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Can I Remortgage With Credit Card Debt?

April 8, 2022 By Mortgage Light Leave a Comment

It is possible to remortgage with credit card debt, so long as you are generally able to prove that you can afford your monthly repayments. Assuming you are able to do this, you may still face some restrictions on the amount lenders are willing to offer you. You could also find that any mortgages offered will be subject to a slightly higher interest rate than you might otherwise have been given.

In this article, we discuss how credit card debt and other debts can affect the remortgaging process and what to do if you are struggling to find a lender who will accept your remortgage application.

How does credit card debt affect a remortgage?

This all depends on the level of your credit card or other debts. Of course, the larger the debt, the larger the warning signs are likely to be to any lender. Lenders will want to understand the nature of any debts you may have. They may ask questions such as:

  • How long have your debts been outstanding?
  • Are you struggling to repay them?
  • Has the overall level of debt been increasing?
  • Are your debts properly structured?
  • Have you met all the repayments on time?
  • If your debt has occurred recently, what was the reason for this?

The answers to these questions could potentially present some ‘red flags’ to a lender. This might cause them to view your application as being a higher risk. This may cause them to decline your remortgage application outright. This could then adversely impact your credit score or it may restrict what they are willing to offer you.

credit cards

If you are meeting your regular payments on time and managing to reduce the outstanding credit, then a lender may be willing to look upon your application more sympathetically. Remember, all lenders approach applications on a case-by-case basis. Some lenders will have very strict policies on personal debt. Other lenders are more willing to consider lending to applicants with higher levels of credit card borrowing. You might find that you may be a little more limited in choice, but the mortgage market is vast and there are deals out there for all kinds of borrowers, including bad credit mortgages.

It’s a good idea to enlist the help of a mortgage advisor and broker, such as us here at Mortgage Light. We know which lenders to turn to in order to have the best chance of getting approval on the first attempt. We have access to the whole mortgage market, including lenders that only we can access as mortgage professionals.

Find out more – ‘How does bad credit affect a mortgage?’

How much credit card debt is too much?

There is no cut and dry answer to the question of how much credit card debt is too much. It depends on your personal circumstances and your debt to income ratio. For instance, you might have £3,000 worth of recent credit card debt outstanding. However, maybe you are about to sell your car or due a bonus from work that will repay or substantially reduce this. A lender may then accept this and consider you a sound applicant for a remortgage.

On the other hand, if you have had this level of outstanding credit card debt for some time and there is no evidence of you being able to reduce it, then this could be a sign of poor financial management and therefore a warning sign.

a woman looking at her credit card debt

Some lenders may automatically reject your application in these same circumstances, simply as a result of the level of your credit card debt. Each lender will have its own assessment criteria. It’s important to understand which lenders are likely to be more sympathetic to your situation.

It’s safe to assume that if you have maxed out your credit card/s and you have used up the majority of your available credit, lenders are less likely to look upon your application favourably. Even if you have never missed a credit card payment, high levels of credit card debt can be an indication that you are reliant on credit cards. Even if a lender is willing to accept a remortgage application from you, they will probably have a number of questions for you to try and fully understand the story behind your credit card and general borrowing history.

Find out more – ‘What happens if a mortgage application gets rejected?’

Will missed or late credit card payments affect a remortgage?

If you have missed any credit card payments, this is likely to be a red flag to any mortgage lender. They may think carefully before accepting or processing an application from you. If you have a missed payment that has been outstanding for more than one month (therefore meaning you owe more than any current month’s repayment), you will be in arrears. This is considered a more major red flag.

Late payments are generally considered less severe and as long as the payment is caught up within the same month that it is due, most lenders won’t report it as a missed payment to the credit agencies. If not though, reported late and missed payments will inevitably lower your credit score. And a low credit score can make getting a mortgage a little more of a challenge.

late payment

There are, however, a number of specialist lenders who are willing to lend to applicants with lower credit scores. The remortgage market needn’t be closed to you if you have been impacted in this way.

Find out more – ‘Can I remortgage with bad credit?’

Can I remortgage to pay off credit card debt?

You may be considering a remortgage as a way to pay off some or all of your credit card or other debts. You could potentially do this by remortgaging. Remortgaging could allow you to release some cash from the equity that has built up in your home since you purchased it. You to pay off your outstanding personal credit.

This would effectively consolidate your personal borrowing with your mortgage into a single loan secured against your house. By doing this, you are transferring unsecured short term debt into secured long term borrowing. This will generally reduce the interest burden on the short term debt and also your monthly repayment costs. These will now be spread over a much longer term.

paying off credit card debt

The overall cost of this might ultimately be higher in the long run. You will be repaying your borrowing over a much longer period. However, it should provide some relief to your monthly budget. A good financial advisor, such as us here at Mortgage Light, will be able to guide you on the value of your options if this is something you are considering.

