£100k debt in 7 years

planning_ahead_2

Button21 wrote: »

thank you very much to everyone who has wrote back. it is very nice of you all to take the time. can anyone tell me why it is cheaper and show me how to work it out. i just don't understand why it is more expensive when the mortgage rate is much lower? i am not too good with money as you can see.

thanks again

poppy

Hi Poppy

I have copied and pasted the wording below from Martin's teen cash guide - which explains why lower interest rates over a longer period actually work out more expensive.

Should you take a lower rate for longer; or a higher rate for shorter?’
Having taught my cash class this, I asked them the following question: Imagine you have a mortgage, which is a special loan you get to buy a house and because the lender is secure in the knowledge it can take the house back if you can’t repay, it gives you a cheap rate of, say, 6%. Now you need an additional loan for a car and the best interest rate you canfind is 12%. Suddenly, your mortgage lender says ‘Hey, why not borrow that extra £10,000 on top of your mortgage: after all, at 6%, it’s half-price….’
I asked my Teen Cash Class which they thought was better, and understandably they all went for the cheaper rate. This would be good…. except… a typical loan will be paid back over five years, while most mortgages last for 25 years. And you have to take this into account.
Here’s the real answer
• A £10,000 Loan at 12% over 5 years costs £3,300 in interest
• £10,000 added to a mortgage at 6% over 25 years costs £9,200 in interest
As you can see, the higher interest rate loan is much cheaper. Though it does also mean because you need to pay it more quickly you need to repay more a month.

I would recommend reading the whole teen cash guide - it really is worth it for all ages and not just teens.

Good luck with sorting out your debts and moving forward to a debt free life.:beer:

Edit: Also meant to say that you should not remove yourself from the mortgage.

Also - remortaging is a quick fix and you won't learn from your mistakes that way. I was the queen of consolidate....but quickly spent again on the credit cards and overdraft. I am fairly new to being a debt free wannabe, but I have learned so much about my lifestyle, myself, my debts etc since my LBM in January. I am proud to be dealing with my debts and the huge sense of achievement that I can do this without consolidating is amazing. The biggest thing is that I am learning a life lesson in how to manage my finances. Please, please do not remortgage - you have more than enough income to work through and clear your debts without taking on any new debt.

naughtymittens

If you go down the remortage route (which, as others have said, seems a really bad idea!!) don't get yourself taken off the title deeds. I don't understand why the bank would advise that. A mortgage is simply a loan secured against your home, your name on the title deeds is different. Do the bank do this so that you have no interest in the property thus meaning they can repossess it without any problems? *thinking aloud* that must be it. Anyway, that is madness what if you split or your husband dies(God forbid but who knows what's in the future), does he have a will leaving the property to you?

It seems to me that getting a new mortgage is the easy option and you will get back where you started. Clearly consolidating does not work for you. I also think you really need to think what you have spent this money on or this will keep happening. Start keeping a spending diary and look through past bank statements. Have you bought anything you could sell to reduce the debt - a car, boat, etc.

Spirit_2

Hello Poppy

Since 2003 (when you inherited your house) in addition to your income you have spent (in simple terms) at least £14250 every year more than your earnings.

You need to really think about what you have spent it on - because it does not stack up with your SOA of a £400 surplus.

Have you already had a LBM and drastically cut spending so that this will be your future SOA?

You and your husband need to learn from where you are now and how you got yourselves to this point, remortgaging will cost you more in the long run. The way I now look on it is that when we borrow money to sustain our present lifestyle we are 'stealing' from our future.

The 'inheritance' could have been a fantastic platform for stability and financial security - if you only use it as a source of funds for paying for 'stuff ', holidays, habits - then you have nothing to show for it - you have no other assets - you are squandering your opportunity. This will be a bit different if for example you have had to carry out essential repairs on the house e.g. A new roof - consider how much of your spending has been on these.

I am speaking as someone who managed to accumulate a very large debt excluding the mortgage and has had 2 and a half lean years so far as we live well within our means to pay off what we owe.

Good luck

JasX

planning_ahead wrote: »

I think there are probably more people than we realise in similar situations. However, it doesn't matter now what it was spent on, as long as the LBM has clicked into place and the people in debt do something - with the fab support from this forum - to sort it out and move forward to a debt free life.

Thats what I'm trying to press, Seems to me there is no LBM yet in this case as its mostly a friend posting on their behalf, a husband with head firmly in sand and little information beyond that....

...tho at least one of them now apprars to have found their way onto this site finding out how much their remortgaging is costing them each time -> a few more £8,000 cards remortgaged over 30 years at an extra £5k in interest (minimum @3.7%) a pop and you can get through a house's worth of interest quite quickly

planning_ahead_2

JasX wrote: »

Thats what I'm trying to press, Seems to me there is no LBM yet in this case as its mostly a friend posting on their behalf, a husband with head firmly in sand and little information beyond that....

