Newbie saying hello...

Frugal_Fox · 29 September 2005 at 2:36AM

Hi, having been 'listening' to Martins posts for the past few months, its time I actually did something about our situation. We are currently over £109k in debt, though that does include our mortgage of 91K too. We have 'consolidated' our loans and remortgaged a couple of times - each easing the initial crisis - but never amending our ways to get out of the hole we constantly seem to be in.

Each month we scrape by - often just by pounds, and its putting a big strain on our relationship. Since having our children a few years ago, I gave up full time work - and am not yet in a position to return to work. I took over the financial running of the household, and managed to clear our overdraft, and was making reasonable headway over our credit card debts. Not by rocket science, just frugal living. However, then the car broke down, and was unrepairable - we had no savings, and needed a car so my husband could get to work 30 miles away. We used credit that I had managed to clear to enable us to get a new car. Then the washing machine broke, then the vacuum cleaner and then the pet (too old for insurance when we got it) took ill - major expenses within a short period of time, and we were back to square one - except I didn't tell my partner, worried that he would be cross with me! So I tried to cover it up - got the post before him each morning, stayed connected to the internet so the calls could not get through etc etc I got irritable with him and the children. Its a horrible vicious circle.

We are now possibly about to do something which most of you will think is sheer stupidity - but it seems logical to us.

We are selling our house, and do not plan to buy a new one. We are planning to rent, and to use the equity from the sale to clear our home loan, joint credit card, store card, bank overdrafts (3) and our 'Personal Reserve' account. The stress that living under this debt has created for us is damaging our relationship with each other, with our children and upsetting our life. We currently pay out over £1300 on debt (inc mortgage) each month. We estimate we can rent a reasonable home for around £750 - and okay whilst we understand this is dead money, it isn't lining the pockets of some big corporation - just the pockets of a shrewd individual!!

We want to appreciate life, and money - to be able to pay the rent and bills, and have money left over to start to save with, and after a few years of 'sensible' living, get back on to the property ladder, having learnt a major lesson in that debt is too easy to get into, and far harder to climb out of.

We aren't being reckless, and thinking we'll just clear our debt and that will be it - there are lessons we have learnt and will continue to learn, but we are in the fortunate position to have made money on our property, and we want this money to work for us. We are prepared to step away from the housing market, to clear the stresses and strain from our lift, and to return to it more aware of what we are doing. We have learnt so much already from this site, but we've heaps to go through yet too.

Hope no one finds this post offensive, as it was not meant to be, its just I wanted to share this with you, as I am totally serious about being debt free, and fear if we go down the straight remortgage route again, we will only end up in the same position. Next time, I want to have my finances in order before I sign any credit agreement ever again, and I never want my children to go through this. I want to be an example to them, but one that they can approach - and hopefully learn from our mistakes!!

Frugal
x

Sofa_Sogood · 29 September 2005 at 3:04AM

Hi Frugal Fox

I can't imagine why anyone would find your post offensive .... that's what this part of the forum's all about ... being debt free.

I'm not much help (sorry

), but keep posting, and don't rush to make any decisions yet. The more astute people who understand money will read this later on, and start asking questions about incomings and outgoings - despite your long post

, so I'd have a few facts and figures ready

You seem very level-headed about it all, but be prepared.

Apologies once again for not being able to help. But you've made the first step, and possibly the biggest step .... by posting here

Good luck!

ceegee · 29 September 2005 at 9:23AM

ditto to everything Sofa said! :cool: and.......

you have a positive attitude

you have a plan that you are happy with and which suits you

you have learned from your "mistakes" (always an excellent thing!)

seems to me that you can't fail in your financial recovery!

Regarding your comment about what other people might think about you selling your house and renting for a bit.....well, I have found that if you feel that something is the right thing to do, then even if most people would advise you against it, you should go ahead. Only you know your precise situation and how you feel about all of the aspects that are involved in any given situation. On many occasions I have gone against perceived wisdom and found that things worked out fine. You must follow your instincts. If it is a plan that you feel happy with and that you feel is the right one for you, then you are far, far more likely to succeed.

All the very best to you in the task that lies ahead. Do keep us informed about your progress.....I love a success story! :T

Petal_3 · 29 September 2005 at 9:47AM

Hi Frugal Fox and Welcome to MSE!

