per month repayment until sometime 2023
Personal loan for wife - She doesn't actually have this yet, but she will be taking out around £8000 to pay for the kitchen next year. This will pay for the kitchen and appliances. I already have many of the materials for the build and being a bricklayer, as well as my dad, labour is free.
Two credit cards in my name with large outstanding balances, both still on 0% deals by the time we remortgage but £10,000 on one, £4,000 on another.
Our mortgage will be around £198,000 outstanding when we come to remortgage next year. We're hoping to increase our mortgage to around £215-£220k and pay off any personal loan than my wife has at that time, then the credit cards.
What I'm worried about is that a lender, or rather a computer, will look at this debt and decide that lending even more is not a good idea as we're outside the affordability, without taking into consideration that the additional borrowing will go straight to paying off the debt that facilitated this huge increase in equity in the first place.
So my question is whether or not anyone has any experience in this kind of situation and if lenders will give you additional borrowing that's outside of affordability, which pays off debt, which puts you straight back into affordability again.
Combined income for myself and wife will be around £50,000 as my income has reduced this past year as I've been doing the work here.
Thanks
Since last year, two other houses, semis like mine that aren't to the same standard as mine will be have sold for over £300,000. It's not a big road either so it's not as if they're the good end and I'm the crap end. Other than the event of political chaos or other factors beyond my control, there's no reason why my house won't be worth just as much, if not more.
With all that out of the way, I'm worried about remortgaging next summer (work will be completed by then) because we (myself and wife) have accumulated a lot of debt in doing this work.
Personal loan for me - £10,000 will be outstanding by the time we remortgage, £350 per month repayment until sometime 2023
Personal loan for wife - She doesn't actually have this yet, but she will be taking out around £8000 to pay for the kitchen next year. This will pay for the kitchen and appliances. I already have many of the materials for the build and being a bricklayer, as well as my dad, labour is free.
Two credit cards in my name with large outstanding balances, both still on 0% deals by the time we remortgage but £10,000 on one, £4,000 on another.
Our mortgage will be around £198,000 outstanding when we come to remortgage next year. We're hoping to increase our mortgage to around £215-£220k and pay off any personal loan than my wife has at that time, then the credit cards.
What I'm worried about is that a lender, or rather a computer, will look at this debt and decide that lending even more is not a good idea as we're outside the affordability, without taking into consideration that the additional borrowing will go straight to paying off the debt that facilitated this huge increase in equity in the first place.
So my question is whether or not anyone has any experience in this kind of situation and if lenders will give you additional borrowing that's outside of affordability, which pays off debt, which puts you straight back into affordability again.
Combined income for myself and wife will be around £50,000 as my income has reduced this past year as I've been doing the work here.
Thanks
This is possible but only with the right lender............the FCA are VERY hot on this type of remortgage currently.........one of the issues that you may have is declining income figures if you are self-employed............on the face of it, income is going down, outgoings going up........not a good combination.......appreciate there is a reason for it, but lenders can't take into account "reasons"....
A lot of lenders will also assume the worst, that you take the extra money and don't pay off the debts so they assess your affordability based on the new higher mortgage PLUS the debts remaining also......which further stresses the figures.......
Pick your lender carefully!
A lot of lenders will also assume the worst, that you take the extra money and don't pay off the debts so they assess your affordability based on the new higher mortgage PLUS the debts remaining also......which further stresses the figures.......
Pick your lender carefully!
My opinion for what it's worth...
Don't assume that a better standard of finish will give you an extra 5% or so in terms of house valuation. Mortgage lender may not even send somekne to value the house..
If you ate in so much debt and worried about remortgae then postpone kitchen refurbishment and use that money to either bring ur debt down or to stop more debts building....
Don't assume that a better standard of finish will give you an extra 5% or so in terms of house valuation. Mortgage lender may not even send somekne to value the house..
If you ate in so much debt and worried about remortgae then postpone kitchen refurbishment and use that money to either bring ur debt down or to stop more debts building....
