Short term into manageable long term debt

Legacy_user

I've recently bought a house borrowing £96,500 at 113% of the value (£85,000) at fixed rate of 5.99% for 5 years with Northern Rock.

I've since renovated the house and its value is now £105,000.

I have £16,000 of debt at 0% across 2 credit cards and 3 overdrafts and I'm not going to be able to keep this at 0% for very much longer and my credit score isn't sufficient enough to allow me to open another credit card account.

I would like to borrow more on the value of my house. Reducing the % to 100 would release £8,500 and keeping it at 113% would release £22,700 so it would be feasible to clear all my outstanding debt.

I was wondering if Northern Rock would be likely to waive their fees in order to make it worthwhile for me so that they would increase the interest received from me. Despite the increased monthly payments I would be in a better position to meet those payments as I would not have the same pressure from short term debts. If it is in fact possible to negotiate a better deal what is the best way to go about this?

Otherwise is there a more sensible option for clearing the short term debts that I could take with a poor credit score?

lynzpower

This sounds like a really bad idea to me. Am I right in thinking that you have already consolidated debt onto the mortgage as the mortgage is worth 113%- or did you take a bigger mortgage to fund douing the house up? it sounds as if you are heading into negative equity. You say your house is now worth more. this is very dodgy territory im afraid, as its only worth what someone is wiling to pay for it. What you might see other houses on your road up for sale at does not mean thats what they, or you would get for yours.

the best and cheapest way of getting rid of debt is not to shuffle it about, but to pay it off. We can help you find spare money in your budget to do so.

I recommend you read Southern Scousers sticky "first time posters" and so an SOA, of your budget.

We can then look at your options and advise accordingly

Welcome :wave:

chevalier

I know it is obvious, but you can do two things to help you out. One is cut your outgoings, the other is to raise your income. If you post your SOA, as lynz (*waves to Lynz hope you are feeling better*) has suggested we can find ways of cutting your outgoings

As regards income, can you get a second job, ebay everything that is not nailed down? Do car boots, have a garage sale? You could also sign up to the money back sites like Quidco and Greasypalm etc, if you need eg any insurances renewing, you do it via the site and get cash back.

Also I am assuming that the three overdrafts are with three banks? Have you looked into reclaiming you bank charges for the last 6 years? There is a thread about this, and I am sure someone will be along in a minute with the link.....

Best of luck
chev

lynzpower

:wave: back to chev- feeling ok, hot tired, but alive

System

Cheers,

I have several job applications in the pipeline and am working overtime to increase income already - much more time available now renovations are complete. Outgoings are already reduced as much as possible.

I've not paid any bank charges as it's all interest free overdrafts from being a student but these will stop being interest free in the next 6 months.

My shuffles have kept £1000s interest free on credit cards so far but am reaching the limit of this now.

Long term I'm not too worried...I've racked up the debt self funding a year's study and house renovations (borrowed extra for basement conversion...which should add good value). I just want to get rid of the stress of juggling debt short term...even if I pay more interest long term (ie. over 35 years on the mortgage) and know that I have to pay x amount each month. I can then overpay on the mortgage/save hard once new I get more work to repay the extra borrowing. The actual mortgage is 95% I think and they tie in a personal loan to allow up to 125% at the same rate.

What's SOA? I'll do more reading as suggested and speak to Northern Rock.

Cheers again for the advice!

Dave

System

Oh yeah...car boot is happening already on Sunday and ebay has kindly rid me of a load of things!

climbgirl

davegillian wrote:

Long term I'm not too worried...I've racked up the debt self funding a year's study and house renovations (borrowed extra for basement conversion...which should add good value). I just want to get rid of the stress of juggling debt short term...even if I pay more interest long term (ie. over 35 years on the mortgage) and know that I have to pay x amount each month. I can then overpay on the mortgage/save hard once new I get more work to repay the extra borrowing. The actual mortgage is 95% I think and they tie in a personal loan to allow up to 125% at the same rate.

Consolidating your debt onto your mortgage might get rid of short-term stress, but what you're doing is turning unsecured debt into secured debt, placing your house at risk if you can't meet the payments. Risky, especially when you have a mortgage over 100%...

If you can overpay on your mortgage and work more to repay the extra borrowing, why can't you put those overpayments onto your credit card debt? I'd post your SOA before rushing into anything...

skintchick

What's the point of the house being worth more if you're not going to sell it though?

Do post your SOA - I think you;re heading into trouble.

