Debt Consolidation

Posted on 14 October 2011 by Richard


We have a property worth £260000 with an outstanding mortgage of £25,000. We also have a second property worth £200000 with an outstanding mortgage of £48,000.  I want to capital raise against the first property to pay off debts, to do this I need to raise a further £85,000.  The intention is to sell the second property in the near future to pay off all the mortgages. There are no arrears on the properties or debts.

Richard

Have you asked your existing lender if they will let you borrow more?  As the total loan is still quite low against the value of the property you may find that they are willing to lend you the money with minimal checks or fees.

If you lender is not happy to help or they don't have an attractive selection of products to choose from you can consider remortgaging the property to someone else.  They would lend you the money required to repay the existing mortgage plus the additional funds required to  pay off your other debts.  A few lenders will not let you borrow more for debt consolidation but I do not think this will restrict your choice and you should be able to find a good combination of rate,fees and early repayment charges (ERC).  I mention ERCs because of your stated intention to repay the loans in the foreseeable future and you do not want to find yourself locked into a mortgage deal with a large penalty to get out.

Of course you may have ERCs on your existing mortgage deal and it may not be worth remortgaging, in this instance it might be possible to raise a second loan secured on your property.  Whilst this would probably be more expensive than a standard mortgage it could still drastically reduce you monthly outgoings and still allow you to repay all your debts as planned.

I believe we can help you and that you would benefit from speaking to one of our independent mortgage advisers.  Please call 0344 346 3672 and tell the consultant the date and title of your question, they will then be able to advise you on your situation.

Peter

Answers provided in response to Ask the experts are based on the information provided and do not constitute advice under the Financial Services & Markets Act. They reflect the personal views of the authors and do not necessarily represent the views, positions, strategies or opinions of John Charcol. All comments are made in good faith, and John Charcol will not accept liability for them.

We recommend you seek professional advice with regard to any of these topics where appropriate.

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