Want a mortgage in 5 years but currently drowning!

M343 · 14 May 2017 at 7:41PM

Hi.

Off the back of getting married and desperately learning to drive to help future job prospects, I am currently drowning in debt. My partner is unaware just how bad things are and she will be super mad if she found out. Also the contract on my job is coming to an end but I have already lined up another job, however it starts on 3k a less than what I'm currently on which is terrifying me considering that it's very likely I will need to drive to commute to this new job.

My debt situation currently is:
£1,780 outstanding on very high % loan. Repayments are £320 a month and is due to expire in February
£300 on 1 Payday loan provider, payments are £90 and due to expire in August
£128 on another Payday loan provider. Paying off this month in full.
£2,100 Credit Card maxed
£500 Credit Card over limit
£350 Credit Card over limit
£200 Credit Card in good standing
£1650 Overdraft
£1540 overdraft from another bank
1 month arrears on Council Tax

Steps taken / will be taken:

Arranged payment plan for Council Tax at £120 a month
Once I get formal job offer letter
Phone £2100 Credit Card and ask to freeze interest for a period
Phone bank with £1540 and ask to freeze interest and monthly payments go towards reducing balance
Phone £1780 high interest loan company and explain change in circumstance and ask to refinance loan for 12 months on reduced monthly payment (don't think they'll freeze interest)

In terms of my other outgoings. Admittedly I'm a smoker and I now want to quit, purely for financial reasons if I'm honest with myself. My phone bill is £80 a month, but thats for both myself and my wife and that cannot be changed for another year yet. My Sky TV & Broadband Bill is currently only £22 a month thanks to a deal I spotted a few months ago, due to go up in October.

I feel like I'm doing everything I possibly can to ride out this financial storm but my balance sheet is still over a hundred quid in the red for the next few months and thats before I even take into account things car insurance if I pass my test! Also if I don't pass my test I have no idea how I will be able to continue to afford lessons / a new test!

I see the main issue is that high interest loan, if I had that £300 a month back, after some belt tightening I would be fine. When I was 21 I got into a similar position but was earning far less than I am now and got a debt management plan. This worked well for me at the time but now I'm worried if I go down that road it would destroy my chances of getting a mortgage. I'm aware these things go away from the records after 6 years but in 6 years time it'll be starting from a blank slate, not a good standing.

My wife and I want a mortgage in approx 5 years time when we'll both be 35. I honestly don't know what to do. Do I:

a.) Go down the Debt Management Route, say goodbye to any credit facility for 5 years and have a blank slate credit rating when I want a mortgage (and hopefully around a 20-25% deposit)

b.) Somehow find a way to ride out this pain until February, putting strain on my home life and sanity levels until the worst debt is clear and rebuild from there.

My aspiration is to get a mortgage for security for myself and my family. I have two children. I then want to overpay the mortgage with my income and live off my wife's so we can clear a £180-200K mortgage in approx 8 years. Mortgage free by 43 is the slogan. Phase 2 would be getting a mortgage on a buy-to-let or two and have that income and the property value itself be a secondary income stream and ultimately our retirement when we sell up. I feel the next 12 months are crucial to being able to achieve those goals and I'm not starting from a good place, but I'm not sure what else I can do!

I would appreciate some wisedom from the very savvy MSE community!

Thanks!

sourcrates · 14 May 2017 at 9:22PM

You will already be a potential bad risk to mortgage lenders as you have high interest payday loans on your credit file.

You may as well take whatever steps are nessessary to deal with your debts, as a mortgage with anything like a normal interest rate, is more than 6 years away from you I'm afraid.

[Deleted User] · 14 May 2017 at 9:26PM

You need to come clean with your partner, then get some advice from step change (debt charity) to see what your options are, as above getting a mortgage with your credit history will be difficult in the future.
Good luck

Pixie5740 · 14 May 2017 at 10:22PM

Can you post a statement of affairs to see all your income and expenditure?

http://www.stoozing.com/calculator/soa.php

I also think you need to clean to your wife. You're building a future together and hope to eventually buy a home with her so she needs to know. I assume you live with your wife so any council tax arrears will also impact her.

Windofchange · 14 May 2017 at 11:08PM

I second coming clean with the Mrs, especially if you are going down the DMP route. It'll come up at some point in your future - in the phone shop together and you get declined for a contract etc etc.

As for the rest of it, yes you need to post a statement of affairs. It may be eye opening for you to write it all down in black and white just how bad things are. Also, if you are being honest with yourself, how likely is your plan that you will overpay the mortgage, live like monks etc? You had a DMP at 21 and have now got into trouble again with loans and credit cards. It would suggest your trend is not fiscal responsibility. I don't say this to have a go, I'm the last person to lecture about this, but I say it to perhaps highlight how realistic your goals are?