Let’s say for example that you currently own a property worth £300,000. You have a £200,000 mortgage outstanding. You want to release £15,000 of equity from your home in order to pay off your credit card debts (or any other debts). You’d therefore need to take out a new mortgage for £215,000. This will refinance your existing mortgage and provide the additional cash to pay off your credit cards.

This is called debt consolidation. It’s important to note that this simply moves your debt onto your mortgage, rather than actually paying it off. Consolidating your loans doesn’t reduce the amount you owe. It instead restructures it in what might be an efficient way of borrowing.

Find out more – ‘Can you remortgage to pay off debt?’

What should I do if I can’t get a remortgage accepted because of credit card debt?

Struggling to know where to turn when remortgaging with credit card debt? Speak to an experienced mortgage advisor and broker. They should be able to provide guidance and help you to secure the deal you need. At Mortgage Light, we have helped many people just like you achieve what they need from their remortgage – even with credit card debt or adverse credit history.

Our experts know the mortgage market like the back of their hands, including which lenders are more accepting of credit card debt and other financial issues such as low credit scores. We will always do our best to find a suitable lender that will accept your remortgage application.

Let’s start your remortgaging process together. Get in touch with us via our website or call 01908 597655 today.

Filed Under: Remortgaging Tagged With: bad credit, bad credit mortgage, credit card debt, credit score, debt, interest, interest rate, interest rates, low credit score, mortgage advisor, mortgage advisor and broker, mortgage broker, mortgage light, poor credit, poor credit history, remortgage, remortgaging

What Does LTV Mean?

April 1, 2022 By Mortgage Light Leave a Comment

Loan-to-value, otherwise known as ‘LTV’ is a phrase that you’ll quite often hear used within the housing and mortgage market. It’s something that lenders look at when assessing the level of risk attached to any secured loan they may be considering offering. It will often drive the level of interest rate being charged.

It’s an important part of the mortgage process, but what does LTV actually mean? In this article, we explain everything you need to be aware of regarding loan-to-value.

What does LTV mean on a mortgage?

In the mortgage world, LTV is a calculation used by lenders use to describe the relationship between the outstanding mortgage balance and the market value of a property. It refers to the percentage of your property’s market value that is being funded by your mortgage.

For instance, let’s say you put down a 20% deposit on a property. You take out a mortgage to cover the remaining 80%. Your LTV ratio would be 80% because 80% of your home is being paid for by your mortgage.

The higher the LTV, the higher the risk profile for the lender. This is because, in the event of you defaulting your mortgage for any reason, a higher LTV means there is a smaller buffer between what is owed on the mortgage and what the market value of the property might be.

mortgage light advisor explaining LTV

Your LTV ratio will change over time. This is often a result of you paying down your mortgage borrowing each month. This reduces the mortgage amount against the property value. It may also change as a result of the market value of your property changing. A rise in the value of your house will reduce the percentage of your property funded by your mortgage. As a result, it will reduce your LTV.

For example, a £200,000 house with a £160,000 mortgage will have a loan-to-value of 80%. If the market value of the property increases to £220,000, and the mortgage remains at the same level, the LTV will reduce to around 73%. Remember, however, that houses values can go down as well as up. A fall in your property’s market value could result in the LTV increasing.

How does LTV affect interest rates?

To compensate lenders for the higher risk associated with providing higher LTV mortgages, these mortgages generally attract a higher interest rate. Similarly, mortgages with lower LTVs are usually offered at lower interest rates. This means that it can be much cheaper to borrow the same amount of money if there is a lower LTV.

Are higher LTV mortgages really more risky to the lender? Well, think about it this way. A home bought with a 90% mortgage would only have to lose 11% of its value to go into negative equity. This is where the market value of the property isn’t sufficient to cover the balance outstanding on the mortgage. As a result, if the lender were to have to repossess the property for any reason and then sell it to try and recoup the amount outstanding on the mortgage, the sale proceeds wouldn’t be enough to get all of their money back.

two dice depicting interest rates

Lenders also know from experience that properties that get repossessed tend to have suffered neglect for some time prior to this. Very often, they fail to reach their full market value at auction. As a result, the reduction in value seen in such properties will see them not get all their money back.

A lower loan-to-value mortgage of 60% however, means that the market value of a property can fall by over a third before the lender faces any real risk of loss. This is why lenders save their more attractive mortgage deals for customers with lower LTV borrowing.

Find out more – ‘How much interest am I paying on my mortgage?’

How to calculate LTV

LTV is expressed as a percentage. It is calculated by dividing the value of the mortgage outstanding by the value of the property. There are plenty of online LTV calculators to help you do this.

