At some point in their lives, many people will encounter some form of debt, whether that be a large amount or a small amount. Sometimes due to personal circumstances, this can spiral way out of control. When this happens, it can feel that once you have paid all your bills at the start of the month, you have very little disposable income left for yourself, if any at all.
A possible solution for customers, a way out if you will, is a debt consolidation Remortgage in Manchester, as we explore here in this case study.
Claire was a divorcee living on her own after her children had moved out to start their own lives. Post-divorce, her debt had started to accumulate with legal bills and increased gradually over the years, having to live on one income with unreliable maintenance from her ex. One day her daughter discovered she was pregnant, but as she was still young she too was struggling a little. As any loving parent would, Claire tried her best to financially support her daughter, despite not really affording to do so.
Luckily Claire had paid her mortgage off a number of years ago so that asset was there to potentially borrow against. Her take-home pay was £1100 per month, and her credit commitments were taking up a vast majority of this amount.
She had not missed any payments on credit commitments, but she also had no emergency fund saved. Whilst Claire’s credit score wasn’t too bad, 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 out there to improve the quality of her financial life.
When I met Claire, she was feeling quite down, like she was at a real low point. She had cut back on all luxury spending, and it was evident that she was desperate to take ownership of her financial situation before it got too out of control and she ended up in a much worse position.
We took a look at the possibility of a personal loan, but the debts had mounted too high for that. Claire had no family members who were able to help and realistically, downsizing was not an option. After much discussion, we agreed the right way forward would be to remortgage the house to pay off the debts and reduce her monthly outgoings.
We managed to find a Mortgage Lender to meet Claire’s requirements, though due to her low income, finding a lender who would lend enough was a rather difficult task. We managed to get her an Agreement in Principle, but regrettably, when we submitted the formal mortgage application, the Lender declined it.
The reason the case was declined, was that the Underwriter who assessed the situation felt that because Claire had been using cards to pay off other cards and then not closing down her old card accounts. When she had transferred balances, there was a high risk that she could re-offend and rack up debts once again.
Claire was noticeably devastated. She understood the concerns, but in her eyes, she had accepted she had a problem, and by engaging us had taken a positive step to getting her life back on track. She felt 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 £500pm better off, which is a significant difference.
Whilst the above may very well be correct, customers may not always appreciate that the possibility of taking a property into possession is the last thing a Lender wants or needs to do. It reflects poorly on the numbers they are required to report each year. In the unfortunate event of repossession, they have the considerable hassle of securing the property, ensuring it, marketing it, selling it, and paying the surplus of equity (if any) back to the previous owner, which in this case would be Claire.
As such, if there is reasonable doubt, then an Underwriter has the discretion to decline an application, even if it is within their own published lending criteria.
Our dedicated and experienced Mortgage Advisors in Manchester pride ourselves on getting our recommendation right the first time, but this one 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 it ought to be the appropriate outcome for her.
Claire perhaps felt like she wanted to give up, but we went back to the drawing board to find a different Lender that would accept her. Sure enough, we found one. Armed with the information we had from the previous Lender, we were able to provide better supporting comments for this hopeful second chance. Luckily this time, it was successful!
Claire didn’t just throw herself into this. She has now secured debt that was previously unsecured and may end up paying back more interest overall, depending on how quickly she can get the mortgage paid off over the course of her term.
However, in the short term, this has worked a treat for her. She now has had the burden of debt relieved from her shoulders, her credit score has improved, and she can save some more money each month.
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. Upon completion of the remortgage, Claire cut up all her credit cards except one to use in emergencies only, and she has now got her financial life back on track.
If you are like Claire struggling with debt but are a Homeowner with equity please contact us to discuss your options, ideally before the situation gets out of hand. The earlier you take back control of your finances the better you will feel about things. Our Mortgage Broker in Manchester can offer debt consolidation Remortgage Advice in Manchester & surrounding areas.