What's the best thing to do??

Julie67

We are just about to put our house on the market, as a way of paying off all the debt and starting again. We are not behind with anything yet but it is getting very close to the bone. We really don't want to sell right now and would stay put for another couple of years ideally.
My OH thinks we should try and remortgage and borrow a further 15,000 which we would use to pay off a private loan. We currently pay £1227 a month on this and £500 to the private loan as this was borrowed to put a deposit down (I know stupid )
But if we could remortgage we would be 400 a month better off according to the figures quoted which we could pay off the outstanding debt (around £27,000) much more quickly and stay in the house.
Any help much appreciated, I have completely lost faith in myself to make an informed decision!

shell_girl

What would happen if one of you was suddenly unable to work? If I've understood correctly, you're planning to make 15k of currently unsecured debt into secure debt on your home?
Wouldn't this mean that essentially if you reach a position when you're unable to meet debt repayments, you have less equity in your home if it comes to selling?

Are you able to post your (or link to if previously posted) SOA?

Julie67

Statement of Affairs & Personal Balance Sheet
Summary
Monthly Budget Summary

Amount(£)

Total monthly income

4,125

Monthly expenses (incl. HP & secured loans)

3,214.95

Available for debt repayments

910.05

UNsecured debt repayments

1,085

Amount short for making debt repayments

-174.95

Personal Balance Sheet Summary

Amount(£)

Total Assets (things you own)

268,000

Total Secured & HP Debt

-225,000

Total Unsecured Debt

-40,580

Net Assets

17,420

Household Information
Number of adults in household

3

Number of children in household

1

Number of cars owned

2

Income, Expense, Debt & Asset Details
Income

Amount(£)

Monthly income after tax

2045

Partners monthly income

2000

Benefits

80

Other income

0

Total monthly income

4125

Expenses

Amount(£)

Mortgage

1127

Secured/HP loan payments

349

Rent

0

Management charge (leasehold property)

0

Council tax

150

Electricity

61.5

Gas

61.5

Oil

0

Water Rates

40

Telephone (land line)

30

Mobile phone

100

TV Licence

11.95

Satellite/Cable TV

35

Internet services

10

Groceries etc.

400

Clothing

50

Petrol/diesel

340

Road tax

28

Car Insurance

210

Car maintenance (including MOT)

0

Car Parking

5

Other travel

0

Childcare/nursery

0

Other child related expenses

50

Medical (prescriptions, dentists, opticians etc.)

10

Pet Insurance/Vet bills

0

Buildings Insurance

33

Contents Insurance

33

Life Assurance

0

Other Insurance

0

Presents (birthday, christmas etc.)

20

Haircuts

20

Entertainment

20

Holiday

0

Emergency Fund

20

Total monthly expenses

3214.95

Secured & HP Debt Description

Debt(£)

Monthly(£)

APR(%)

Mortgage

210000

(1127)

6.4

Hire Purchase (HP) Debt

15000

(349)

11

Secured & HP Debt totals

225000

-

-

Unsecured Debt Description

Debt(£)

Monthly(£)

APR(%)

HSBC Cred Card

8780

230

19

HSBC Loan

9400

210

12

Private Loan

13000

500

2

Halifax Cred Card

1600

130

15

HSBC Overdraft

2000

15

6

Private Loan

5800

0

0

Unsecured Debt totals

40580

1085

-

Asset Description

Value (£)

Cash

0

House Value (Gross)

250000

Shares and bonds

0

Car(s)

18000

Other assets (e.g. endowments, jewellery etc)

0

Total Assets

268000

shell_girl

Your car expenses seem quite high- especially the insurance. Have I read it right as £210 per month for insurance and £340 for petrol?

dallas85

Hi Julie!

Well done for starting a diary - I started one a few days ago and have found it so so helpful, and everyone very supportive.
Have you watched Economy Gastronomy? You can watch it on IPlayer for free! It's a great programme and shows how families can reduce their food bills. If you got your grocery bill down to £225 per month instead of £400 you would have enough to cover the deficit in your current SOA.

Katie-Kat-Kins

You are less than £200 short for your repayments at the moment, you can easily save that from you expenses and meet all your minimum repayments so I would really avoid making these currently unsecured debts secured.

By all means continue looking to downsize but I wouldn't remortgage for the purpose of "consolidating your debt".

I'll do another post with specific comment on your SoA but the savings are there to be made with just a little effort.