Buy to let - have you done your homework around section 24 and the increased costs / tax liabilities? It isn't the gravy train it once was. Lots of landlords selling up.

Why do you have to have a car? Are you a taxi driver or similar? Would pedal biking to work and back be an option? Quit smoking, increase your fitness? You're already up to your eyeballs, how are you going to afford to purchase a car? Run it? MOT / Insurance / Road Tax? Getting a cheap run around could be an absolute money pit if things go wrong. All this ontop of earning 3k a year less? Just how essential is this car and is it a case of it'd be nice rather than a necessity? Is your potential career going to give you a car / van to drive, or are you looking to get into more trouble by putting it on finance?

Can you find extra work? At one point in my late 20's / early 30's, I had 4 jobs. I got in a real mess with debt but was adamant I wasn't going bankrupt and I would sort it out. The totals in my signature represent what is left of my debts after a 10 year slog starting at a point of debt many thousands more than you. You have probably already impacted your credit score by asking for payment plans and interest rate freezes - as I understand it this will be marked as a default on your file, although someone may come along and correct me.

It may come across as harsh, but I would rate the chances of you saving £50 grand in the next 5 years as zero whatever option you take. As has been mentioned, even if you default and spend the next 5 years paying off token amounts, you won't get to 5 years and 1 month and have banks queuing up to give you a fixed rate mortgage at 2%. You'll need to build your credit history which will take time.

Anyway, bit of a ramble.

TL;DR - you need to put up a statement of affairs so people can properly advise you.

pennystretcher · 19 May 2017 at 4:54PM

Please post SOA here so that we can tell what to cut etc. Without seeing that it is impossible to predict if you can save £50k (assuming this would be halved between you two, so £25k?)...?

I have overpaid mortgage by £10k per year for the past couple of years by scrimping and saving, so it depends how much "spare" you have and what you can cut..

On existing debts - ccl tax first. Then payday loans, and move CC debts with interest to zero interest card.

And last - be honest with your partner. You will be glad you did - if your relationship is strong the best thing is to work things out together.

enthusiasticsaver · 19 May 2017 at 10:59PM

M343 wrote: »

Hi.

Off the back of getting married and desperately learning to drive to help future job prospects, I am currently drowning in debt. My partner is unaware just how bad things are and she will be super mad if she found out.How did your wife think the wedding was paid for then? This is a joint expense and should have been sorted between you. Being ignorant of how you took out debt to pay for it does not excuse her so she has no right to be super mad about that. Also the contract on my job is coming to an end but I have already lined up another job, however it starts on 3k a less than what I'm currently on which is terrifying me considering that it's very likely I will need to drive to commute to this new job.

My debt situation currently is:
£1,780 outstanding on very high % loan. Repayments are £320 a month and is due to expire in February
£300 on 1 Payday loan provider, payments are £90 and due to expire in August
£128 on another Payday loan provider. Paying off this month in full.
£2,100 Credit Card maxed
£500 Credit Card over limit
£350 Credit Card over limit
£200 Credit Card in good standing
£1650 Overdraft
£1540 overdraft from another bank
1 month arrears on Council Tax

Steps taken / will be taken:

Arranged payment plan for Council Tax at £120 a month
Once I get formal job offer letter
Phone £2100 Credit Card and ask to freeze interest for a period
Phone bank with £1540 and ask to freeze interest and monthly payments go towards reducing balance
Phone £1780 high interest loan company and explain change in circumstance and ask to refinance loan for 12 months on reduced monthly payment (don't think they'll freeze interest)You have two options. Either you budget tightly and throw everything you can at the debt or opt for a dmp. Post an soa as others have suggested.

In terms of my other outgoings. Admittedly I'm a smoker and I now want to quit, purely for financial reasons if I'm honest with myself.That would be a good start. Visualise the cigarettes as £10 notes and you setting fire to them. Get help from your doctor with patches etc My phone bill is £80 a month, but thats for both myself and my wife and that cannot be changed for another year yet. My Sky TV & Broadband Bill is currently only £22 a month thanks to a deal I spotted a few months ago, due to go up in October.

I feel like I'm doing everything I possibly can to ride out this financial storm but my balance sheet is still over a hundred quid in the red for the next few months and thats before I even take into account things car insurance if I pass my test! Also if I don't pass my test I have no idea how I will be able to continue to afford lessons / a new test! Running a car is expensive and presumably you still have to buy a car. An impossibility as it stands at the moment. Can you not get to the new job using public transport?

