At this time of the year people start thinking about Christmas, with many people funding the festive season through the use of their credit cards. Unfortunately it is around this time of the year that some people realise, rather like the Greek Government, that they cannot continue year after year stacking debt upon debt. Often this realisation is brought home to people by credit card companies refusing to increase credit card limits, and personal loans being declined. This choking off of credit has the effect of making life extremely difficult for people as they try to juggle finances, whilst realising perhaps for the first time that the payments that they make each month for cards and loans are in fact unaffordable within the family budget. This fact has probably been masked in the past by the ease of credit getting them out of a tight spot, by in effect, robbing Peter to pay Paul.
The solution to some people’s affordability crisis is to try to cut back on none essentials and renegotiate utility contracts. Also it maybe worthwhile to food shop at a cheaper outlet, and then see if these measures bring the household budget back into surplus. If the budget still falls short then more drastic action needs to be considered such as perhaps working overtime or taking a second job. If all the above do not create affordability then it is always worth looking at your mortgage to see if you can make the household budget come back into the black. This can be done by changing your mortgage deal or perhaps asking for an interest only mortgage or payment holiday until you have paid down some of your debts.
These actions may have the desired effect but if you still can’t make ends meet it could be worthwhile considering remortgaging to consolidate the debts. You may already have a good rate with your existing lender, so before moving the mortgage else where and possibly suffering in addition mortgage exit fees, it is worth asking them to consolidate your unsecured debt by a way of a further advance. If they are unable to assist then remortgaging will probably be your best option. However, this is only the case providing the benefit of the overall deal outweighs the penalty that may need to be paid to exit your existing loan.
During these times it is not as easy to consolidate debt as it was in the past with most lenders restricting the amount in total that they will lend for consolidation purposes. Others start to charge higher rates with the more you borrow as a percentage of the value of your house, so it could perhaps be better to keep some of your unsecured debt to enable you to get a sharper rate on the remortgage.
With lenders becoming increasingly more cautious in how much money they will lend, coupled with house prices falling in some areas, it is important to seek advice with regards to remortgaging for consolidation purposes as soon as possible. This is while equity and affordability remain, as delay could take you out of the market. Therefore it could be worth adding remortgages to your Christmas list and making an appointment with an Independent Financial Adviser who specialises in mortgages to see if remortgaging is right for you. Kieron Bassett Financial Services has two Independent Financial Advisers who specialise in mortgages. Contact us on (01524) 832057, via e-mail, info@kieronbassett.com, or visit www.kieronbassett.com.
Kieron Bassett CertPFS
14th November 2011
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