The reality is that there are lots of people in life, who will at some point or another, find themselves in some level of debt. Sometimes, due to factors out of your control, this may spiral and leave you struggling.
In situations like this, people may feel like there’s no disposable income left after all your bills have gone out. If you’re a homeowner, one potential route you could take is a debt consolidation remortgage in Hull, which is something we explore throughout this case study.
Lacie was a divorcee living by herself; her children having moved out and onwards. Her debt had started to accumulate with legal bills post-divorce and gradually increased over the years, having to live on one income with unreliable maintenance from her now ex-partner.
As time passed, her daughter became pregnant, and as any mum would, she tried to help her daughter out financially, although arguably, she wasn’t viably able to afford doing so.
Luckily Lacie had paid her mortgage off in the past, so there existed an asset of which she could potentially borrow against. Her take-home pay was £1100 per month, and her credit commitments were taking up more than half of this amount.
She had not missed any payments on credit commitments, but she had no emergency fund to draw from. Whilst Lacie’s credit score wasn’t too bad, she was no longer able to obtain new 0% credit cards to transfer her balances.
Someone had recommended that she speak to me, to see if there were any available routes for her to take, in order to improve her financial quality of life.
When I met, Lacie was feeling quite down on her luck. She had cut back on all luxury spending, and it was evident that she was desperate to finally take control of her financial situation before it got any worse.
We explored the possibility of a personal loan, but the debts had mounted too high for that. Lacie had no family members who were able to help; downsizing was not an option, and we agreed the most suitable path to take would be to remortgage the house to pay off the debts and reduce her outgoings.
We managed to find a lender to meet Lacie’s requirements. Although because she had a lower income, it was quite difficult to find a lender who was willing to lend her enough. We managed to get her an Agreement in Principle, but regrettably, her formal mortgage application was declined.
Lacie had been using cards to pay off other cards and not then closing down the cards. The reason the case was declined was that the underwriter who assessed the situation felt that when she had transferred balances, there was a high risk that she may re-offend and get back into major debt.
Lacie was understandably disheartened. She understood the concerns, but from her perspective, she had accepted she had a problem, and by engaging us had taken a positive step to remedy her position.
Their risk was minimal in her eyes, the loan to value was under 40%, she had never missed any payments, and if the remortgage was successful, she could be an impressive £500pm better off.
All the above was indeed correct, but unfortunately customers don’t always take into account the mortgage lenders perspective. The last thing a mortgage lender wants or needs is to repossess the property. It reflects poorly on the numbers they are required to report each year.
In the event of repossession, they have the unenviable task of securing the property, ensuring it, marketing it, selling it, and paying the surplus of equity (if any) back to the previous owner of the property.
Depending on the circumstances pertaining to the property and it’s value at that point, it’s even possible that the mortgage lender could find themselves out of pocket at that point.
As such, if there is any reasonable doubt at all, an underwriter has full discretion to decline an application, even if it is within their published lending criteria.
We pride ourselves on getting our recommendation right the first time, but unfortunately this one didn’t work out that way, due to the underwriter’s choice to decline our customer at the full application stage.
Though this was a hurdle in our way, we knew this remortgage wasn’t as risky as the mortgage lender had made out, and it ought to be the right outcome for her. Lacie perhaps felt like she wanted to give up, but we went right back to work and looked to find a different mortgage lender.
Sure enough, we found one! Armed with the information we had from the previous mortgage lender, we were able to provide better supporting comments for the second roll of the dice. Contrary to the previous application and quite fortunately, it was successful!
Lacie didn’t take this step lightly. 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.
That being said, in the short term, this has worked well for her. She now has had the burden of debt relieved from her shoulders, her credit score has improved, and she has the ability to save a little more 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, Lacie cut up all her credit cards except one spare that she could use in emergencies only.
She has now got her financial life back to where it should’ve been, allowing to be happier and more comfortable with her finances.
If you are like Lacie struggling with debt but are a homeowner with equity please call 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.
We offer debt consolidation remortgage advice in Hull & surrounding areas.
Last edited 22/07/2022