Debt Advice please.

Ribbons473

Statement of Affairs and Personal Balance Sheet
Household Information
Number of adults in household........... 2
Number of children in household......... 2
Number of cars owned.................... 1
Monthly Income Details
Monthly income after tax................ 3000
Partners monthly income after tax....... 0
Benefits................................ 135
Other income............................ 0
Total monthly income.................... 3135
Monthly Expense Details
Mortgage................................ 900
Secured/HP loan repayments.............. 300
Rent.................................... 0
Management charge (leasehold property).. 0
Council tax............................. 185
Electricity............................. 62
Gas..................................... 100
Oil..................................... 0
Water rates............................. 30
Telephone (land line)................... 20
Mobile phone............................ 25
TV Licence.............................. 35
Satellite/Cable TV...................... 20
Internet Services....................... 20
Groceries etc. ......................... 400
Clothing................................ 20
Petrol/diesel........................... 50
Road tax................................ 10
Car Insurance........................... 30
Car maintenance (including MOT)......... 10
Car parking............................. 0
Other travel............................ 90
Childcare/nursery....................... 0
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 0
Pet insurance/vet bills................. 0
Buildings insurance..................... 20
Contents insurance...................... 20
Life assurance ......................... 80
Other insurance......................... 0
Presents (birthday, christmas etc)...... 10
Haircuts................................ 0
Entertainment........................... 0
Holiday................................. 0
Emergency fund.......................... 0
Total monthly expenses.................. 2437

Assets
Cash.................................... 0
House value (Gross)..................... 420000
Shares and bonds........................ 0
Car(s).................................. 18000
Other assets............................ 0
Total Assets............................ 438000

Secured & HP Debts
Description....................Debt......Monthly...APR
Mortgage...................... 300000...(900)......4.5
Hire Purchase (HP) debt ...... 18500....(300)......3.5
Total secured & HP debts...... 318500....-.........-
Unsecured Debts
Description....................Debt......Monthly...APR
Capital One CC.................12500.....360.......17
Virgin CC......................2700......80........18
Halifax CC.....................2600......60........16
NAtwest Loan ( Parent..........25000.....300.......8
A&L Loan.......................6900......200.......8.5
Tesco Home Loan................9000......181.......8
Total unsecured debts..........58700.....1181......-

Monthly Budget Summary
Total monthly income.................... 3,135
Expenses (including HP & secured debts). 2,437
Available for debt repayments........... 698
Monthly UNsecured debt repayments....... 1,181
Amount short for making debt repayments. -483
Personal Balance Sheet Summary
Total assets (things you own)........... 438,000
Total HP & Secured debt................. -318,500
Total Unsecured debt.................... -58,700
Net Assets.............................. 60,800

Really want a few opinions please.

As you can see from our SOA we are negative at the end of each month and the situation now is that we are basically living off credit cards which obviously has to stop.

My husband is looking for a new job with a higher salery and I am also looking for part time work, although this is difficult as we have a 5 YO and a 5MO and we are unable to pay for any childcare.

I have gone on the CCCS site and their advice is to start a DMP or another option would be to sell our house. Selling our property is not something we really want to do as this was suppossed to be our 'forever' home, however I am realistic and feel that this is probably our best option and I would prefer to deal with the problem ourselves rather than going down the DMP route.

I have worked out if we can get £420000.00 for our house which seems to be a realistic price then we would be able to clear all of our debt completely and have aprox £20000 left to put down on a new house hopefully buying a property between £280000. to £310000 which could be difficult where we live

My husband and I cant agree on what is best to do so would really value some other opinions.

Thanks in advance

isy1011

Didnt want to read and run but your council tax seems high but then so is your house value. Is this over 10/12 months?
Your life insurance seems high also.
What have you on HP? A car? For 18K Get a cheap runaround.

Well done for posting anyway.

HappyMJ

There are a lot of fees involved in downsizing property... Stamp Duty Land Tax being the one that will cost a lot. If this house really is the forever house that you want then as you say a DMP may be a good option. Your mortgage is a reasonable rate and the LVR ratio is good at 75%. Trying to find a mortgage at 90% at the same interest rate will be much harder with no guarantee of the application succeeding.

I'd say downsize the car if that's possible it would save you £300 per month especially considering you are only putting £50 of fuel in it each month.
A few minor things a tv licence is £13 per month not £35.
Other Travel....£90 What's that? If you aren't using the car for some journeys then why have the car at all when taxi's would suffice?