...tho at least one of them now apprars to have found their way onto this site finding out how much their remortgaging is costing them each time -> a few more £8,000 cards remortgaged over 30 years at an extra £5k in interest (minimum @3.7%) a pop and you can get through a house's worth of interest quite quickly

Totally agree - it is not clear that poppy and her partner have had their LBM yet. I was just trying to explain in general that although £107k in 7 years seems a lot of debt to run up (well, ok it IS a lot of debt to run up) - it can easily be done without realising it, and without actually having excessive luxuries. I was trying to say that I've done it and so have probably many others on this site and elsewhere in the country.

g_attrill

gingerwhinger wrote: »

The soa looks great but if they've run up debts of £100k in only 7 years it's really not accurate. The soa is more likely a "wish list" of what they would like their monthly budget to be. In reality there is about £1600 of expenditure unaccounted for (100k over 7 years plus the surplus which hasn't been saved).

I was just about to post this - Poppy needs to post a realistic SOA, and probably do a spending diary and pore over the past 6 months bank statements and find the "missing expenditures". If they genuinely do have that much spare (unlikely) then they aren't in a massive hole, certainly not enough to remortgage again.

Obviously at this rate they could end up having to sell the house and end up with nothing!

happyhaddock_2

Hi Poppy can't really give any advice as new to this myself:) just wanted to reiterate what others have said about consolidation. We've been there and done that so many times, to pay off the outstanding credit cards etc, that we now owe £75000 on the mortgage instead of being nearly mortgage free:(. Of course we paid of the debts at the time and then ran them straight back up again to the tune of £25000:o so please don't go down that route as it is exactly what the banks want you to do:mad: Get in touch with CCCS they've been brilliant with us:)

WASHER

planning_ahead wrote: »

.
Here’s the real answer
• A £10,000 Loan at 12% over 5 years costs £3,300 in interest
• £10,000 added to a mortgage at 6% over 25 years costs £9,200 in interest

I would recommend reading the whole teen cash guide - it really is worth it for all ages and not just teens.

Excellent find Planning ahead - Poppy take note, you and your OH need to address some serious over spending issues, and we will be here to help. I can promise you we will not judge you, but offer support and advice.

WASHER.x.

Button21

happyhaddock wrote: »

Hi Poppy can't really give any advice as new to this myself:) just wanted to reiterate what others have said about consolidation. We've been there and done that so many times, to pay off the outstanding credit cards etc, that we now owe £75000 on the mortgage instead of being nearly mortgage free:(. Of course we paid of the debts at the time and then ran them straight back up again to the tune of £25000:o so please don't go down that route as it is exactly what the banks want you to do:mad: Get in touch with CCCS they've been brilliant with us:)

hi its poppy again. thank you everyone for replying. what is cccs? is that like an iva?

i spoke to the bank again today and they seem pretty certain that remortgaging is our best option. we are in a mess and my husband is pretty stressed about money and it isnt helping our relationship.

i am a bit ashamed to say its probably all my fault we are in this mess. i am really bad with money but over the past 6 months i have been trying to change. just bringing up the kids has been a drain on our finances. but apart from that i dont know where the money has gone. we dont go on holiday or have our own car or any thing else.

i know its silly but i am just thinking that we have had such a hard time recently its maybe time to clear the slate and start again. the bank said we are in a better position than most and said we have a lot of savings in our property. it just seems so tempting that we could clear our feet and maybe have a nice family holiday and then come back to start again afresh. i just think that if we dont do something like that then me and my husband might split upbecause of all the stress and strain we are under. i just dont know what to do for the best.

i just dont see any other way out of this except going for this and starting again but this time doing it property and not getting into this mess again.

i do hear what everyone is saying though and thank you for writing to me. i am just trying to do my best and make the right decision. i am working tonight so will be to use the computer and reply through my friends membership here. thank you.

happyhaddock_2

Hi Poppy, CCCS is a charity debt service who will help you sort things out and WON'T charge you. This time last week I was the same as you didn't know where to turn and praying for a lottery win;). On Friday I happened to look at the CCCS website that someone on here had mentioned, and completed their DEBT REMEDY. It was very easy and straight forward, just make sure you've got your monthly incomings and outgoings to hand, and it gave me an instant decision and figure for repayment of ALL my debts. It leaves you enough money to live on and I really feel as if I've been given my life back and I'm in control:D.

PLEASE think very carefully before adding your debts to the mortgage as it will seem as if everything is taken care of whilst giving you a false sense of security:( and unfortunately down the line you will start spending again, been there done that:o.

Good luck whatever you decide:)