House renovations have landed us in debt

Foundational

First time posting after lurking for a while, and learning a lot from many good people. Now it's time to join in!

We moved house 18 months ago, taking on quite a large mortgage, and we have been caught out somewhat by the amount of work needed on the property. We knew it needed some work but...

We thought we might need to borrow up to £10k, an amount we have managed to pay off before - but that was at a time when we hadn't such a big mortgage. Now we owe £22k on credit cards, amassed in the main to pay for renovation work, the DIY stuff that adds up, etc.

Whilst getting on with life and doing lots of decorating, joinery to make this home our home, we've mistakenly thought that once we'd finished with all this outlay that we would steadily be able to pay off what we owe. We have now realised it's not as simple as that, as we have seen our debt stay pretty much static over the last few months.

We pay over the minimum payments but we have put some things like clothes and shoes on the cards, so this has counterbalanced any progress we have made. As we currently have a 0% Virgin card till May 2010, things could get a lot harder when this offer ends, and our mortgage fixed rate ends in May as well, so were interest rates to go up we'd be struggling (Hopefully they will stay low for a while).

We've nearly finished the renovations. we really want to knuckle down and pay this off, and live our lives. The house is (going to be) really nice, in a really quiet and safe area, but the enjoyment of this is marred by the worry of the debt. We do wonder if we did the right thing but we need to look forward, not back.

Any advice or ideas would be welcome. Here's our SOA:


Statement of Affairs and Personal Balance Sheet
Household Information
Number of adults in household........... 2
Number of children in household......... 2 aged 4 and 6
Number of cars owned.................... 1
Monthly Income Details
Monthly income after tax................ 2520
Partners monthly income after tax....... 174.05
Benefits................................ 0
Other income............................ 0
Total monthly income.................... 2694.05
Monthly Expense Details
Mortgage................................ 1310
Secured/HP loan repayments.............. 0
Rent.................................... 0
Management charge (leasehold property).. 0.36
Council tax............................. 138
Electricity............................. 45
Gas..................................... 58.5
Oil..................................... 0
Water rates............................. 47.33
Telephone (land line)................... 37
Mobile phone............................ 18
TV Licence.............................. 0
Satellite/Cable TV...................... 0
Internet Services....................... 14.67
Groceries etc. ......................... 300
Clothing................................ 30
Petrol/diesel........................... 50
Road tax................................ 10
Car Insurance........................... 31.53
Car maintenance (including MOT)......... 30
Car parking............................. 0
Other travel............................ 0
Childcare/nursery....................... 0
Other child related expenses............ 20
Medical (prescriptions, dentist etc).... 60
Pet insurance/vet bills................. 0
Buildings insurance..................... 37.9 Building and contents combined
Contents insurance...................... 0
Life assurance ......................... 25.56
Other insurance......................... 33.51 Mortgage Insurance
Presents (birthday, christmas etc)...... 60
Haircuts................................ 16
Entertainment........................... 30
Holiday................................. 0
Emergency fund.......................... 0
Total monthly expenses.................. 2403.36

Assets
Cash.................................... 0
House value (Gross)..................... 210000
Shares and bonds........................ 0
Car(s).................................. 7000
Other assets............................ 0
Total Assets............................ 217000

Secured & HP Debts
Description....................Debt......Monthly...APR
Mortgage...................... 175000...(1310).....5.65
Total secured & HP debts...... 175000....-.........-
Unsecured Debts
Description....................Debt......Monthly...APR
Virgin Credit Card.............10515.2...25........0
Co-op Visa.....................9140.12...170.......9.9
Nat West Mastercard............2352.13...54........17.9
Abbey overdraft................1300......10........0
Total unsecured debts..........23307.45..259.......-

Monthly Budget Summary
Total monthly income.................... 2,694.05
Expenses (including HP & secured debts). 2,403.36
Available for debt repayments........... 290.69
Monthly UNsecured debt repayments....... 259
Amount left after debt repayments....... 31.69
Personal Balance Sheet Summary
Total assets (things you own)........... 217,000
Total HP & Secured debt................. -175,000
Total Unsecured debt.................... -23,307.45
Net Assets.............................. 18,692.55
Created using the SOA calculator at 'Make Sense of Cards' website (sorry, it seems we can't include the link as this is our first post).
Reproduced on Moneysavingexpert with permission, using IE browser.