Good look and enjoy frugal living!

sarahs999

DOn't borrow more money. You're just going the wrong way and it will mean you repay more in the end. Try to figure out with what you've got - there'll be some more detailed analysis later I'm sure, frmo someone with a bit more time than I have right now! A thought - who's the third adult living in your home? Don't they contribute anything financially? They really ought to given your situation.

dancingfairy

Would defnitely avoid consolidating - as someone has said if you become ill or lose your job you could lose the house. I have also heard that if you need to claim help with the mortgage that you can only get help with what's the mortgage rather than any extra secured loans - so again that would leave you in a very bad position.
Also what has happened to an awful lot of people is they think - great the debts sorted -I'll have all this free money each month and before they know it they owe even more and take out more credit cards and loans and the more you do this the harder the situation becomes to sort out.

Right let's have a look at the SOA:



)Mortgage

1127

Secured/HP loan payments

349

Rent

0

Management charge (leasehold property)

0

Council tax

150

Electricity

this and the gas seem a bit high - can you switch them? 61.5

Gas

61.5

Oil

0

Water Rates

40

Telephone (land line)

30

Mobile phone

this really is high - how many mobiles have you got? you really should be looking at 25 pounds or less each and you can get some good deals for this much -I think Tesco do an unlimited package for 25 or 30 punds a month. 100

TV Licence

11.95

Satellite/Cable TV

you need to look at downgrading this - especially if it is a choice of this or to sell your home 35

Internet services

10

Groceries etc.

that's a lot of money but you have quite a few mouths to feed don't you - would head over to the old style board for hints and tips to see if this can be lowered at all. 400

Clothing

50

Petrol/diesel

340

Road tax

28

Car Insurance

is this the best deal around? 210

Car maintenance (including MOT)

0

Car Parking

5

Other travel

0

Childcare/nursery

0

Other child related expenses

what's this? can you really justify it? 50

Medical (prescriptions, dentists, opticians etc.)

10

Pet Insurance/Vet bills

0

Buildings Insurance

seems quite high especially as you have contents seperately - can you shop around and see if combining them works out cheaper 33

Contents Insurance

33

Life Assurance

is this covered through work? might be worth looking at some kind of life insurance if you have kids ? 0

Other Insurance

0

Presents (birthday, christmas etc.)

20

Haircuts

20

Entertainment

20

Holiday

0

Emergency Fund

20

Total monthly expenses


That's my thoughts for now. Will have a think what might be best for you.
df

Katie-Kat-Kins

Julie67 wrote: »

Statement of Affairs & Personal Balance Sheet
Summary
Monthly Budget Summary

Amount(£)

Total monthly income

4,125

Monthly expenses (incl. HP & secured loans)

3,214.95

Available for debt repayments

910.05

UNsecured debt repayments

1,085

Amount short for making debt repayments

-174.95
That isn't much of a defecit to make up really!

Personal Balance Sheet Summary

Amount(£)

Total Assets (things you own)

268,000

Total Secured & HP Debt

-225,000

Total Unsecured Debt

-40,580

Net Assets

17,420

Household Information
Number of adults in household

3
Does adult number three pay keep? If not they should do.

Number of children in household

1

Number of cars owned

2
I can see that there is HP are they both on HP? Is it an option to sell/return one or both and down size these to free up some capital and reduce your expenses? Swapping for a smaller greener model could halve your fuel bill and your tax and insurance.

Income, Expense, Debt & Asset Details
Income

Amount(£)

Monthly income after tax

2045

Partners monthly income

2000

Benefits

80

Other income

0
Keep for the other adult????

Total monthly income

4125

Expenses

Amount(£)

Mortgage

1127

Secured/HP loan payments

349

Rent

0

Management charge (leasehold property)

0

Council tax

150

Electricity

61.5
You could probably be a bit more frugal and save on gas and electric, check your bills are based on actual use and cut back on what you use, see the gas and electric board for advice.

Gas

61.5

Oil

0

Water Rates

40

Telephone (land line)

30
You can cut that, there are bundled deals out there that include internet for less than this so shop around. Make sure you aren't making calls other than your free ones

Mobile phone

100
That is frankly a shocking amount to spend on mobiles for the two of you. Switch to PAYG and use them just for incoming/emergencies if you are outside contract. If still in contract phone your provider, tell them you are in financial hardhsip and ask to be switched to the cheapest tarriff available (normally £15 - £20)

TV Licence

11.95

Satellite/Cable TV

35
This is a luxury and needs to go, switch to freeview/freesat and you'll still have hundreds of channels and will have £35 towards those debts.

Internet services

10
Why are you paying this on top of phone and tv? You should get them all included together.

Groceries etc.

400
That is quite high for four people, downshifting on all your brands will knock £50 off this easily, you can cut more by meal planning, batch cooking, shopping to a strict list and cutting out luxuries. Check out the O/S board for tips, there are people on there feeding a family of four for £25 a month!!!