So you're in big debt, your income is going down, your CCs are maxed and you want a bigger mortgage - and you're planning to borrow more to spend 8K on a kitchen when the one you have still works...
Sorry if this stings, but stop borrowing money. All you're doing is keeping yourself poor and the lenders in nice warm offices. Try to live within your means, not in a bubble of debt and worry.
Sorry if this stings, but stop borrowing money. All you're doing is keeping yourself poor and the lenders in nice warm offices. Try to live within your means, not in a bubble of debt and worry.
Sarnie said:
This is possible but only with the right lender............the FCA are VERY hot on this type of remortgage currently.........one of the issues that you may have is declining income figures if you are self-employed............on the face of it, income is going down, outgoings going up........not a good combination.......appreciate there is a reason for it, but lenders can't take into account "reasons"....
A lot of lenders will also assume the worst, that you take the extra money and don't pay off the debts so they assess your affordability based on the new higher mortgage PLUS the debts remaining also......which further stresses the figures.......
Pick your lender carefully!
Thanks. I realise most lenders will look at "worst case scenario" in this kind of situation. Probably naive to think that a lender would give you a larger mortgage, with a contractual obligation to use the extra funds to pay off the loans. Our outgoings would be considerably less at the end of the transaction.A lot of lenders will also assume the worst, that you take the extra money and don't pay off the debts so they assess your affordability based on the new higher mortgage PLUS the debts remaining also......which further stresses the figures.......
Pick your lender carefully!
Worst case scenario, I simply sell the car, few other bits and bobs and I've got enough cash to clear all these debts. That way we could easily remortgage for the amount we want as without any debts at all, we will easily pass the affordability, then I could buy everything back again, so to speak. This is a lot of messing around though and frankly I won't know exactly where we stand until I've spoken to a broker next spring. Maybe we will pass the affordability checks, it will be borderline.
Just planning ahead early.
Simpo Two said:
So you're in big debt, your income is going down, your CCs are maxed and you want a bigger mortgage - and you're planning to borrow more to spend 8K on a kitchen when the one you have still works...
Sorry if this stings, but stop borrowing money. All you're doing is keeping yourself poor and the lenders in nice warm offices. Try to live within your means, not in a bubble of debt and worry.
Your response probably sounded perfectly reasonable, and would probably read reasonably to others who don't know me or my situation as well, but I can assure you, I am well within my means. Any debt I have I'd regard as good debt because the materials the debt has purchased will have given me a six figure equity that I simply didn't have 12 months ago when I was in rented accommodation waiting for a house like this one to come on the market....Sorry if this stings, but stop borrowing money. All you're doing is keeping yourself poor and the lenders in nice warm offices. Try to live within your means, not in a bubble of debt and worry.
The CCs are 0% interest for another 20 months and they've played a vital role in making my house almost the same as the house next door but two that just sold for £110,000 more than I paid for mine. Once the kitchen is done, it will be the same.
As for my reduced earnings, they'll go straight back up again when I'm not spending as much time renovating this house. I'm not worried about that in the slightest.
Worst case scenario, I could sell some assets when the house is done to clear the debt, remortage and then buy those assets back. Or when its done and I'm working full time again, we could have all this debt paid off within 18 months anyway even if we're on the svr for a year. There are lots of options and I'm simply thinking ahead now.
Ultimately, it's all a means to an end. The equity this house will produce will go towards a plot of land that I want within the next 5 years, ideally in the next 3. My dad isn't getting any younger and I'm determined to build a house with his help while he's still around. Once this house is to the standard of everything else on the road, a large deposit is there to facilitate it regardless of whether in the short term we remortgage to £220,000, or leave it at £198,000 and pay off the debt over the following 18 months.
Your fears are just for the reasons sarnie points out. However if you looked at it differently - sold the house when finished then paid the debts then asked for a mortgage against a £330k house with the £100k deposit, and no debts the computer is likely to say yes, would you like more? Crazy but true the affordability checks ask you all about the debts which doesn’t look good at the moment.
Edited by BoRED S2upid on Thursday 17th October 10:51
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