Many thanks,

Foundational

cocalls

morning didnt want to read and run, one or two things re your soa are you sure you dont get any benefits everyone with a child gets child benefit! also you haven't put down tv licence, and are you sure your management charge is only 36p?
Apart from that your aprs are relavily low-maybe you could try and get the 17.9% down, £60 for medical stuff is this for prescriptions dentist can you find it cheaper get a monthly prescription charge?
Have yu got anything to ebay etc? I think its good you've had your LBM now before it gets too bad, but if you're struggling now then yes come may you will have probs but if you really pull your belts in now you should be ok good luck!

gfplux

Hello foundational,
Well done for posting your SOA.

You have done this just in time as it may well be that interest rates will rise in 2010 and with a mortgage that is nearly 50% of your income you would end in deep deep trouble unless you fix your other debts very quickly.
You must and I hope you will use this window of time to sort this out.

TV Licence - This is missing from your SOA
Life insurance £25.56 you have to consider how high this is in priority given you have mortgage insurance at £33.51
Presents you have a problem that needs fixing and presents at £60 per month should be money going towards your debt.

You have to realise that getting this sorted is going to be painful. The more pain you suffer NOW will mean less pain in the future.

Start a spending diary TODAY to find out exactly where your money goes. That knowledge will shock you but also give you power. You only need a pen and a paper.


If you have online banking you should be checking your balance EVERY day. If you do not have internet banking get it today.


NEVER carry your credit cards with you. Leave them at home. If you miss buying something as the card is not available maybe the next day you won't want to buy it or the “need” will turn into just a “want”


Good Luck
Do not put of till tomorrow what can be done today.

Pollycat

Hi & welcome
Your water rates seem high - is this metered?

If not, it may be worth changing to a meter if this is possible.
Check out the 'Water' sub board under 'Utilities'.

There's a 'water meter - pros & cons' thread that you might find useful.

There's a guy who posts on there (Cardew) who was very helpful when I was looking into having a water meter fitted in my parent's warden-controlled flat.
Severn Trent Water were quite helpful too and it was easy to sort out.
It's saved them loads of money.

Good luck.

urg123

Foundational wrote: »

First time posting after lurking for a while, and learning a lot from many good people. Now it's time to join in!

We moved house 18 months ago, taking on quite a large mortgage, and we have been caught out somewhat by the amount of work needed on the property. We knew it needed some work but...

We thought we might need to borrow up to £10k, an amount we have managed to pay off before - but that was at a time when we hadn't such a big mortgage. Now we owe £22k on credit cards, amassed in the main to pay for renovation work, the DIY stuff that adds up, etc.

Whilst getting on with life and doing lots of decorating, joinery to make this home our home, we've mistakenly thought that once we'd finished with all this outlay that we would steadily be able to pay off what we owe. We have now realised it's not as simple as that, as we have seen our debt stay pretty much static over the last few months.

We pay over the minimum payments but we have put some things like clothes and shoes on the cards, so this has counterbalanced any progress we have made. As we currently have a 0% Virgin card till May 2010, things could get a lot harder when this offer ends, and our mortgage fixed rate ends in May as well, so were interest rates to go up we'd be struggling (Hopefully they will stay low for a while).

We've nearly finished the renovations. we really want to knuckle down and pay this off, and live our lives. The house is (going to be) really nice, in a really quiet and safe area, but the enjoyment of this is marred by the worry of the debt. We do wonder if we did the right thing but we need to look forward, not back.

