Remortgaging to pay off cards?

jemandscout

Hi everyone, this is my first post here -hope it's ok to dive in and ask for advice, and sorry if it's long! I'm considering my options and struggling to figure out what the best course of action is to get our debts under control.
We owe a total of £10k on three credit cards, currently all 0% til next year. Our minimum payments total £220, which leaves us on a very, very tight budget - so if there are unexpected expenses we're pretty stuck. We also have a £2k overdraft(reducing by £50 pm), and pay £95 per month to a loan(will be paid off by March next year).
We've got a reasonable income - my husband's salary is £25k and we get £350-odd per month in tax credits and child benefit (I'm at home with 2 young kids), and have about £35 - £45k equity in our house. Our credit rating isn't great, and our current mortgage lender won't lend us any more money. I spoke to a broker who said that our lender is particularly strict, and based on our credit score and income we'd have no problem getting a cheap high street mortgage, and the quote he gave us would pay off the cards and overdraft and save us £200 a month - we'd still be on a tight budget but would have a bit of leeway to pay for unexpected stuff, or new clothes/shoes for the kids, or birthday presents...BUT...we're tied in to deal with our current lender til June 2011, with an early repayment fee of £2k, and this broker's fee is £2k:eek: . I don't particularly want to add another £4k to our debts for a quick fix. We're really struggling though, and don't know how we'll manage Christmas, car repairs etc. To complicate matters further, we'd like to move house - we live in a rural village at the moment, which means travel costs and two cars(a necessity to get kids to nursery, for work, etc) and a move into town would mean we could get rid of one car and hardly use the other. Should we put the house on the market then apply for a remortgage? But then we have no money to do essential repairs, paint it etc so we'd get a reasonable price for it...aaargh!
Well done if you got this far, and sorry for the ramble! Any advice really gratefully received.

NorthernLas

Generally, people would say it is a bad idea to re-mortgage to pay off cards. This is because the debt becomes secured and more importantly because it allows you to get away with thinking things are OK and taking it easy and running up the cards again.

Your cards are on 0%, so your credit rating can't be that bad.

Rather than worry about re-mortgage or not (as you are fixed until next year), could you look at what you spend and how you can reduce income and decrease outgoings?

Malky

If I were you, I wouldn't turn unsecured debt into secured as you then risk losing your home. Post your SOA and someone will be able to assist you in where you can cut back and tackle your debts rather than looking for a quick fix.

eyeopener2

Hi

I will be the first to say it. Post your statement of affairs and let the people on here take a look and see what can be done. Don't try borrowing more to pay of your debts, it rarely works and can leave you in a worse position.

E

eyeopener2

Opps, I cant type fast enough nowadays!

RAS

Hi

You need to be aware that whilst remortgaging may appear to reduce your monthly payments, you will be paying that off with ijnterest for the next 20-25 years. In the end it will cost you a lot more than you thought.

Also if you fail to keep up payments, you lose theb house, wheras if he debt is unsecured you get a default.

Adding another £4k to you debt to do this would be madness.

You need to post up a proper SOA here and we will see if there is any way to sort your finances out.

Also join www.freegle.co.uk if you have not already done so - like e-bay but free to collect, for toys, household goods and thing like paint.

jemandscout

Thanks everyone.
here's our SOA:

Monthly Incomings:


My salary - £0 (I'm at home with 2 under-5s)
Partners salary - £1520
Benefits - £385

Total - £1905

Monthly Outgoings:

Mortgage/Rent - £352
Council Tax - £122
Gas - N/A
Electric - £220 (horrendous I know. Paying off huge debt which built up as a result of estimated readings and me not appreciating how expensive wet electric heating is compared to gas that I had in my previous house. I think £50 pays off debt for next 3 years, rest is usage. On cheapest tariff and use v sparingly now - jumpers not radiators when it's cold!)
TV License - paid for the year already as I set up annual d/d by mistake!
Sky £19 (no digital here or channel 5, and bad TV reception! Most basic package)
Phone - £25
Food - £450 (Probably a conservative estimate actually)
Car Insurance - paid annually, about £90 p.m.for 2 cars
Petrol - £160 (2 not very efficient cars, middle of nowhere - no way to reduce this I don't think)
Life Insurance £40
Contents insurance £32
Mobile x2 £50 (limited choice as only O2 and vodafone signal here)
Loan £94 (will be paid off in March/April)
Credit card min payments £220 (see below)
Gym £14 (husband uses gym several times a week)
Toddler groups £25
Playgroup 1 morning a week £50 (would be v reluctant to give this up, my son loves it)
Ballet £12
AA membership £10
Broadband £22

Total: £2004


Hmm - not looking good is it??

Credit cards:
Santander Zero, 0% til Apr 2011 £4064
Santander Zero, 0% til Oct 2011 £1045
RBS, 0% til Dec 2011 £4830

We've had our heads in the sand about our finances, but have definitely had our lightbulb moment - no more impulse buys, very careful with food shopping, have put all savings/ spare money/unexpected money into the cards - I just want to have enough money to live on:(

jemandscout

I'd like to add that there's no way we'd rack up credit card debt again, so the secured/unsecured thing I don't think is that big a concern for us. We've been a bit irresponsible with our money, but the debt has accumulated gradually because of things like attending weddings/fairly modest Christmas shopping/car repairs/house repairs rather than spending sprees as such. Things we should have saved for but didn't, and couldn't afford to pay for in one go. Another big contributing factor was going on (a pretty modest) holiday this year, which we couldn't afford, but we've never been on a family holiday. Stupid, stupid, stupid I know, and I wouldn't ever do something like that again just because I thought it wasn't fair we couldn't afford it! Honestly, we're committed to clearing this debt and sticking to our budget. Looking at the figures though I don't see how we can do it without remortgaging.
ETA it might be worth saying that I will be going back to work full time in a few years, so we will be better off in the future. We just need to get our outgoings down in the short-medium term I suppose.

loveGSDs

hi there,

firstly well done on posting your soa and noticing you need help before things get worse.

i think ur grocery bill is very high - im currently budgeting £180 a month which is for 2 adults and 2 large dogs - this includes toiletries as well.

try switching to cheaper brands, they are generally just as good and cost a fraction of the price. also, is it necesary for you to have a house phone? ok it would only save £25 but every little helps.

have you shopped around for a better broadband deal?

hope someone elso will be able to offer more help

loveGSDs xx

goingforward_3

I'm not expert but you should be able to cut £100 off your food budget easily.. we (2 adults 2 kids) spend less than £350 per month.

Re the electric £50 is arrears so that leaves £170 a month usage.. still very high. My house is a 3 bed semi, heated with storage heaters (economy 7), immersion heating, washer on everyday (some times twice a day) + all the gadgets etc kids use and i only pay £95 a month.

eyeopener2

Sky tv, phone and broadband all on seperate companys? get them all in one package, may be Sky TV, Broadband and talk. £25ish a month or read the guide on the main site.