Ribbons473

Thanks for your replies, yes our council tax is high but we live in a London borough and its a high band property. Our life insurance is high as my husband always gets loaded as he has hereditary heart disease.

I have calculated the fees involved in moving and this would be around £20k and yes we have a good deal on our mortgage but it is Interest only and it does concern me like you say they when our LTV reduces getting a mortgage would be more problematic.

Our car is on HP not having a car isnt an option as our daughters school is too far to walk and twice a week my husband uses the car to commute to Berkshire, he gets a petrol allowance for this, so we need a reliable car as this is a 2 1/2 hour journey round the M25. The positives of this car is petrol is fab and it has a low tax band. The rest of the travel costs are for my husbands commute to work on the tube.

HappyMJ

According to my calculations you're household income is £50,000 and you have borrowed 6 times salary borrowing £300,000 to buy this house. That's difficult to work with. The interest only component at 4.5% p.a comes to £1125 per month but you have only put down £900 per month. Are you making full payments to the mortgage? To be able to have a nice house beyond your capacity to repay the loan you must cut back on everything else or get a higher income.

Ribbons473

HappyMJ wrote: »

According to my calculations you're household income is £50,000 and you have borrowed 6 times salary borrowing £300,000 to buy this house. That's difficult to work with. The interest only component at 4.5% p.a comes to £1125 per month but you have only put down £900 per month. Are you making full payments to the mortgage? To be able to have a nice house beyond your capacity to repay the loan you must cut back on everything else or get a higher income.

My husband earns £59000.00pa plus they took the years child benefit and a bonus he gets althoughthis isnt guaranteed.

Yes we make full payment our interst rate must be a bit lower than this havent been able to get all the paper work out at the mo

isy1011

You have two choices really: make drastic cut to your lifestyle e.g. downgrade car, move child to nearer school, cheaper house etc or earn more: take in lodger? my friend does this in London, but those are your choices really for the shortfall in income against outgoings you have.

HappyMJ

That makes a bit more sense... £59,000 is £3,427 after tax per month. I imagine as you say he also gets a mileage allowance of 40p/mile lets say that an extra £300 per month. The bonus he gets although not guaranteed is what? Put the minimum it could ever be and divide it by 12 and put it under Other income. The interest rate on your mortgage at £900 per month is 3.6% a very good rate. 5 times income isn't quite as bad but still you need to trim a bit and all i see is the car. You could have a brand new small car for £150per month so why pay £300.

Hannah_10

Statement of Affairs and Personal Balance Sheet
Household Information
Number of adults in household........... 2
Number of children in household......... 2
Number of cars owned.................... 1
Monthly Income Details
Monthly income after tax................ 3000
Partners monthly income after tax....... 0
Benefits................................ 135 << Just have a check with the benefits checker on this website because with such high housing costs you might be entitled to a bit of help with council tax http://www.turn2us.org.uk/benefits_search.aspx
Other income............................ 0
Total monthly income.................... 3135
Monthly Expense Details
Mortgage................................ 900 << Very high
Secured/HP loan repayments.............. 300 << High, presume this is car?
Rent.................................... 0
Management charge (leasehold property).. 0
Council tax............................. 185 << High, but as with the two above it's probably proportionate to the property.
Electricity............................. 62 << This is high, electric consumption isn't really affected by house size, so you need a good hard look at where the waste is happening.
Gas..................................... 100 << Very very high, you need to take this on almost as a project in its own right.
Oil..................................... 0
Water rates............................. 30 << Got more than 3 bedrooms? If so you might be better off on a meter.
Telephone (land line)................... 20
Mobile phone............................ 25
TV Licence.............................. 35 << Not £12 p/m then?
Satellite/Cable TV...................... 20 << You don't need it, you just want it.
Internet Services....................... 20 <, You could be getting unlimited broadband for a lot less.
Groceries etc. ......................... 400 << £200 would do it just as well (unless nappies are in this).
Clothing................................ 20
Petrol/diesel........................... 50
Road tax................................ 10
Car Insurance........................... 30
Car maintenance (including MOT)......... 10
Car parking............................. 0
Other travel............................ 90 << Yours on public transport I am guessing?
Childcare/nursery....................... 0
Other child related expenses............ 0 << This is where nappies go.
Medical (prescriptions, dentist etc).... 0 << What never ever any prescription charges, dental checks, glasses, contacts, ibuprofen or calpol? Maybe put a figure here.
Pet insurance/vet bills................. 0
Buildings insurance..................... 20
Contents insurance...................... 20
Life assurance ......................... 80 << Are you sure you can't reduce or stop this?
Other insurance......................... 0
Presents (birthday, christmas etc)...... 10 << Well done.
Haircuts................................ 0 << You sure? Never?
Entertainment........................... 0 << Is that sustainable?
Holiday................................. 0
Emergency fund.......................... 0
Total monthly expenses.................. 2437

