newbies to forum thinking of selling home to pay off debts!

Millie321

Hi this is the first post to in these forums I have also posted this in the cccs forums.

We have just dug our heads out of the sands - thanks to the call from the bank warning us to stop spending or lose our accounts!- and realised we are a shameful 40k in debt on credit cards.

My partner and I have 3 children, and have had two incidents of redundancy in the last 8 years and of course 3 lots of maternity leave which has left us with very low incomes each time. We stupidly continued to spend on credit cards and it has spiralled out of control.

We are in the fortunate position that all minimum payments have been kept up with so far, this is the first month that we cannot meet them.

We have received a debt remedy from CCCS and will probably sign up to their lower debt management scheme, which with our current surplus money will take 15 years to pay off. We do expect our income to rise and hopefully reduce that timescale - but still a horrific thought.

We think we have a solution - and that is to sell our home, buying a cheaper home which would release enough cash to pay off all our debts. But I am scared that because we can no longer afford our minimum repayments, we will have too poor a credit rating when the time comes to get a new mortgage.
I need to enquire with our mortgage company if we can transfer the existing one to the new address - does anyone know if this is usually possible? If so do the review income and credit rating?

I know that CCCS have a standard letter to send to banks, letting them know that we plan to sell, so i will definitely use cccs to help us deal with this.

could really do with support and here from others who have done similar,

one extremely worried couple.

DarkConvict

We are in the fortunate position that all minimum payments have been kept up with so far, this is the first month that we cannot meet them.

Not to dishearten you, but that is not a fortunate position to be in. Min payments are so low, i believe it takes 26 years to pay them off on average. Use the snowballing calculator to show how long it takes for all your debts to be paid off, be prepared for a hell of a shock! - http://www.whatsthecost.com/snowball.aspx

As to the mortgage, i honestly can't say anything as i don't know, never had to deal with them myself yet. You have to consider how feasible it is, will the new mortgage be at a decent rate, remember the stamp duty, moving costs, estate agent fees, solicitor fees etc, on a £250K house can cost £8-15K. So is there enough value in the house to do this, will the move make getting to work harder etc.

CCCS are the right people to goto, for a 2nd opinion national debtline, PayPlan and CAB are good as well.

If you go for DMP route, you are likely to get a default for each one of your accounts, and potentially CCJs, although usually they don't bother as they get more (or same) from a DMP than a CCJ anyway.
This will destory your credit file, so yes mortgages will be hard to get as a single default lands you in sub prime lending.

miss_missy

hi
well done on facing up to your debts youve made the first step by talking to cccs another good start would be to post your soa on here and see if everyone can help you reduce your out goings

about selling your house are you sure theres enough equity in the house to pay your debts off? once paid will you stop spending as much? i think your less likely to run up big debts again if you have struggled to pay them off

you do have alot of debt but if your willing to really work hard to get rid you can my OH and I had £65000 debt 3yrs ago when i found this site i did have to confidence to post so just lurked but took in all the advice people were posting and now 3 yrs on our debt is £28000 its not been easy we have given up alot of things and worked hard

post you soa and see if people can help
also post all your debts name your credit cards give you limits, how much you have on them, min payments, if they are on special deals when the deal ends and their aprs

also which bank told you to stop spending ???

good luck

Tixy

You won't be able to transfer the mortgage you have. I don't know if your own lender would be more willing to lend you the same amount again than a new lender. But they would certainly want to re-credit check you and look at your credit score again.

Would you be able to maintain minimums on your debts until your house sold.

How much equity do you have in your house. How much are your debts?
If you were to sell, pay off your debts and pay moving fees, would you still have enough equity left to put down a 25% deposit on a cheaper home?

Its hard to get mortgages with an LTV of more than 75% now, even with a reasonable credit score.

Do talk to CCCS about it. They may also recommend you get advice from a mortgage broker or your own mortgage company.

Millie321

Hi thanks for the replies.

I have done the snowball calculator - realise fortunate was not the correct word! but i meant fortunate that currently our credit rating is good.

We have reduced our income already to the most we can. i will sit down and do the soa this week - but already we have cut satellite, tobacco, energy, food.

Yes we have 110k equity in the house and rough sums - 10k moving costs, 40k pay off debts leaves 60k deposit for new house with exact same mortgage we have at mo. Yes we will stop spending so much as we have had this debt hanging over us for years, we have already realised how stupid we have been and how easily we have cut back recently, we will not take out credit cards again. The problem started when we had no money and had no choice to put things on cards, and then we did just ignore the whole problem. But having been in this situation for years, we don't ever want to put us in this situation again.

The move ultimately could be good, as we currently live in a 'nice' area, and there is a much cheaper village neighbouring us, so we wouldn't go far (still near schools and work) but would probably have a larger house - which we need now we have 3rd child. So there is no emotional attachment or concern by either of us about having to move because we'd see this as positive.

First direct told us to stop spending because our overdrafts were over their limits.

I am so scared right now to make the right decision, i feel under pressure to do something sooner rather than later, as until September i am technically still employed (although on mat leave) I only intend to go back for 3mths to retrieve my mat pay and then leave as we cannot manage childcare with both of us working. Once i quit and can no longer declare my salary we are unlikely to be eligible for a mortgage anyway.

