Unfortunately, lots of people at some point in their lives will accrue some debt. Whether this is a lot or a little, it’s sometimes unavoidable due to the situations people find themselves in, often spiralling out of control and into even further trouble. When this becomes a factor in your life and you’ve had to set up your repayment plans with whoever you owe money, you can be left feeling pretty low and like there is very little disposable income left each month for you to spend on yourself.
Some applicants decide to take the route of a Debt Consolidation Remortgage in Lincoln, which we will jump more in-depth with in this mortgage case study.
Julia was a divorcee, living on her own after her children had moved away. Her debt had been building up due to legal bills from the divorce and over the years this just kept going up, having to live on one income with unreliable maintenance from her ex-partner. Soon after her daughter became pregnant and due to her being young, Julia decided that she would do all she could to support them financially, even though she herself was not exactly well-off due to the debt.
With a lot of luck on her side, Julia was able to pay her mortgage off before things got out of hand, so that asset was there to potentially borrow against. Her take-home pay was £1100 per month, and her credit commitments were taking up the majority of this amount.
Though she had not missed any payments on credit commitments, Julia had no emergency fund to rely on. Whilst her credit score wasn’t too bad, she was no longer able to obtain new 0% credit cards to transfer from her existing balances.
She was recommended to me to see if there was anything that could be done to improve her financial life, which in turn would hopefully create a more positive mental state for her with no more debts to worry about.
When we met, Julia was feeling stressed and depressed. She had cut back on any additional spending she was doing to treat herself, and it was evident that she was desperate to take ownership of her financial situation before it got beyond the point of no return.
We did take a look at the possibility of Julia taking out a personal loan, but the debts had gotten too high for that. With no family members who were able to help her out, downsizing was not a viable option. We came to the agreement that the right way forward would be to remortgage the house to pay off the debts and reduce her outgoings.
We managed to find a Lender to meet Julia requirements and take her case. Admittedly though, due her low income, it was hard to find a lender who would lend her as much as she needed. We managed to get her an Agreement in Principle turned around in a respectable amount of time, but unfortunately her formal mortgage application was declined.
The reason this happened is because the Underwriter who assessed the situation felt that because Julia had been paying off her cards with new cards but leaving the old accounts still open. When she had transferred balances, there was a high risk that she could rack up the debts again and end up in the same position.
Julia was understandably gutted by this.Though she understood why this had happened, she also felt that she had accepted she had a problem, and that getting in touch with us was one step closer to fixing the situation. Julia felt that their risk was minimal – the loan to value was under 40%, she had never missed any payments, and if the remortgage was successful, she could be a massive £500 better off per month.
Whilst that is correct in theory, clients don’t always appreciate the perspective the Lender is taking. They really don’t want to take a property into possession if they can help it. as it reflects poorly on the numbers they are required to report each year. In the event of repossession, they then have to go through the long and difficult process of securing the property, insuring it, marketing it, selling it, and paying the surplus of equity (if any) back to the previous owner, in this case Julia.
With this in mind, if there is any reasonable doubt at all, an Underwriter has the discretion to decline an application, even if it is within their own published lending criteria.
We always take great pride in getting our recommendation right the first time, but this one sadly didn’t work out that way due to the Underwriter’s adverse comments at the full application stage. However, we knew this remortgage wasn’t as risky as the Lender had made out, and proceeded with hunting for a deal that she would get accepted on.
Julia seemed deflated and almost defeated, but we went back to the drawing board to find a different Lender. We were incredibly fortunate enough to find one for her and armed with the information we had from the previous Lender, we were able to provide better supporting comments. We’re glad to say this resulted in a successful outcome for Julia!
This wasn’t a step that Julia took lightly. She has now secured debt that was previously unsecured, though she may end up paying back more interest overall, depending on how quickly she can pay off her mortgage.
However, on a short term basis, this has worked out very well for her. She now has had the burden of debt relieved from her shoulders, her credit score has improved, and she can save a little more each month than she previously could.
The savings we were able to help her make amounted to over 50% of her net take-home pay monthly and it has changed her life hopefully for the better. Upon completion of the Remortgage, Julia cut up all her credit cards except for one she could use in the event of a financial emergency. Finally, her financial and everyday life is back on track.
If you are like Julia struggling with major or minor debt but are a Homeowner with equity, please get in touch to discuss your options, ideally before the situation gets out of control. The earlier you take back control of your finances the better you will feel and the quicker your life can get back to normal. We offer Debt Consolidation Remortgage Advice in Lincoln & surrounding areas.
Many people like the idea of creating a property portfolio to fund their retirement.
Not everybody is a fan of pension plans, but they do understand the property, I know that over the past 20 or 30 years it has been a sound long term investment despite the peaks and troughs.
In this case study, we look at one way we helped a client take her first step on the road to being a Landlord.
Robin is a self-employed mum of two, who is a Director of two small businesses in Lincoln. She and her partner had a substantial amount of equity in their home and were interested in raising some capital to buy a low value buy to let property, possibly at auction.
Robin felt she could get some bargains at auctions, but she never had enough money to attend and be a cash buyer.
She had looked into Remortgaging her house in Lincoln for this purpose before but had been told it wasn’t possible unless they could provide an address for the onward property they wanted to purchase – the proverbial “chicken and egg” scenario.
Robin also mentioned that once or twice a year, she received a dividend in the region of £3000 from one of the companies she was a sleeping partner in, and she has been prone to wasting some of that cash when it arrived, perhaps unexpectedly.
I could tell that Robin was a very busy person but also an astute businesswoman. The dividends she received could be put to better use as she never had it earmarked for anything specific.
I recommended an offset Remortgage in Lincoln for Robin and her partner secured on their home.
I found a Lender who was happy to release funds on completion to be assigned to a future buy to let purchase without insisting on a specific property.
Robin simply deposited the additional funds into the offset savings account that comes as part of the mortgage, and these monies simply sit there until she needs them.
The offset savings accounts do not attract interest but instead is offset against the mortgage balance.
To clarify, Robin had £85,000 surplus funds from a total remortgage of £215,000. While the money is in the savings account, Robin only pays mortgage interest on the £130,000 difference between the two figures.
The £85,000 is on instant access and was available whenever she needed it
Three months after completion, Robin identified a suitable property that was in a state of disrepair. It was probably not mortgageable itself, but of course, Robin had access to liquid funds to buy the house outright.
Robin secured the property at a knock-down price of £55,000, but this amount needed to rise to a total of £70,000 to fund legal costs and a refurbishment program of works.
A further nine months went by, and with the works all done, Robin had no trouble finding a tenant. The house was now worth £90,000, and we raised a remortgage of £67,500 against it to fund the purchase of property number two.
Robin has no intention of becoming a full-time Landlord, but she can now see a way forward to owning three or maybe even four properties in the future to fund her planned retirement lifestyle.
She loves the flexibility that her offset mortgage brings, and while she still ‘squander’ some of her dividend, which is her right to do. Without fail, half of it at least is deposited back into her offset savings account, her money working “for her” to reduce the total amount of interest repayable.
If you are interested in offset mortgages or building your investment property portfolio, please get in touch, and our Mortgage Advisors in Lincoln will be happy to assist you.