Case study; Our clients bought their property back in 2006, and due to their growing family they recently carried out significant renovation works (extension and loft conversion) which increased the value of their home. These works were funded by personal loans and credit cards, as the clients felt raising funds against their mortgage would be unachievable as the clients existing mortgage product was on a fixed rate and as such was tied in for another two years, so if the clients redeemed this loan early they would encounter an early repayment charge.

Although the clients were open to the option of a full remortgage their debt to income ratio was breaching many lenders criteria. We also had to contend with a slight credit issue due to a hiccup with a historic direct debit mandate.

In light of the above we diligently assessed the option of a remortgage versus second charge loan (by way of a secured loan), and due to the existing early repayment charge the most suitable option was to recommend the arrangement of a secured loan. This will allow the current first charge mortgage to be ringfenced meaning the early repayment charge will be avoided at this time.

As the works carried out by the clients had already been completed this meant we could apply to the lender on the enhanced property value, which enabled them to raise the capital required to consolidate all of their debts associated with the renovation works. We presented to the clients our product recommendation, which meant the secured loan deal would offer desired flexibility and option to transition this within their first charge once they come to remortgage, subject to their circumstances and criteria at that given time.

Following the above our clients cash flow is now in a much healthier position, and they are now able to start saving for their future, and can relax and revel in their upgraded surroundings without the burden of the unsecured debts.

To note, whilst consolidating debts was a suitable option for these clients’, it does not mean consolidating debts is right for everyone. It is highly advisable to seek expert mortgage advice before making such a decision, and considering all pros and cons before entering in any such arrangement.

Samantha Turmaine
Mortgage Broker