Customer Overview
This case study focuses on a 57-year-old married professional from Kent, serving as an enforcement team leader with a household income of approximately £119,000 per annum (combined).
The customer has multiple properties: their main residence and a second home previously rented out but now occupied by an adult son. The pressing concern was managing significant monthly mortgage payments alongside over £21,000 in credit card debt, all while facing rental issues and attempting to sell the secondary property.
Main Challenges Faced
- High unsecured debt: Around £21,500 in credit card balances leading to heavy monthly payments and interest charges.
- Unable to secure reliable tenants or sell the second property: The house remained on the market with two failed purchases, and extended vacancies meant ongoing financial strain.
- No longer eligible for buy-to-let remortgage: As the son (a family member) now resides in the property, lenders require it to be mortgaged as a second home, which involves stricter affordability assessments.
- High outgoings due to two mortgages: The main residence has a monthly payment of £3,180, and the second property (with Santander) is approximately £1,100 a month, leading to substantial financial pressure.
- Variable interest rates and lack of flexibility: Both mortgages are on variable or standard rates to avoid tie-ins, leading to unpredictability and missed opportunities for better deals.
The Debt Consolidation Remortgage Solution
Given the complexity of the situation, with the inability to treat the second property as buy-to-let, a standard debt consolidation remortgage was not possible. Still, several options and actions were explored:
- Secured loan proposal: The adviser explored the possibility of a second charge (secured) loan against the equity in the second property. This approach would keep the current Santander mortgage in place and raise an additional £60,000–£70,000 to clear the credit card debts and fund planned home improvements.
- Repayment scenario: Over a 10-year term, this loan would result in repayments estimated between £750 and £850 per month, based on prevailing rates for secured loans. This would be repaid on a capital and interest basis, offering a defined timeline to clear the debt.
- Affordability focus: The adviser checked affordability carefully, considering the main and secondary mortgage payments, ongoing bills, and required disposable income after clearing debt repayments.
- Credit check and pre-approval: A soft credit search confirmed there were no major issues, improving the chances of passing lender checks for the secured loan route.
- No early repayment charges on existing mortgage: Since the customer was on a variable rate with no tie-ins, they had flexibility in structuring any additional borrowing.
Results: Improved Financial Flexibility and Debt Management
- Potential to eliminate high-interest credit card debt: By consolidating unsecured debts into a single affordable loan secured against the property, the customer could save significantly on monthly interest and simplify their payment schedule.
- Stable monthly repayments: The secured loan option provided a clear, fixed repayment target, replacing variable and often higher credit card minimum payments with a more manageable figure around £750–£850.
- Increased breathing space to manage property sales or future rental opportunities: With debts consolidated and repayments predictable, the customer could afford to wait for a better sale or rental scenario.
- No early repayment penalties: Remaining on flexible mortgage terms left options open for switching or settling early if the second property sold.
Customer Testimonial:
“If we didn’t have to pay the repayments on those , then we would have the funds to pay it .” – Satisfied homeowner, Kent
Frequently Asked Questions (FAQs)
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