Can I consolidate my debts with a mortgage?
Wednesday, 22 October 2008 04:27
A reader from Gravesend wants to know if he can buy a property and use some of the cash to cover his debts.
Tony Davis, myfinances.co.uk mortgage expert from Mortgage Meadow, takes her through the problem and what it means to her finances.
Stephen from Gravesend asks:
I am looking at a property for £80,000 and unfortunately have £15,000 of debt. £12,000 left on a Lloyds TSB loan and £3,000 on Lloyds TSB Credit Card.
Currently I pay £270 a month on the loan, £300 on the credit card which totals £570.
When I've looked at the mortgage on £80,000, my monthly payment would roughly be £550-600. So I'm wondering if it's possible for me to borrow £95,000 for the flat and to clear my debts which would leave me with roughly the same monthly outgoing as now but with a flat as well.
My monthly net income is £1,830. I can also come up with about £1,500 as a gift from my parents if I was to buy a place....... which should cover my costs?
Please could you let me know if this kind of scenario is possible and if so who should I approach?
Many thanks Steve
Tony replies:
There are very few lenders granting mortgages above 95% in the current climate and the days of 100% plus mortgages are a distant memory.
To buy a property on the open market for £80,000 you will need at least a 5% deposit and around £2,500 to cover your legal fees, lenders fees and valuation costs.
You could look at a shared ownership scheme (New Build Home Buy, My Choice Home Buy), where you buy only an element of your property and a housing association owns the remaining share on which you pay rent.
The overall monthly costs are lower than a comparative open market purchase, but equally you do not own the house outright. For more information on these schemes visit our website.
You should really be thinking hard about whether now is the right time to buy bearing in mind your current commitments, you might be wiser to focus your efforts on repaying your existing loans and building up a deposit, as you could be over committing yourself by taking a mortgage on top of your current debts.
If you have a question for Tony, go to the myfinances.co.uk Ask the Mortgage Expert section. ">
Or for more information or mortgage advice go to Mortgage Meadow.
Mortgage Meadow is an independent mortgage broker and is authorised and regulated by the Financial Services Authority
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