In this guide we will explain how credit card debt could affect your chances of remortgaging. It also contains some notes on how you might possibly consolidate credit card debt with a remortgage this year.
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Applying for a remortgage with high credit card debt does make it more difficult. This is why it’s important to use a specialist adviser. They will also be able to help you if the intention is to remortgage your home to help consolidate credit card debts.
They can help with checking to see if the credit card debt will affect your chances whilst providing you steps to improve the application chances.
How to remortgage with credit card debt
Can I remortgage with credit card debt? It is possible to remortgage with credit card debt. If done for debt consolidation it could reduce interest rates that you pay, bringing monthly outgoings down. Applying for a remortgage with high credit card debt is possible with specialist lenders providing criteria is met.
Before you consider remortgaging with credit card debt it’s important that you get the right advice and talk through your financial circumstances with a professional adviser.
What you need to do
To get started with a remortgage application to help with your credit card debts, you need to do a little bit of preparation first. These small steps will help your chances of a successful application enormously. The more detail and accuracy you have, the easier it will be for an adviser to find you the right type of remortgaging deal.
The details you should have on-hand when first speaking with a specialist adviser include:
- How much are you looking to borrow to remortgage to pay debt?
- What is the value of the property?
- How much is currently owed on mortgage?
- Give accurate details of your credit problems including amounts and dates.
- If either applicant is employed what is their basic salary?
- If either applicant is self-employed what was the most recent years net profit?
By providing this level of detail as a minimum, it will let your adviser quickly get an idea on your potential options for credit card debt remortgaging. An adviser can then complete a fact find which is the first step towards a remortgage offer.
You can start to answer these questions with us now on our enquiry page.
How remortgaging with credit card debt works
The consolidation of debt with your mortgage and credit card worries isn’t the best option for everyone. It’s something that needs to be carefully considered, making sure that it’s the best decision for you financially.
However, it is something that is common in the UK, with many people choosing to consolidate debt by paying their credit card debts off by remortgaging.
Consolidating credit card debt by remortgaging will put all of your debts into one simple monthly payment. It’s important to understand that you will still have the debt, it will just be on your mortgage, rather than with a credit card company.
Many high street mortgage lenders decline remortgage applications for credit card debt consolidation. The big-name providers have become increasingly more stringent with their application criteria, so often you will need to remortgage with a specialist lender, providing they believe it’s affordable to you.
This is why many people choose to work with us, as we have a panel of specialist advisers who have experience in this market and access to lenders more inclined to accept applications.
If you have been refused a remortgage with credit card don’t give up just yet. Get in touch with us by answering 5 simple questions as our advisers could be able to help you. They will explore the whole market, and work with you on your application.
How lenders assess credit card debt remortgage applications
As you would assume, lenders look at remortgage applications from people with high credit card debt a bit stricter than normal. Having credit card debt can imply to the lender that you have financial problems… and therefore could present a lending risk.
All potential lenders will want to see that you have a regular monthly income that will cover the remortgage payments. Based on your income and the amount of credit card debt and other commitments, they will then calculate what you can afford.
As well as the amount of credit card debt you have, they will also examine your repayment history. Your ability to pay credit card debt on time is a key aspect that many lenders will look at.
They will also consider your debt to income ratio. This is a simple metric which shows how much you earn compared to how much you owe. Your adviser will help you work on this part of the application, because the lender will want to see as a low a ratio as possible.
A low debt to income ratio shows the debt is in a lower proportion to your earnings, therefore making you a less risky applicant.
Another factor will be how often you have been refused credit in the past. This can be very relevant for people looking to remortgage with credit card debt. Often, they will have applied for new credit cards to consolidate existing debt. If there have been refusals, then this can be a signal to the mortgage lender that you have financial trouble.
However, none of this is cut and dry and each application is reviewed on a case by case basis. This makes it so important to work with an adviser with experience of submitting successful applications to remortgage with high credit card debt.
Their experience will be invaluable to you.
How mortgage lenders assess credit card payments
If you are looking to remortgage for alternative reasons for debt consolidation but have developed credit card debt since you took the original mortgage out, you need to be aware of how lenders will look at this.
As an example, if you owe £10,000 on a credit card and are paying it off at a rate of 3%, the lender will assume you need £300 a month just for that commitment alone. They will then factor this payment into your application towards what you can afford to pay on a remortgage each month.
Conclusion
Credit card debt is extremely common. A UK Finance report published in 2018 shows there were 58.6 million credit cards in circulation at the end of 2017 with almost 2 out of every 3 adults holding at least one card.
With 3.1 billion payments made on credit cards in the UK alone it is easy to understand the wide level of debt outstanding of approximately £70 billion.
According to The Money Charity, the average interest rate charged on credit cards was 20.7% as of February 2020. Additionally, the time it would take to pay off average credit card debt making only the minimum payment per month would be 26 years and 8 months.
Remortgaging with credit card debt is a possible option, and it may well reduce the interest rate you pay and result in a substantial saving in your monthly outgoings, but it is vital that you get the right advice and make sure that you discuss your full circumstances with a professional adviser.
An adviser will make sure that you have a clear picture of your options and that you understand the true cost of credit card remortgaging.
Sometimes a debt consolidation loan doesn’t make sense!
A professional adviser will work with you to decide if a consolidation loan is right for you.
A credit card debt consolidation will not make sense if:
- you cannot afford the new loan payments
- you end up paying much more overall
- you would be better off rearranging your debts rather than taking a new loan
You should always consider the downsides along with the advantages of a consolidation loan mortgage secured on your property. Consider what could happen if your circumstances changed meaning your home could be at risk if you do not keep up with repayments.