Have you addressed why you have such big debts on the CCs? Are you living beyond your means?

System

Sorry I'm not sure what "SOA" is...

I have big debts on CCs as I used it partly to fund an MSc as I was playing the tarting game, which was far cheaper than the government's CDLs (Career Development Loans). I've carried on moving betweek 0% deals to get the house rennovated...which inevitably cost more than expected hence the problems I've got now. The extra room will allow me to charge rent though and will increase the value when I come to sell in a few years so hopefully it'll have been worth it.

I take the point on risking the house. My income has been up and down over the past few months but is starting to stablise finally (that's not just me being optimistic as it might sound!) so I'm confident I'll be able to keep meeting the mortgage payments (even when increased to cover the extra borrowing) as long as I don't have this extra debt to worry about. I'd be just as happy to get a life of the balance deal at 6% or summat to consolidate and pay it all off as and when I can but I'm not sure anyone would take that much debt off me at the moment...and I'm reluctant to start applying for that kind of thing because of the damage extra credit searches will do.

My main priority is to de-stress and live a happy life...isn't everyone's? Money isn't everything! If I pay more on interest so be it...I've just lost a long term relationship due to in part me spending more time stressing about these things than on enjoying my free time away from work so priorities are changing in my life!

I don't mind taking risks (hence I'm in this situation) and I'm not shy of hard work to save/pay off debt. I'm also pretty competant at keeping on top of things. I was just hoping for all the options...pros and cons so that I could make an educated guess at least!

DontDoDebtKids

davegillian wrote:

Sorry I'm not sure what "SOA" is...

I have big debts on CCs as I used it partly to fund an MSc as I was playing the tarting game, which was far cheaper than the government's CDLs (Career Development Loans). I've carried on moving betweek 0% deals to get the house rennovated...which inevitably cost more than expected hence the problems I've got now. The extra room will allow me to charge rent though and will increase the value when I come to sell in a few years so hopefully it'll have been worth it.

I take the point on risking the house. My income has been up and down over the past few months but is starting to stablise finally (that's not just me being optimistic as it might sound!) so I'm confident I'll be able to keep meeting the mortgage payments (even when increased to cover the extra borrowing) as long as I don't have this extra debt to worry about. I'd be just as happy to get a life of the balance deal at 6% or summat to consolidate and pay it all off as and when I can but I'm not sure anyone would take that much debt off me at the moment...and I'm reluctant to start applying for that kind of thing because of the damage extra credit searches will do.

My main priority is to de-stress and live a happy life...isn't everyone's? Money isn't everything! If I pay more on interest so be it...I've just lost a long term relationship due to in part me spending more time stressing about these things than on enjoying my free time away from work so priorities are changing in my life!

I don't mind taking risks (hence I'm in this situation) and I'm not shy of hard work to save/pay off debt. I'm also pretty competant at keeping on top of things. I was just hoping for all the options...pros and cons so that I could
make an educated guess at least!

SOA = Statement of Affairs. Basically a complete list of income and expenditure as well as a list of debts, associated interest rates and minimum payments. People on here can then pick at it and suggest things that you can do re:shuffling debt, cutting back, etc.

Just a minor point, more of a home truth: We all want an easy life - but life is much easier when you don't have any debts!

Martin always goes on about how haggling over the few percent means that debts go down quicker, cost you less and last a shorter period of time. Yes, you can leave it to all sort itself out, but a little bit of work on your part to get it in order to start with goes a long way. Then you just have to keep paying it...

1) First off, well done on tarting. You're playing the system correctly, so CARRY ON!

2) The solution you suggest, i.e. life of balance transfer cards, is a good one (and one I am using). Try looking at the Marks & Spencer 3.9% (no fees) card. That's pretty cheap as far as debts go.

3) Work out what the cost of paying everything back is when you change a few options - you'll need to know how much you can afford to pay each month for this. http://www.whatsthecost.com/snowball.aspx

4) Good Luck!

all_hours

SOA is a statement of affairs - see this post for a template

http://forums.moneysavingexpert.com/showthread.html?t=107280

You can also use the budget planner - the link is at the top of this forum.

For the debts post the balance, credit limit, APR after the introdution period ends + when the introduction period ends.

Then the other posters will throw ideas at you for anything you can cut back on and how you can move the debt to keep it cheap and pay it off as fast as possible.

You could sign up for the equifax and experian 30 day free trials to look at your credit report. If you sign up via quidco you'll also get some cash back. Remember to unsub before the 30 days is up.