Bad Credit – Will I be able to get equity?

Can equity issuance be used to pay off debt? Mark Gregory examines the pros and cons in our latest Q&A

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Question

I’m almost 70, own my house outright and it’s worth around £300,000. I needed surgery recently, and because the NHS waiting list for my area was so long, I went private with a consultant – which cost me £10,000. I put this on my credit card, and because I also needed to pay for care and support around the house, I was able to rack up an extra £5,000 on that card and £3,000 on another.

I have now gotten over the health scare, recovered physically, had time to reflect on my financial decisions during that time and am very anxious about this debt. I missed a few payments because I felt so ill after the procedure, and even though I got back on track, it affected my credit report.

Can I get equity relief to pay off debt, or will my low credit profile put this at risk? top form

Mark’s answer

First, I’m glad to hear that you’re recovering from surgery, and I hope your recovery continues to go well. It can be difficult to manage bills while sick, and it’s understandable that you now want to put your finances in a more comfortable position.

The reassuring answer is that missing credit card payments doesn’t automatically prevent you from getting a mortgage for life. Some lenders accept applications from people with missed payments or other negative credit, although each provider has its own criteria and approval cannot be guaranteed.

From the figures you have provided, your total credit card borrowing is £18,000, which equates to approximately 6% of your home’s estimated value of £300,000. At nearly 70 years old and owning your home outright, a lifetime mortgage may be an option worth exploring. for you Equity release advisor You’ll need to determine current card balances, any costs involved, and whether the property meets the lender’s requirements.

to Flexible lifetime mortgage With no mandatory monthly payments, lenders may take a different approach to credit history than lenders who offer mortgages with required monthly payments. Credit checks can still be made, so it’s helpful to clarify when a payment went into default, the circumstances surrounding your illness and whether the accounts are up to date now. A recent copy of your credit report and card statements can help your advisor carefully evaluate your options.

However, being eligible is only part of the decision. Using a lifetime mortgage to settle your credit cards would replace unsecured debt with a secured loan against your currently mortgage-free home. You’ll still owe money, but under a different arrangement.

A plan with optional payment can take the stress out of your current monthly card payments. You could choose to Make voluntary payments Include the lender’s allowance or let the interest accumulate. If left unpaid, interest is added to the balance and additional interest is charged on this increased amount. So borrowing over many years may be more expensive overall, even if… interest rate They were lower than your credit card rates. It can also reduce the inheritance you leave and may affect your means-tested benefits.

Your advisor should compare the total costs, including arrangements and advice fees, and consider whether consolidating some, all or none of the debts would be better for you. With a repayment of £18,000, these costs deserve special attention.

It’s also worth talking to your card providers about the difficulties you faced while you were ill and asking about the support they can offer. Free, impartial debt counseling from an organization like StepChange can help determine if there is a manageable way to pay off cards without borrowing against your home.

Our independent advisors can take the time to understand your financial situation, your recovery, and any ongoing care or home support costs. They can then explain the options available, and if a lifetime mortgage is suitable, they can provide a personalized infographic showing the costs and how the balance can change over time.

Calls Supermarket stock issue on 08008021015 To speak directly to an experienced advisor. The initial consultation is free and without obligation. Our advice fee is only paid if you follow through with the recommendation and your mortgage is completed, any other costs will be explained before you decide.

Meet our expert…

Mark Gregory, Founder and CEO Supermarket stock issuehere to answer your questions. Mark is himself a consultant with over 20 years of equity issuance experience.