Any advice or ideas would be welcome. Here's our SOA:


Statement of Affairs and Personal Balance Sheet
Household Information
Number of adults in household........... 2
Number of children in household......... 2 aged 4 and 6
Number of cars owned.................... 1
Monthly Income Details
Monthly income after tax................ 2520
Partners monthly income after tax....... 174.05
Benefits................................ 0
Other income............................ 0
Total monthly income.................... 2694.05
Monthly Expense Details
Mortgage................................ 1310
Secured/HP loan repayments.............. 0
Rent.................................... 0
Management charge (leasehold property).. 0.36
Council tax............................. 138 Is this over 12 months?
Electricity............................. 45
Gas..................................... 58.5
Oil..................................... 0
Water rates............................. 47.33 As above, is this metered?
Telephone (land line)................... 37 Are you on the best package
Mobile phone............................ 18
TV Licence.............................. 0
Satellite/Cable TV...................... 0
Internet Services....................... 14.67 There are some cheaper deals out there.
Groceries etc. ......................... 300 Look at reducing this by £50 by meal planning; batch cooking; packed lunches etc.
Clothing................................ 30 This is hard to reduce when you have little ones but see if you can use freecycle and hand-me-downs to keep you going.
Petrol/diesel........................... 50
Road tax................................ 10
Car Insurance........................... 31.53
Car maintenance (including MOT)......... 30
Car parking............................. 0
Other travel............................ 0
Childcare/nursery....................... 0
Other child related expenses............ 20
Medical (prescriptions, dentist etc).... 60
Pet insurance/vet bills................. 0
Buildings insurance..................... 37.9 Building and contents combined
Contents insurance...................... 0
Life assurance ......................... 25.56
Other insurance......................... 33.51 Mortgage Insurance
Presents (birthday, christmas etc)...... 60 Can this be reduced? Look at other ways of reducing the costs - home made gifts. There is a neutral gift page on one of the forums here. Worth a look. An idea for the future is to buy your gifts in the sales - I keep these in a present box that I 'shop' in when I need to get a birthday/christmas gift.
Haircuts................................ 16
Entertainment........................... 30
Holiday................................. 0
Emergency fund.......................... 0
Total monthly expenses.................. 2403.36

Assets
Cash.................................... 0
House value (Gross)..................... 210000
Shares and bonds........................ 0
Car(s).................................. 7000
Other assets............................ 0
Total Assets............................ 217000

Secured & HP Debts
Description....................Debt......Monthly...APR
Mortgage...................... 175000...(1310).....5.65
Total secured & HP debts...... 175000....-.........-
Unsecured Debts
Description....................Debt......Monthly...APR
Virgin Credit Card.............10515.2...25........0
Co-op Visa.....................9140.12...170.......9.9
Nat West Mastercard............2352.13...54........17.9
Abbey overdraft................1300......10........0
Total unsecured debts..........23307.45..259.......-

Monthly Budget Summary
Total monthly income.................... 2,694.05
Expenses (including HP & secured debts). 2,403.36
Available for debt repayments........... 290.69
Monthly UNsecured debt repayments....... 259
Amount left after debt repayments....... 31.69 Are you really left with this - you need to keep a spending diary. YOu will be surprised at this!
Personal Balance Sheet Summary
Total assets (things you own)........... 217,000
Total HP & Secured debt................. -175,000
Total Unsecured debt.................... -23,307.45
Net Assets.............................. 18,692.55
Created using the SOA calculator at 'Make Sense of Cards' website (sorry, it seems we can't include the link as this is our first post).
Reproduced on Moneysavingexpert with permission, using IE browser.

Many thanks,

Foundational

I have made a few comments above. The other thing to do is look for ways to up your income

• Free scratchcards and bingo sites
• Use quidco and other cashback sites for all purchases
• Sell what you can on amazon; ebay; car boot sales

Good luck

urg x x

Mrs.D

Welcome to MSE!

We got into debt for exactly the same reasons as you, so I know exactly how you feel. Fortunately we're at the stage now where everything is 'livable', so we can focus on debt repayment, before starting on the 'nice to have' stuff.

I'd second Urg. It's amazing how scratchcards, quidco etc adds up over the year.

Would it be possible for your partner to work more hours or take on a 2nd job for a few months in order to ease the cashflow? Loads of shops etc are taking people on for Christmas and they're always looking for people to work evenings or weekends (if you have childcare committments during the day).

Good luck

Mrs.D

Foundational wrote: »

Secured & HP Debts
Description....................Debt......Monthly...APR
Mortgage...................... 175000...(1310).....5.65
Total secured & HP debts...... 175000....-.........-
Unsecured Debts
Description....................Debt......Monthly...APR
Virgin Credit Card.............10515.2...25........0
Co-op Visa.....................9140.12...170.......9.9
Nat West Mastercard............2352.13...54........17.9
Abbey overdraft................1300......10........0
Total unsecured debts..........23307.45..259.......-

Just another thought.. :rolleyes:

What's your credit file like? If you haven't already done so, you can check it for free by following Martin's advice.