Let’s say for example that you wish to purchase a house for £200,000. You intend on putting down a 20% deposit of £40,000. To complete the purchase, you will need a mortgage of £160,000. By dividing the required mortgage (£160,000) by the property value (£200,000) and then multiplying by 100, you get the LTV which is in this case 80%.

What is a good LTV?

So, we now know that low loan-to-value mortgages are generally preferable and often come with lower interest rates. High LTV mortgages are considered higher risk and often come with higher interest rates. But what exactly is considered low and high for LTV?

As a general rule, anything below 80% LTV is considered low. Anything higher than 80% is considered high. For that reason, it’s a good idea to try and put down at least a 20% cash deposit. Of course, this can be difficult for first-time buyers. It’s not uncommon to have a higher LTV mortgage when you purchase your first property. As you build up equity in your property, you could then look to move on to lower loan-to-value deals later on.

mortgage light meeting

For first time buyers, it can still be worth taking on the more expensive higher loan-t0-value borrowing just to take that first step onto the property ladder. After all, house prices might be going up faster than the value of your savings! If you start off with a high LTV mortgage, then you can always look to remortgage onto a cheaper facility later, once you have seen your LTV start to reduce as a result of either house price rises or your borrowing reducing (or most commonly, a combination of both).

 

Got more questions about LTV? Just give us a shout! Our friendly and experienced mortgage advisors would be happy to help you. Contact us via our website or call 01908 597655.

Filed Under: Getting a mortgage, Managing your mortgage Tagged With: getting a mortgage, interest, interest rates, loan to value, LTV, managing your mortgage, mortgage advisor, mortgage advisor and broker, mortgage broker, mortgage interest, mortgage light

Difference Between Fixed and Tracker Mortgages

March 1, 2022 By Mortgage Light Leave a Comment

There are a number of different types of mortgages available. It’s important to try to make sure you choose the right one for you. After all, a mortgage is probably going to be one of the biggest and longest-running financial commitments you ever make. It’s well worth getting it right!

Chances are, you’ve heard of both fixed and tracker mortgages. But what exactly are they and how do they differ? In this article, we’ll discuss the difference between fixed and tracker mortgages to help you decide which, if either, is best suited to you. [Read more…]

Filed Under: Getting a mortgage Tagged With: Bank of England, BoE, fixed-rate, fixed-rate mortgage, getting a mortgage, interest rate, interest rates, Libor, London InterBank Offered Rate, mortgage light, standard variable rate, SVR, tracker mortgage

How do Shared Ownership Mortgages Work?

February 14, 2022 By Mortgage Light Leave a Comment

If you need a little helping hand getting onto the property ladder, you may be considering making use of the shared ownership scheme. The scheme has been around since the 1970s. Today, the shared ownership market is well established and is really quite strong. Mainstream lenders such as Nationwide, Halifax, Santander and many more all offer shared ownership mortgages, making the scheme more accessible than ever.

So, how do shared ownership mortgages work? In this article, we explain all you need to know about a shared ownership mortgage. [Read more…]

Filed Under: Shared Ownership Tagged With: first-time buyer, first-time buyers, interest rates, shared ownership, shared ownership mortgage, shared ownership mortgages, shared ownership scheme

How Does Bad Credit Affect a Mortgage?

February 8, 2022 By Mortgage Light Leave a Comment

When it comes to getting a mortgage, your credit history is a pretty important factor. It plays a big part in how a lender will assess your affordability. Looking into your credit history is one of the ways in which a lender will gain information on how reliable you have been at paying back debts and loans in the past. After all, a mortgage is likely to be the biggest loan you’ll ever have! A lender needs to be confident that you’ll be able to keep up with your repayments across the whole lifetime of the loan.

So, how does bad credit affect a mortgage application? Is it still possible to get a mortgage with a bad credit history? In this article, we explain all you need to know. [Read more…]

Filed Under: Getting a mortgage Tagged With: bad credit, bad credit mortgage, credit, credit history, credit score, getting a mortgage, guarantor mortgage, interest rates, joint mortgage, mortgage application, mortgage guarantor

How to Save For a House Deposit

February 1, 2022 By Mortgage Light Leave a Comment

So, you’ve decided to begin planning your first step onto the property ladder. For many, the largest obstacle you will face is saving up enough cash for a house deposit. A house deposit is usually required by most mortgage lenders as your initial contribution towards the cost of your property purchase. For a first time buyer, saving for a house deposit can be particularly difficult – especially if you are currently paying out a large part of your income in rent for your existing accommodation.

Before you begin saving for your house deposit, it’s a good idea to have an idea of roughly how much you’ll need to save and the options available to you if you are struggling to reach this goal. Here is a guide and some tips on how to save for a house deposit. [Read more…]

Filed Under: Getting a mortgage Tagged With: budgeting, budgeting tips, deposit, first-time buyer, first-time buyers, getting a mortgage, help to buy, help to buy equity loan scheme, help to buy scheme, home deposit, house deposit, house hunting, interest rates, lifetime ISA, saving, savings, shared ownership, shared ownership scheme

What is the Minimum Deposit on a Mortgage?

