Carry on with debt/Stepchange/Buying a house

HBBeast · 23 November 2016 at 5:36PM

So my dilemma is this

Currently we owe together £40,000 we are getting ‘gazelle intense’ on this (see Dave Ramsey) and hope to have it paid off in 2 years paying £1,700 a month off. Achievable on our £4,000 joint take home but still hard!

Currently I am paying interest on the credit cards – we can afford the minimum payments (and above) but I’m not sure whether to go to a debt recovery company (step change or the like) in order to consolidate these debts and then hopefully get the interest frozen (thereby costing less in the long run).

This will mean I’m no longer paying the interest and will cut down on the payments – or do I keep going with what I am doing??
I have about 10 credit cards – not missed any payments but I have a low credit score as I have a high utilisation of debt – we are no longer using the credit cards but just want to clear them as soon as possible so that we can start saving for a house! I can’t open any 0% balance ones as I’m maxed out and won’t be accepted (ive tried a soft search) – any opinions greatly received!!

Then secondly – we want to buy our own house (currently we rent) my inlaws are looking to sell their house – it needs work as in its old fashioned but the structure of the house is sound i.e. wouldn’t need anything done to it just not my taste and we'd like to put new bathroom/kitchen etc in). Great location, good schools and its in my orginal home town so friends and family close by. They would sell it to us at a discounted market rate – however we would still need a deposit in order to get a mortgage.

Are we better to save for a deposit paying the min on credit cards then lump them onto the mortgage?

Or carry on with what we are doing?

Again any opinions greatly received – I feel like im chasing my tail

[Deleted User] · 23 November 2016 at 5:45PM

If you enter a DMP with Stepchange, that would likely knock the mortgage idea on the head for several years.

I would clear your debts then save for the deposit. Otherwise your deposit is effectively borrowed and your debt will drastically reduce what you can borrow in any case.

January2015 · 23 November 2016 at 5:47PM

If you are intending to get a mortgage within the next 6 years don't go down the Stepchange route.

I wouldn't recommend putting unsecured debt (credit cards) onto a mortgage either (been there, done that and still paying for it!).

If I were you I would stick at trying to pay off your debts in the next two years - as per your opening paragraph and then saving a deposit for a mortage.

MrsTinks · 23 November 2016 at 5:49PM

If you are hoping to buy a house in the next 6 years then a DMP is a bad idea... it will land you with a much smaller mortgage offering and they will be less favorable.

As for deposit vs debt - personally I would go nuts on the debt and then save once you are debt free. £40k is a boat load of debt in all fairness and part of the answer will depend on what the debt is... If all £40k is cards then I would seriously focus on paying these off. Highest apr first. As you clear the total down you will find that better transfer offers will become available to you and if you clear cards that often do offers you will find they are going to start sending you transfer offers once you're a better risk in their eyes.

With the amount of debt you have right now I can't see paying the minimum and saving in a deposit would help you find a good mortgage. They will look at the loan to value rate as well as your outstanding debt and the affordability.

Start with paying your debts back, THEN worry about buying a house. Your in-laws may be looking to sell now, but you're not really likely to be in a position to get the finance to buy it... Although the only REAL way to tell that is for you to speak to a mortgage adviser...

HBBeast · 23 November 2016 at 5:50PM

Thank you for your quick responses - its so annoying that we have all this debt (lending money I didn't have to family to get them out of situations and now not getting the money back) but I suppose the positive I can take from it is that I will never lend money that I cant afford to lose ever again!

Im going to revisit the frugal boards and up my income boards the sooner we can clear this the better! I think trying to stay motivated is the hardest thing x

HBBeast · 23 November 2016 at 5:52PM

Im going to try and put the in laws off selling it for a year or 2!! Would be a great investment property!!
I like the idea that once a couple of credit cards are paid off we might get a few 0% transfer deals as I hadn't thought of that x

z1a · 23 November 2016 at 8:27PM

Can you not do what I did when I bought from a relative?
House was valued at X£, he sold it me at X£ - 10%, but told my BS that I has paid him the 10% deposit in cash, therefore a 90% mortgage needed. ( Not sure on legalities of this, but worked OK for me 20 odd years ago.)

HBBeast · 24 November 2016 at 1:48PM

Wow that's a good idea but they may want to see the paperwork for the cash transaction for money laundering etc.

I think that we are going to have to just keep paying the debt off and hope that they don't sell the house in the next 2 years - I'm sure that there are more ways that we could cut back on if I really tried - so we can get out of this mess!
If I post a SOA up do you think people would see where further cuts could be made?

glentoran99 · 24 November 2016 at 1:50PM

z1a wrote: »

Can you not do what I did when I bought from a relative?
House was valued at X£, he sold it me at X£ - 10%, but told my BS that I has paid him the 10% deposit in cash, therefore a 90% mortgage needed. ( Not sure on legalities of this, but worked OK for me 20 odd years ago.)

You basically committed fraud when you could have done the same thing in a legal way, im interested what solicitor allowed you to do this?

z1a · 24 November 2016 at 2:52PM

I can't remember who solicitor was, but he was happy enough to accept the fact i had handed over the cash to the seller, as was the BS.
Probably before money laundering was an issue 1986.

Carry on with debt/Stepchange/Buying a house

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