Are you paying £10 per month for your overdraft? Some banks will offer a free overdraft plus other benefits (e.g. cash signup bonus) so might be worth looking at switching? And if you do, have a look at a cashback site (e.g quidco) first.

The Natwest card has a very high interest rate. If your credit record is still ok, you might be able to still get a 0% deal to balance transfer?

Treadmill

it looks to me like you need to up yor income, is it pssible to get an evening or weekend job ?

Foundational

Thanks so much for your quick responses and advice. There's tons of stuff here that we will explore. First of all, though, some clarification on our SOA:

My wife's income is actually Child Benefit and Child Tax Credit. She's a stay at home mum. (So we will consider evening or weekend work to boost our income at this time - thanks, Mrs D and Treadmill).

We don't have a TV, haven't done for years, so that's why there's no entry for TV licence.

Medical seems high - we didn't want to underplay anything so we set this figure based on the last year - we both had dental work done. We do hope it will be much lower this year.

Same applies to the figure we put down for presents. We think that's what we have been spending over the year. We have already cut back and found some bargains, plus done some home made things. Thanks for the ideas about this. (Thanks, urg)

Council Tax and Water are both paid over 10 months, giving payment free months in Feb and Mar (we'll make the most of that..) - so the figures we put in were the actual payments we make. Sorry if this makes the SOA less accurate in a way.

Now for the other suggestions and advice.... Really grateful to you, gfplux, for the 'big issue' warning about interest rates and the need for us to take action urgently. This is a big worry for us. We were wondering whether to apply for another 0% card now (Halifax perhaps) or wait, but we now think we should get straight on to this to transfer some of the highest interest debt. We've always had an excellent credit score, it would seem but dunno whether we could get another card with our debt so high now.

We haven't been doing a spending diary, but we will begin.

Bingo/scratchcards and quidco - we've never looked at any of those so we will do some research.

We're a bit wary of water meters as a fanily with 2 kids, with baths and lots of washing etc. We will look into it though - thanks for the info, Pollycat. Have any families managed to make savings with a meter?

Phone and internet packages we will look at.

Life insurance is probably a luxury on top of mortgage insurance so it's going to have to go.

I can see there is going to be some pain involved in getting through this. Thanks for the warm welcome - you guys have helped a great deal!

Foundational

Pollycat

Foundational wrote: »

We're a bit wary of water meters as a fanily with 2 kids, with baths and lots of washing etc. We will look into it though - thanks for the info, Pollycat. Have any families managed to make savings with a meter?

You're right to be wary of water meters, and obviously it's just 2 elderly people in my parent's case but if I remember correctly when I rang Severn Trent they sent some literature where you put in the number of times you use the washing machine, have baths/showers etc and it gives you an indication of whether you'd save or not.

I also have a vague recollection that you can change your mind within a year of having a meter fitted and revert back - may be wrong on this though.
Worth checking it out - hope you can save money.

Regards

Foundational

An update on our progress since last weekend when we got some good advice from MSE folks...

We've started a spending diary and after just one week, it feels like it makes a difference. We've set a groceries budget lower than our previous estimated spend - £200 pm, let's see if we can do this.

Got a couple of real bargain Christmas presents and generally being really careful in this area, pitching what we will buy a lot lower just for immediate family. We're still considering temp extra work, better deals on phone etc. But we've decided against looking into water meters we don't reckon we would save as a family of 4.

To reduce the interest and try to speed our debt repayment, we applied online for the Halifax card with 0% for 12 months - but have got turned down, received the letter today. Can't say I'm surprised, we are carrying too mcuh borrowing, and it occurred to me too late that this might happen, but then leave a record on our credit file. Ah well, I've just enacted Plan B and rung Capital One: I have a card with them unused since Feb this year. They offered 9.94% BT with a 0.79% fee to shift what we owe to Nat West (at 16.9%). Tried to persuade them to go lower than this but didn't succeed - still a help, so that's now going through.