January 4, 2022 By Mortgage Light Leave a Comment

One of the first steps after deciding you’d like to purchase a house is to begin saving up for your house deposit. Your deposit is usually the most expensive part of getting a mortgage.

Typically, you need to put down a deposit of at least 5% of a property’s value. With the average UK house price sitting at around £265,000 as of August 2021, the minimum deposit amount that you would need for the average house in the UK is £13,250 – 5% of £265,000.

In this article, we are going to explain a little more about the minimum deposit on a mortgage, how to save for one and what to do if you don’t have one. [Read more…]

Filed Under: Getting a mortgage Tagged With: 0% deposit, 0% deposit mortgage, 95% mortgage, 95% mortgage scheme, apply for a mortgage, applying for a mortgage, deposit, first-time buyer, getting a mortgage, guarantor mortgage, house deposit, interest, interest rates, loan to value, LTV, minimum deposit, mortgage, mortgage deposit, mortgage guarantor, mortgage interest, shared ownership, shared ownership scheme

How to Get The Best Rate on a Mortgage

December 24, 2021 By Mortgage Light Leave a Comment

The UK finance market offers a broad range of mortgage products to borrowers. The interest rate charged on those products can vary quite widely for different borrowers. Generally, the interest rate charged by a lender is a reflection of their view of the risk the borrower poses and the scale of loss the lender might run into should that happen.

As a result of these different risk profiles, some of the preferential deals that may be available to one borrower may not be available to another – and vice versa. So, what are some of the factors that affect the interest rate that you may be offered on your mortgage and how can you get the best rate for your personal circumstances? [Read more…]

Filed Under: Getting a mortgage, Managing your mortgage, Remortgaging Tagged With: bad credit, Bank of England, bank of england base rate, base rate, credit score, deposit, employment, getting a mortgage, help to buy, help to buy equity loan, help to buy equity loan scheme, help to buy scheme, house deposit, interest, interest rates, joint mortgage, joint mortgage application, loan to value, LTV, managing your mortgage, mortgage deposit, mortgage guarantor, rates, remortgage, unemployment

Mortgage Costs Increase – Now is Time to Act!

November 4, 2021 By Mortgage Light Leave a Comment

It’s been an eventful few weeks in the mortgage world, with Rishi Sunak’s announcement of the Budget 2021, mortgage rates on the rise and inflation increases all dominating the financial press.

So, what does all this mean for our Mortgage Light customers? We’re here to explain all. [Read more…]

Filed Under: Managing your mortgage, Remortgaging Tagged With: Bank of England, base rate, Budget 2021, energy crisis, fixed-rate, fixed-rate mortgage, inflation, interest, interest rates, managing your mortgage, mortgage interest, mortgage rates, remortgage, remortgaging, standard variable rate, SVR, The Budget, The Budget 2021

How Much Interest am I Paying on my Mortgage?

October 21, 2021 By Mortgage Light Leave a Comment

Most mortgages these days are standard capital and interest repayment mortgages, also known as ‘repayment mortgages’. This means that each month you repay all of the interest charged on your borrowing for the month, plus a small amount of the capital that you originally borrowed.

Over the term of your loan, you will eventually repay all of the capital you borrowed via your monthly repayments so that your loan is fully paid off. The interest that you pay each month is effectively the fee you pay to your lender in return for borrowing the capital from them. It is how lenders make their profit. [Read more…]

Filed Under: Managing your mortgage Tagged With: amortization, Bank of England, base rate, fixed-rate, fixed-rate mortgage, interest, interest rates, interest-only mortgage, managing your mortgage, mortgage interest, repayment mortgage, standard variable rate, SVR

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Recent Posts

  • Does Getting Rejected for a Mortgage Affect a Credit Score?
  • How do Joint Mortgages Work?
  • Can I Remortgage With Credit Card Debt?
  • What Does LTV Mean?
  • What Happens if a Mortgage Application Gets Rejected?
  • Do Shared Ownership Properties Increase in Value?
  • Difference Between Fixed and Tracker Mortgages
  • How do Shared Ownership Mortgages Work?
  • How Does Bad Credit Affect a Mortgage?
  • How to Save For a House Deposit

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All of our brokers deal with the whole of the mortgage market. It doesn’t matter what the question or when you want to speak to us, we have brokers available on the phone or face to face seven days a week. Whether you are just thinking of buying a home and have no idea where to start, a seasoned investor or someone looking to better your current mortgage product, we are happy to help andchat over ideas free of charge.

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