My first thought is that you have £18k over and above your mortage and notice that you have some store card debt which must be a fortune in interest. I'm no expert but there are plenty of them on here that will be able to help/advise. There must be a way around this apart from selling your house hun. It may solve the immediate problem but when you decide you're ready to buy again it's gonna cost a hell of a lot more to buy what you already have. £18k doesn't seem insurmountable to me, but then again I don't know your circumstances.

Why don't you post a statement of your incomings & outgoings to see if there's a better way?

Good Luck with whatever you decide.
x

Frugal_Fox · 29 September 2005 at 1:28PM

Petal wrote:

Hi Frugal Fox and Welcome to MSE!

There must be a way around this apart from selling your house hun. It may solve the immediate problem but when you decide you're ready to buy again it's gonna cost a hell of a lot more to buy what you already have. £18k doesn't seem insurmountable to me, but then again I don't know your circumstances.

Hi, Thanks for the replies. Selling the house isn't just a knee jerk reaction, to as you say an 'insurmountable' amount. However, the fact is that our financial situation is bringing us down. My husband earns £1200 month. We get £288 from child benefit and tax credits, and roughly £350 from a small 'self employed' job that I do - giving us an income of £1838.

Our outgoings are:
£1122 for mortgage (5.6%) and secured loan (9.9%) - both taken over short period to reduce interest.
£230 for credit card (15.9%), store card (15.9% - but only £250 credit limit!! - not that silly!) and reserve account (18.9%) repayments
£292 for household bills - council tax, gas & electricity, telephone, internet, tv (no sky - already cancelled) home, car, life and pet insurance & water rates.

Leaving just £194 for food, clothes, shoes (school shoes, not 'posh' ones!), petrol etc for a family of 4. This is so very tight. We lost my income of over 16k when our children came along, and for personal reasons I am unable to leave them with child care to get a full time job. My husband changed jobs and had his salary decreased by around 7k, so whilst we are meeting our commitments, its tight. We are living ethically - but frugally!

Selling our home is a step we are prepared to take to clear our debt, and although 18k debt (without mortgage) is probably a manageable feat - it will involve many years of harsh living to achieve - we estimate if we stay put, and continue on our budget we should be debt free in 2014 - but that also means for the next 9 years we live from hand to mouth, and we want more than this. It will probably cost more in the long run to sell, then rent, then buy again - but the reduction in outgoings (roughly £600/month) will mean that we can put this into an ISA, and start to build up a larger deposit, and buy again.

I am aware that things may change - I may be able to get a full time job, my husband may get a promotion, we might even win the lottery - but this may not happen for a while - and in the case of the lottery - probably never!! but if we stay with fingers crossed, we may not survive as a couple. We've spent months talking about this. The only cause of arguements in our house are financial. We feel this is the right decision for us. To release the equity in our home, pay off our creditors, to put the remaining funds in a high earning account and to rent with only household bills to pay. We intend to keep a card, to maintain our credit score - which currently isn't great, as we did get behind with payments, although we are now caught up. Although we intend to use the card regularly for food shopping, and pay the balance in full each month - is this a good idea, or not?

Frugal
x

ms_london · 29 September 2005 at 1:37PM

Hello.

Sorry to hear that things are tight, but it seems as though you have your head screwed on (so to speak) so well done.

Will you be able to manage until your house is sold though? (if you do go down that route).

Could you contact your creditors in the meantime and offer them a smaller repayment, they will understand that £194 for a family of 4 is tight to live on - especially if youve got food to buy there too. Even if you could half your repayments for the time being it would give you a bit of "breathing space".

I hope that you sort things out, I am sure you'll be fine. Check out the old style board for tips on shopping & Old Style ways - definately interesting!!

Take Care, Ms_London xx

mr218 · 29 September 2005 at 1:43PM

hi frugal fox

it is obvious that you are viewing your debt as a big shadow hanging over your lives. and being in this shadow means that you may not be able to view it objectively. you have now decided that you want to get rid of all debt and just live a happy life without anyone constantly tugging at your purse strings.

you ascribe your problems with your partner as arising from the financial matters. surely now that you both are aware of your situation you should not really have that many issues. i am concerned that you are putting this financial strain as the sole cause for all your problems and you feel that if you get rid of this financial strain, all your other issues will vanish automatically.