Clothing

50
You don't NEED to spend this every month, go essentials only for a few months, and shop from your wardrobes. Sell anything you don't wear on ebay.

Petrol/diesel

340
Yikes that is high! We spend less than that and I commute 100miles a day!!! Why is this so high? Think about switching to a more economical car (plenty do more than 60mpg now) cut your usage and drive efficiently, read martin's article for advice.

Road tax

28

Car Insurance

210
Again that is really high, most people pay about that per year!!!! Follow the advice in Martin's article and compare switch and save now, don't wait for renewal, there are big savings here!

Car maintenance (including MOT)

0

Car Parking

5
Can you cut this by being careful about your usage and parking in free zones?

Other travel

0

Childcare/nursery

0

Other child related expenses

50
What is this? Is it pocket money? If so reduce it and get your child to earn it via a paper round or babysitting.

Medical (prescriptions, dentists, opticians etc.)

10
What is this? If it is prescriptions get a pre-payment certificate, it will be cheaper, if it is contacts use your specs more and read teh cheaper contacts article.

Pet Insurance/Vet bills

0

Buildings Insurance

33
Your biuldings and contents together are high, you should be able to halve this by comparing & switching.

Contents Insurance

33

Life Assurance

0

Other Insurance

0

Presents (birthday, christmas etc.)

20
Try to save on this by using loyalty points etc and having a strict budget for all the presents you need.

Haircuts

20
Investigate colleges for very cheap haircuts, try going a week or two longer between cuts or using a cheaper hairdresser.

Entertainment

20
Can you reduce this? You want to do some fun things but can you do more free stuff?

Holiday

0

Emergency Fund

20
What do you do with this? Do you have some savings that could pay of a chunk of the debt? Consider using half your emergency fund to pay off debts everytime it hits £200. It is better to pay off debts than to save.

Total monthly expenses

3214.95

Secured & HP Debt Description

Debt(£)


Monthly(£)


APR(%)

Mortgage

210000


(1127)


6.4

Hire Purchase (HP) Debt

15000


(349)


11

Secured & HP Debt totals

225000


-


-

Unsecured Debt Description

Debt(£)


Monthly(£)


APR(%)

HSBC Cred Card

8780


230


19

HSBC Loan

9400


210


12

Private Loan

13000


500


2

Halifax Cred Card

1600


130


15

HSBC Overdraft

2000


15


6

Private Loan

5800


0


0

Unsecured Debt totals

40580


1085


-

Use the snowball calculator to work out the best way to pay these off.

Asset Description

Value (£)

Cash

0

House Value (Gross)

250000

Shares and bonds

0

Car(s)

18000

Other assets (e.g. endowments, jewellery etc)

0

Total Assets

268000

See lots of things you can do to save. I reckon that with a bit of work you can shave £200 off your expenses allowing you to overpay by £25. If you up your income at the same time the debts will come down faster and maybe you will be able to afford to stay in your house.

dancingfairy

There are a number of options available to you which is good, here in no particular order they are:
1) bankruptcy
2) IVA - sort of a half way house to bankruptcy as far as I understand it.
3) sell your house - the problem is unless you can sell it for more than your mortgage and unsecured debts won't you still have debts to pay? and you will need to look at things like deposits, credit checks, check in fees, removal costs, estate agent costs, legal fees etc, etc.
4) live frugally and within your means and sart paying back the loans and cerdit cards, consider getting a second job, selling things on ebay/car boots, etc - anything to earn a bit of cash (well legal things obviously)
5) consider going interest only or taking a holiday on the mortgage or loans to give yourself a bit of breathing space - I would not recommend doing this without getting advice as to how it all works though so please be careful

I am sure there are loads more options but those were off the top of my head. I think your best bet would be to contact National Debtline or CCCS or your local CAB and discuss your options with them - you can always ask on here and seek FREE professional advice - please only go with a company Martin recommends and avoid a company who charge you for their help. You need all the money you can get right now and paying someone when you can get free advice is mad.
df

Katie-Kat-Kins

Your defecit is so small that you wouldn't be considered for a Debt Management Plan.

IVA or Bankruptcy would be madness when your debts are entirely manageable if you get tough with yourself and cut out the luxuries.

Going interest only on the mortgage until you are able to sell would be a sensible option, but to be honest you don't need to. You just need to start living within your means and not taking credit to buy junk you don't need on the never never!

Start a spending diary to moniter what you are spending every penny on and before you spend anything ask yourself do I NEED it or WANT it. If the answer is WANT not NEED don't buy it. If it is NEED ask yourself whether you can get it elsewhere cheaper or on a better offer.

Once you get out of the sort of "I deserve...." and "soandso's got one...." mindset and into the can I afford it mindset you will find your house and your essential expenses more manageable.