I see the main issue is that high interest loan, if I had that £300 a month back, after some belt tightening I would be fine. When I was 21 I got into a similar position but was earning far less than I am now and got a debt management plan. This worked well for me at the time but now I'm worried if I go down that road it would destroy my chances of getting a mortgage. I'm aware these things go away from the records after 6 years but in 6 years time it'll be starting from a blank slate, not a good standing.

My wife and I want a mortgage in approx 5 years time when we'll both be 35. I honestly don't know what to do. Do I:

a.) Go down the Debt Management Route, say goodbye to any credit facility for 5 years and have a blank slate credit rating when I want a mortgage (and hopefully around a 20-25% deposit)

b.) Somehow find a way to ride out this pain until February, putting strain on my home life and sanity levels until the worst debt is clear and rebuild from there.

My aspiration is to get a mortgage for security for myself and my family. I have two children. I then want to overpay the mortgage with my income and live off my wife's so we can clear a £180-200K mortgage in approx 8 years. Mortgage free by 43 is the slogan. Phase 2 would be getting a mortgage on a buy-to-let or two and have that income and the property value itself be a secondary income stream and ultimately our retirement when we sell up. I feel the next 12 months are crucial to being able to achieve those goals and I'm not starting from a good place, but I'm not sure what else I can do!

I would appreciate some wisedom from the very savvy MSE community!

Thanks!

Realistically I think you need to focus on paying off the debt rather than future goals of mortgages and buy to lets. You need to discuss this with your wife and do a budget. Your debts will impact on her too so this needs to be tackled together. Post an soa, cut back wherever you can and if you are able to restructure the loan or get interest stopped then do this. Repay the most expensive debts first. Most importantly, stop using credit to live. You have to start living within your means and if that means no more driving lessons or no car then you will need to find another way to make the job work.

GarthThomas · 20 May 2017 at 7:08AM

You have expensive phone contracts, does that mean expensive phones? If so, sell them both and go back to a cheap phone.

You are paying fot satellite television, that's a luxury for people who are not drowning in debt, so if that can go, dropping it would help.

If you want to pay back your debts more quickly you have two options, earn more or spend less. Can you get a higher paying job than the one that you have lined up? Can your wife get a better paying job? Can you find Evening or weekend work?

Many people don't do what's needed as they feel that they shouldn't have to, but "should" is a terrible way of looking at the world. It's as though you've fallen down a hole and decide not to climb out as it shouldn't have been there.

Jm90 · 20 May 2017 at 1:50PM

Hi there,

I think the first thing you need to so is speak to your wife, I don't know the reason you haven't yet but maybe she could help in some way, Don't try to deal with this by yourself or hide it.

My husband and myself both have debts, previous to us getting together and whilst together, it helps being able to talk and figure a way out together, because like you, we would love to some day buy our home we currently rent...

We are now taking the steps we need to sort ourselves out debt wise, so hopefully in the future we will own our home...I don't know how long that will be as we will probably always be seen as a risk.

I would hate to think he held this back from me, for what ever reason, I would rather be annoyed/mad for a while but know you have told me the truth than find out in the middle of a shop when you can't get credit somewhere. I imagine it would come up when you apply for a mortgage, you both need to be on the same page as each other, sorting this out together.

I cannot help in regards to your debt situation, you seem to be making to right steps in my opinion, we are in the same situation

cjv · 20 May 2017 at 2:11PM

Telling your partner is probably the biggest thing you can do to help improve your situation. She may be angry at first, but given time I am sure she will understand and appreciate you coming clean.

You will instantly feel a huge weight being lifted off your shoulders and it will allow you to focus entirely on overcoming your debts, with a clear head. You will also be able to tell her your plans to fix this and hopefully get morale support throughout your journey to a debt free future together.

Good luck!

lynz68 · 20 May 2017 at 2:38PM

First of all you need to be honest with your wife. Where does she think your money is going? Does she think you're saving for your future home I hope not because clearly you aren't and that would be cruel to let her believe that.

I wouldn't even think of taking on a car which will only add to your debt.

You need to get your Council Tax sorted ASAP
Stop taking out payday loans they will not help when applying for a mortgage.
The money you will save when payday loans expire can you use that to overpay the loan to reduce the term of it?
The credit cards that over there limit need to be brought down under the limit.
Be aware that any arrangements to pay that you make to pay with lenders will be noted as that on your credit file.

Clearly you have been living beyond your means for whatever reason but you need to get this under control and learn lessons from it or you may well end up in the same situation again with even higher debts.

While it's all well and good to have aspirations of owning a home and other properties you need to live in the here and now. Im not saying you won't be able to fulfill your dreams but 5 yrs may be a bit unrealistic.

Post the SOA people can only really give advice when they see where your money is actually going.

Want a mortgage in 5 years but currently drowning!

Comments

Categories

Get our FREE Weekly email full of deals & guides - and it’s spam-free