Newbie Financial Advice Please

DevonGal_2

Hi all, I have been a reader of these boards for sometime but always a little apprehensive about posting our position, but having seen the range of advice available on this site I figured I would take the plunge and see what advice is on offer.

Our debt situation is as follows

Loan - Monthly £210.57 - Outstanding £8843 - 9.9%
Egg Card - Monthly £100.00 - Outstanding £5200 - 0% till Nov 06
Car HP - Monthly £155.20 - Outstanding £5266 13.7%
Car HP - Monthly £79.64 - Outstanding £4278 6.5%
Loan - Monthly £37.64 - Outstanding £941 11.9%


Monthly Total: £583.05

We have just finished paying off another substantial loan which was costing us £860.00 per month.

Our income situation is:

Husband – Monthly £2100
Me – Monthly £560.00
Child Benefit and Tax Credit £150.00

Total Net Monthly Income £2810

Our Monthly outgoings for utilities insurance food petrol etc amount to £1036.43

This gives a total monthly outlay (inc debt repayment) of £1619.48

With our other loan now paid off this should leave us £1190.52 a month disposable income.

We desperately want to move out of our rented house and buy our own property, we have 2 children of differing sexes and the average price for 3 Bed Houses in our area is £160000. This is towards the top end of what we believe we can afford.

Our indecision lies in whether we should concentrate this extra cash in making ourselves debt free – something we believe could achieve within 18 months or whether we buy a house now, we could afford mortgage repayments and cash would be steadily released as the other loans are paid off. I am concerned that if we wait too long we will be priced out of the market and find ourselves unable to buy a property. We are both in our mid 30s and have been a bit frivolous in the past but middle age sanity is catching up with us and we wish to redeem some of youthful foolishness. To add to this my husband only has 5 years remaining on his present contract and we have to assume that his wages could half by 2011.

I should also add that we now adopt a cash only policy on all other aspects of our life and if we cannot afford it we don’t have it.

Thanks for any advice you could offer.

rchddap1

I assume that in your outgoings you have catered for things like car tax, birthday presents, christmas expenses, emergency breakages (eg, cooker / washing machine) etc.... It is amazing what can be left out of these calculations if you don't keep an eye on it.

If you have to assume that you're going to lose half of your OH's wages then I'd be tempted to focus on clearing those debts. That way if / when it does happen you won't have any nasties lurking over your head and can carry on regardless (so to speak).

Or of course you get that huge house, only pay the minimums on your debts, and if your OH takes a pay cut you could have.....a 'minor cashflow problem'.

However it does depend on how much rent you're paying, and how much you expect to pay on a mortgage. Also you will need some savings .... ideally for a deposit and to pay the legal & search fees associated with buying a house. Do you have these?

Annie_Fanny

What are the penalties on your loans/car HPs for overpayment or settlement?

ms_london

Hi. Welcome to MSE!!

Thanks for posting a list of your debts. Would you be able to break down your other outgoings in the same way? I.e Food £200, Gas £50, Elec £50 etc etc - perhaps you could trim these back without realising it!!

Well done on getting rid of that pesky loan - £860 a month - wow!! I bet you feel relieved thats out of the way!?

I would suggest concentrating on clearing your debts for the time being. If you apply for a mortgage with debts, isnt it true that they will loan you less money on account that you are already committed to £X a month? Perhaps I am talking gibberish. But house prices may be more affordable 18 months/2 years down the line when you are debt free, so you might be able to get more for your money.

Are your loans/HP agreements flexible? Would they allow for overpayments? Could you look into this? If not then I suggest you try and clear your CC. What are the chances of you being able to get another 0% card come Nov? Could you balance transfer the HP/loans onto a CC? (I dont know if this is even possible)..

If your hubbies wages could half by 2011, then definately clear your debts first. You wouldnt want to be in that position with debts and a mortgage hanging over your heads - at the end of the day you never know whats around the corner!!

Well done for posting - it wasnt all that bad was it :0) xx

DevonGal_2

All,

Thanks for quick responses and in answer to some of your questions:

The outgoings do include all sundries - christmas savings etc. Using a lot of the tips from this site we have managed to save a fair bit in both utilities telephone, insurance etc. :T

None of the loans incur early repayment charges, though I need to check with my bank for overpayments. I am hoping come November to transfer CC balance to another 0% card.

We have £10000 available to us for house deposit but this is tied in to a house saving scheme and can only be used for house purchase - sadly we cannot pay our other debts with it. Our current rent is deducted at source so it does not currently factor into our equations, but should we buy our own house then we would see an extra £400 a month (less tax) on my OH income.

My OH wage cut is not definite but something we have to bear in mind, I only said his wages could half, based on the average earnings in this area. In five years time however my children will be old enough to allow me to work fulltime so I can increase my monthly earnings.

Our concern with houses is that 3 years ago a 3 bed semi cost £80000 now our 'big house' as someone put it is a 3 bed mid terrace which start at £154000. I just can't see house prices dropping and if they continue to increase then I am concerned about affordability.

Grateful for anymore opinions.

CLAPTON

the trouble with mid terrace houses is that they often need new kitchen, bathrooms , ch boiler, carpets curtains etc etc which has to be budgeted for. many people buy at the limit of affordability and then need to use cc for all the extras.

i think i would try to pay off the maximum possible over the next six months..presumably you could clear the 13.7% HP debt and review then...if you really have been paying off at a rate of 1190 then review the mortgage market at that time and see what you can afford

also you have two car HP arrangements totalling about 10,000 ..have you considered returning them and buying somthing arround a grand of two freeeing up a very useful sum..this site might be useful

http://www.direct.gov.uk/MoneyTaxAndBenefits/ManagingDebt/DebtsAndArrears/DebtsAndArrearsArticles/fs/en?CONTENT_ID=10013226&chk=1uPl5U