in theory your plan sounds like a good one to me if not making total financial sense, at least it makes sense emotionally. but how much is your house worth. will it be easy to sell it in this current climate. you still have to pay about 2% estate agent fees and will need money for deposit on the rental property. so there will be a few thousands eaten up that way. also depending on where you move you might have to look for new schools etc etc which might be a big upheaval for your children.

it seems that you are just about break even with your monthly budget. maybe you might be able to get a small part time job to bring in 200 pounds or so every month. that will give you a breathing space and maybe the odd luxury.

also, if you have substantial equity in your property,why not absorb the loan into the mortgage (from what i read you have not done this) to reduce interest rates. why not see if you can move to an interest only mortgage for a couple of years in your current deal if possible to reduce mortgage outgoings while paying what would be equivalent to paying rent without really moving out.

my general feeling is that you just want to get rid of this debt no matter what to relieve stress and this may not be the best option in the financial sense.
reading back my message there are portions where i feel that i might have sounded a bit patronising about asking you to get a part time job. but that is not my intention and i hope i have not come across that way

ffs · 29 September 2005 at 1:49PM

"We used credit that I had managed to clear to enable us to get a new car."

It always puzzles me when people decide that only a new car will be reliable enough to get them to work. Even one only 12 months old would offer a saving of perhaps 20%.

Even so, congratulations on coming to terms with your problem and posting here, and being willing to consider that drastic changes may be needed. You have doubtless considered trading down rather than renting, can you explain why you've not suggested that option?

Frugal_Fox · 29 September 2005 at 2:06PM

Our children are adopted - and have been passed around from pillar to post before they came to us. They are both still having regular therapy sessions and even slight changes in the home situation invokes terrifying nightmares for them. They regress, and become very unhappy. We are planning to rent in the local area - thus maintaining friends and schools etc. This is why I am unable to go out to work, I need to be here for them.

Possibly we are 'pinning' our hopes on selling, but we are not magically expecting our lives to change once the home is sold. We still have to clear our debts - and pay the fees associated with moving, and once done we should still have £23k to put away into a high earning account - whichever this may be (haven't looked for the right one yet).

We have a lot of work to do to re-educate ourselves, and we know that if we put all of the surplus money from switching paying the mortgage and creditors to renting then we still would only have £194 to live on for a month for a family of 4, but if we can put away £300 a month it will all add up.

We've made some bad decisions in the past - and because I am now not 'working' full time we are unable to even remortgage to reduce our outgoings, nor add the loan onto the mortgage. Over the years we have consolidated our loans to reduce the interest - but this no longer seems to be an option. I have approached an independant advisor, but they are unable to help us, as because I have no income - and my husband is new in his job we are unable to get a mortgage agreed for the value we need. In fact our current lender has said that given our current status, in terms of credit score and me not working they would only be prepared to lend us £47k, we currently have a mortgage of £91k with them.

I do feel this is our only option - but love the fact that I am being challenged on this, you are providing valuable questions, and as this is such a drastic plan, we need to know we have covered every angle.

Thanks,
Frugal

and no - I'm being very thick skinned and not taking offence!

dinkylou · 29 September 2005 at 2:07PM

You mentionned that you were worried about remortgaging to cover the debts and then continuing spending and getting yourself into further debt.

But from what you have told us, you have been very frugal recently and that your attitude to your money has changed.

I am a little worried that if you sell your house and rent that you may both struggle to get back on the property ladder in a house similar to your current one. And can you be certain that you wont relax and start to a get more debts?

Selling your house isnt your only way out.

Maybe you could remortgage to a flexible mortgage over a longer period where you can overpay when you have spare money then not when you are pinched. That way you wont feel like you re paying too much interest but it wont be as nasty as £1122 per month (which sounds very high to me for that amount of mortgage and loan)

Hope this doesnt sound funny in any way.

Maybe if you felt you were doing something more about it rather than risking your main asset then it would nt be so stressful?

Frugal_Fox · 29 September 2005 at 2:10PM

ms_london wrote:

Hello.

Sorry to hear that things are tight, but it seems as though you have your head screwed on (so to speak) so well done.

Will you be able to manage until your house is sold though? (if you do go down that route).

Take Care, Ms_London xx

Thanks for your reply - I love your signature, it really gives me hope that I'm not the only one doing this, and that it is possible...!

How long has it taken you to get this far - and are you planning on celebrating next month??!!

I have already reduced our debt from the 26K it was to 18k - so I'm aware of how hard you'll have worked to get this far.

Frugal
x

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