Assets
Cash.................................... 0
House value (Gross)..................... 420000
Shares and bonds........................ 0
Car(s).................................. 18000 << Is that right, you have an 18 grand car? Your tax/insurance/MOT costs suggest you have either done very well or there's a zero here that shouldn't be.
Other assets............................ 0
Total Assets............................ 438000

Secured & HP Debts
Description....................Debt......Monthly...APR
Mortgage...................... 300000...(900)......4.5
Hire Purchase (HP) debt ...... 18500....(300)......3.5 << Car I presume?
Total secured & HP debts...... 318500....-.........-
Unsecured Debts
Description....................Debt......Monthly...APR
Capital One CC.................12500.....360.......17
Virgin CC......................2700......80........18
Halifax CC.....................2600......60........16
NAtwest Loan ( Parent..........25000.....300.......8
A&L Loan.......................6900......200.......8.5
Tesco Home Loan................9000......181.......8
Total unsecured debts..........58700.....1181......- << This is the crux of it, even for all that your expenditure and income have potential, that's £77, 200 of debt you have (counting secured loan but not mortgage).

Monthly Budget Summary
Total monthly income.................... 3,135
Expenses (including HP & secured debts). 2,437
Available for debt repayments........... 698
Monthly UNsecured debt repayments....... 1,181
Amount short for making debt repayments. -483
Personal Balance Sheet Summary
Total assets (things you own)........... 438,000
Total HP & Secured debt................. -318,500
Total Unsecured debt.................... -58,700
Net Assets.............................. 60,800

If I may be brutally frank about this and with the best will in the world... How long have you been living over and above your means? Seventy seven thou doesn't run up in a month, I think maybe this has been accruing for a long time. If it's been five years accruing (which seems possible, as the birth of a first child whacks the income) then you have gone £15,440 over means a year roughly speaking. That's a wage, is that something like your pre-baby wage by any chance?

You've got a £420k house, an £18k car, sky and probably all the trappings of a good life... At what cost? I wish I could find an alternative in this SOA to downsizing the house, but truly I don't see that I can. Maybe an IVA, maybe. Read this about IVA's... IVAs are they worth it?: Free guide to download and print

Honestly, I mean no criticism here, but you need to jointly wake up. Just to keep you in the life you are used to you are going to need another proper wage coming in, not a part time wage, a proper one, £16k a year. Then on top of that you have as much to do again to clear that debt down in a reasonable time.

It could actually be done. You could actually get a full time job (which would then afford the childminder, or in fact why don't you just BE a childminder?) You could attack your income. You could take in a lodger and start doing the Avon and rent out your car and spend an hour a day doing online clicks and surveys and all of that and you would, if you really pulled it off, save the day.

But even so, you are still going to have to look at how you are living. You can't afford an 18k car and a 420k house on 36k a year. You wouldn't really be affording it until there was 52k a year coming in, and that is just to preserve the life you know. You need more again for debt repayments. I don't know how to say it without sounding hard but- your expectations are well out of synch with your reality. I'm sorry.

You can downsize the house, but unless you learn to budget, live without any credit at all and be realistic to what you really have then you'll be in this mess again and worse a few years down the line too.

isy1011

Can you switch some of your cc's onto 0% so that the interest you are currently paying diverts into repayment?
About the car situation. We have a 7K car that is also very reliable so as long as you buy wisely it will save alot of money for you. Lets face facts I would love a BMW because I know they would be more reliable than the car I have but I just cant afford it.

Changingme

Can you try and cut shopping down by £100 a month there is the grocrey challenge on the old style board , also look on the freebie site for vouchers ect to help.Don't buy any clothes for a couple of months.Have a look round house to see if there is anything you don't use that you can sell,try keeping a spending diary this helped me loads.Best of luck.