newbie seeking advice please

silver16v

Hi Guys,

can i start by saying what a great site this is, gave me the courage to own up to my debt problems. I would really appreciate some advice on loans & mortgages to help me out of a sticky situation.

4 years ago my wife and I bought a house we couldnt really afford, we borrowed £212k on an interest only basis. Being first time buyers and somewhat ignorant on these matters a family member "helped" us to get a buy to let mortgage for this amount, so we were hedging the loan against future increased income. We have been paying between £920 and £1100 per month ever since.
I foolishly started to take out unsecured loans and credit cards without my wife's knowledge over the years to pay for luxuries at first, but then gradually
for living expenses. I have £24k of debt from personal loans and credit cards at the moment.

Last week I came clean to my wife about this debt. She is trying to be as understanding as possible given the circumstances but I know i have given her alot of unnecessary stress. We have decided to move back in with my parents, and sell or let our house in order to clear my debts. My wife wants us to clear the unsecured debt ASAP by any means necessary

I would be most grateful for your advice. Should we:

1)Sell the house and clear the debt with any likely profit BUT we would be liable to a redemption penalty of 5% of the loan (nearly £11k - ouch!)

2)Keep the house and let it out until the redemption penalty expires (03/09)
using rental income to pay the mortgage, and making payments towards the unsecured debt

3) transfer the mortgage to another cheaper property which we would let out, hopefully enabling us to find the £24k we need.

Any advice would be genuinely appreciated.

Thanks,

Bob

Miss_Moneypenny_6

Hi there,

The first thing the people need to know is your income and a very detailed list of your outgoings, all DD's, monthly food/car expenses, total loans & basically anything you need to purchase/spend money on in a month.

Once you get this posted you'll get lots more help, the experienced MSE's will be able to advise what to cut back on or cut out & how to reduce the debt possibly without having to take out extra loans/selling the house.

Good luck

silver16v

Hi,

the reaon I didnt post a SOA was that we are definitely moving back in with my folks - they are getting old and need a helping hand, which we are happy to do, and it helps us with our financial situation too.

The two of us earn approx £2600 a month combined, and our mortgage is £1020 per month. My debts total up to £460 per month (paying the minimum amount).

I will post up a SOA if you still think it would help

CLAPTON

how much will the house sell for?
how much will you be able to rent out the house for?

if you bought a cheaper house how much would that be for and how much could you rent it for?

Miss_Moneypenny_6

I think you need to look at where the other £1120 is going each month, check that you are spending it wisely, it may be possible to pay a little extra each month off the loans/cc's if you can reduce other non essential items for example reduce your sky package, shop around and make sure you have the most cost effective insurances, cancel old gym memberships.

I really think it would be best if you sat down and wrote your outgoings every month to see where you can cut back (i have mine on excel). The more experienced on here will help but it probably would be easier if they have more info to go on.

Carolie38_2

Just a thought but you need to move the unsecured loans to a cheaper rate as fast as possible.

Check out the cheapest 'life of loan' credit cards, theres one on the this weeks notification email, other wise interest there will be crippling.

Talk to your bank for help, if your a long term customer its in their interest to keep you, if they cant help shop around.

DO check insurances, most people are covered for different things twice on different policies.

Best of luck

P.S. Option 2 gets my vote!

silver16v

Our house is worth £310 - 320k
rental income would be £1300-1400 per month

If we bought a cheaper house for investment purposes I'd want to spend £240 - 250k for rental of around £1000-1100 per month

sophiesmum_2

If you can make enough rent on the property to cover the mortgage i would keep the house. that should then free up your income to tackle the debts.
You would still have the house as a asset for the future.
sophiesmum

CFC

I sense a bit of thought needed here...

moving back in with parents as a way to get out of the debt problem, then in a later post, you say they're getting old and need a hand and it suits you too.

That's absolutely fine and dandy if it suits both parties, the only note of caution I would say is...it's very easy to move in with aging parents, but my goodness it can be verrrry hard to move out again in the future (unless you all fall out and want to move out again after a week).....please *do* make sure you and your wife have thought through all the implications for the future very thoroughly.