It’s unfortunate but true, that many people, to a greater or lesser extent, are in debt at some point throughout their lives. Sometimes due to your own personal situation, debt can spiral out of control. When you reach this point in life, it can feel like there’s no hope, especially once you have paid all your bills at the start of the month, because this can leave you with little or no disposable income left.
When this happens, we find that most applicants choose to go down the route of a debt consolidation remortgage. As an experienced and knowledgeable Mortgage Broker in Sheffield, we have opted to explore this case study on debt consolidation.
Amber had been dealt a rough hand of cards, going through a divorce and her children moving out to start their own journey in life. Over time, her debt built up with legal bills from the divorce and over the years they slowly increased. She was now having to live on one income with unreliable maintenance from her ex-partner. Her daughter then became pregnant quite early on into adulthood, and as any loving parent would, she tried to help her daughter out with her finances, even though she couldn’t really afford it herself.
Luckily by this point, Amber had paid her mortgage off, so she had the potential to borrow against her home as a asset. Her take-home pay was £1100 per month, and her credit commitments were taking up the majority of this amount.
She had not missed any of her monthly payments on her credit commitments, but she had no emergency fund. Amber’s credit score wasn’t too bad, but because of her past, she was no longer able to obtain new zero% credit cards to transfer her balances. She was recommended to me to see if there were any options available to improve the quality of her financial and in turn, personal life.
When I met Amber, she was feeling pretty low. She had cut back on all of her luxury spending, and it was evident that she was desperate to take ownership of her financial situation before it got completely out of hand.
We explored the possibility of a personal loan, but the debts had gotten too high for that. Amber had no family members with a means or willingness to help and downsizing was not an option she could take. We agreed the right way forward would be to remortgage the house, to try pay off these debts and reduce her regular outgoings.
We managed to find a lender that could meet Amber’s requirements. Given her low income, finding a lender who would let her borrow enough was quite a difficult task. We managed to get her an agreement in principle, but regrettably, when we submitted the formal mortgage application, she found herself being declined.
The reason the case was declined was that the Underwriter who assessed the situation felt that Amber had been using cards to pay off other cards, followed by not closing down the cards. When she had transferred balances, there was a high risk that she should re-offend and rack up debts once again.
Amber was, to put it bluntly, utterly devastated. She understood the concerns, but in her eyes, she had accepted she had a problem. By getting in touch with us, Amber felt she had taken a positive step to sorting her financial life out, making her a minimal risk. The loan to value was under 40%, she had never missed any payments, and if the remortgage was successful, she could be a whopping £500pm better off.
Whilst the above was indeed correct, a lot of clients don’t always appreciate that taking a property into possession is the last thing a lender wants or needs to do. This process reflects poorly on the numbers they are required to report each year, and even more to that point, in the event of repossession, they have the stress of securing the property, insuring it, marketing it, selling it, and paying the surplus of equity (if any) back to the previous owner.
With this in mind, if there is reasonable doubt, then an Underwriter has the discretion to decline an application, even if the case technically is within their published lending criteria.
We pride ourselves on getting our recommendation right the first time, though we have to hold our hands up on this one and say that it didn’t quite work out the way we would’ve liked, due to the Underwriter’s adverse comments at the full application stage. We knew with our knowledge and experience as a mortgage broker in Sheffield, that this remortgage wasn’t as risky as the lender had made out. It was almost certainly going to be the right outcome for her.
Amber perhaps felt like she was ready to call it quits. Still, we went back to the drawing board to find a different lender who would accept her. Sure enough, we found a suitable candidate. Now armed with the information we had from the previous lender, we were able to provide better supporting comments this time around. Thankfully this time, it was successful.
Amber didn’t take this for granted and understood the potential downsides. She has now secured debt that was previously unsecured, but overall may end up paying back more interest, depending on how quickly she can get the mortgage paid off.
The good news, is that in the short term this has worked wonders for her. She now has had the burden of debt relieved from her shoulders, an improved credit score, and she can save a little money for herself each month.
The savings we were able to help her make amounted to over 50% of her net take-home pay monthly. Upon completion of the remortgage, her life was changed. Amber destroyed all of her credit cards besides one to use in emergencies only. Now she has now got her financial life back on the right path.
If you are like Amber, struggling with accumulated debt, but are a homeowner with equity, please do get in touch. We’ll put you through to a mortgage advisor in Sheffield and see what we can do to help. We would rather that you contact us before the situation gets out of hand, as the earlier you take back control of your finances the better you will feel about things. We offer debt consolidation remortgage advice in Sheffield & surrounding areas along with a free initial mortgage consultation.