I shall go and do our soa now.

Millie321

Sorry what does LTV stand for?

It did cross my mind to get yet another credit card to help pay the min payments on cards until we sell - to avoid credit rating suffering, but that is just such dodgy ground, because if we were unable to sell we'd just be in worse debt.

Millie321

Household Information[/b]
Number of adults in household........... 2
Number of children in household......... 3
Number of cars owned.................... 2
Monthly Income Details
Monthly income after tax................ 500
Partners monthly income after tax....... 1016
Benefits................................ 0
Other income............................ 597
Total monthly income.................... 2113
Monthly Expense Details
Mortgage................................ 555
Secured/HP loan repayments.............. 0
Rent.................................... 0
Management charge (leasehold property).. 0
Council tax............................. 160
Electricity............................. 40
Gas..................................... 57
Oil..................................... 0
Water rates............................. 30
Telephone (land line)................... 11
Mobile phone............................ 26
TV Licence.............................. 14
Satellite/Cable TV...................... 20
Internet Services....................... 20
Groceries etc. ......................... 400
Clothing................................ 0
Petrol/diesel........................... 220
Road tax................................ 25
Car Insurance........................... 60
Car maintenance (including MOT)......... 20
Car parking............................. 0
Other travel............................ 0
Childcare/nursery....................... 0
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 7
Pet insurance/vet bills................. 0
Buildings insurance..................... 39
Contents insurance...................... 0
Life assurance ......................... 15
Other insurance......................... 20
Presents (birthday, christmas etc)...... 20
Haircuts................................ 0
Entertainment........................... 0
Holiday................................. 0
Emergency fund.......................... 50
Total monthly expenses.................. 1809

Assets
Cash.................................... 0
House value (Gross)..................... 215000
Shares and bonds........................ 0
Car(s).................................. 7000
Other assets............................ 0
Total Assets............................ 222000

Secured & HP Debts
Description....................Debt......Monthly...APR
Mortgage...................... 100000...(555)......0
Total secured & HP debts...... 100000....-.........-
Unsecured Debts
Description....................Debt......Monthly...APR
Barclaycard....................2725......82........14.9
Virgin.........................9424......283.......0
Virgin.........................3847......116.......0
Loan...........................6800......400.......5.7
First Direct ..................8958......265.......18.9
Halifax........................6173......186.......20.9
Total unsecured debts..........37927.....1332......-

Monthly Budget Summary
Total monthly income.................... 2,113
Expenses (including HP & secured debts). 1,809
Available for debt repayments........... 304
Monthly UNsecured debt repayments....... 1,332
Amount short for making debt repayments. -1,028
Personal Balance Sheet Summary
Total assets (things you own)........... 222,000
Total HP & Secured debt................. -100,000
Total Unsecured debt.................... -37,927
Net Assets.............................. 84,073

WASHER

Welcome to MSE, you have had some excellent advice on here.

Are you currently locked into a special deal/rate on your mortgage, if so, this could lead to a redemption penalty if you decided to sell.

I know Tixy has said you couldn't transfer the mortgage (Tixy knows her stuff) but I have had a quick look at my mortgage papers and I can port my mortgage if i wanted to, it was a specific request of mine at the time of taking the mortgage out incase my husband got relocated again, so have a look at your mortgage offer and speak to your lender in around about way and find out your terms and conditions are.


The problem I foresee is that if you cannot meet your debt repayments this month or next and you want to sell the house, the non repayment will affect your credit rating and this could impact on your suitability for a new mortgage deal. You need to take professional advice on this one, (I'm not in favour of Independent financial advisors myself) but take the advice of the CCCS or cab before you cannot meet your payments.

WASHER.x.
An SOA would be great.

Tixy

Millie321 wrote: »

Sorry what does LTV stand for?

It did cross my mind to get yet another credit card to help pay the min payments on cards until we sell - to avoid credit rating suffering, but that is just such dodgy ground, because if we were unable to sell we'd just be in worse debt.

Loan to value (amount of mortgage compare to value of house) but as you've said you would have a £60 deposit if you were looking at a £160k house of so you'd only be about 63% so thats okay.

I agree about the extra credit card, can understand why you thought of it but you could end up in a much worse position if you did that.

Millie321

On our dmp with cccs they were slightly more generous in budgeting money for hair dressers and presents, and so the result was 215 leftover for creditors.

I should point out at this point, that our income has halved since i went on maternity leave in December, hence the sudden halt of ability to pay. But we needed this wake up call to stop the spending anyway.

I plan to return to work for 3mths and recieve a lump mat payout of 4k. 1k of this we plan to service and mot our cars with and the rest will pay off debts.

When cccs are managing your debts - are you able to pay more on the months you have more? (seems like a silly question but i havn't read the answer anywhere in my debt remedy pack).

Thank you all for your time and patience!

Millie321

No we are not locked in on our mortgage thankfully, that expired end of last year.

I will speak to cccs on Monday r.e immediate action to take.

Do you think i'd be mad to get another card to meet the repayments for next few months while we try and sell?