Debt problems

althesmiler

Hi I am recently married. I have a number of debts which I will state in a bit but my main concern is getting on the property ladder- applying for a joint mortgage. I have a Barclays loan for 13,000, I owe 7,800 on my Barclaycard and 5,700 on my Egg card. I have applied for another credit card from M & S and plan to transfer the balance for Barclaycard to this.
I earn a basic salary of around 17,000 and my wife earns 17,700.She has a student loan of 2,700 left to pay.
We are being frugal now and not spending silly now and are both trying to get better paid jobs and saving up for a house.
Now as I owe around 27,000 and my wife owes under 3k will this mitgate against us applying for a morgage or at least getting one?
We are now accounting for each penny and are aware of what outgoings go out when.I am in control to some extent meaning that although I may end up overdrwan all the bills and loans and minimum balances are paid, sometimes I make sure that more than the minimum balance is paid back.
Please advise on a course of action so as to reduce the debts and help us get on the property ladder by being eligible for a mortgage.
Many thanks

Molanole

Hi there althesmiler, welcome to the DFW board.

You've taken the first step by coming on here and starting to face up to the problem. As with all newbies it's difficult for the nerds on here to offer assistance until you have posted your statement of affairs. Take a look at Southerscouser's sticky for first time posters http://forums.moneysavingexpert.com/showthread.html?t=107280 which will tell you how to go about listing all your incomings and outgoings. Once you've done that we'll be able to find ways of helping you to cut back, make savings and get the most out of your salary.

Regarding getting a mortgage I'm not the best person to answer. Someone more knowledgeable than I will be along soon. But I think I may have read somewhere that mortgage companies may look at how much existing debt you have and factor it into the amount they will be prepared to lend you. So, it is worth making all the inroads you can into reducing your debt.

Welcome, and good luck!

Mola x

Dolly_Smith

I have to be frank and say yes, it will affect you getting a mortgage. when I got mine they took all our debts into account - you can get a mortgage for something like 2.8% times your joint income (approx £95k) but if you already have debts it matters because you're considered more of a risk

there are lenders that will offer you more than that but I wouldn't advise it - I know someone who went to a high street chain and got 5x their annual salary - house reposessed two years later

KatrinaC_2

althesmiler wrote:

Now as I owe around 27,000 and my wife owes under 3k will this mitgate against us applying for a morgage or at least getting one?

If you have missed any payments or made them late, this will make it more difficult for you to get a mortgage. When we looked at mortgages recently, my debts (less my student loans) were also subtracted from the maximum amount they would lend to me. If this is applied in your case, it's likely to be 2.5 times your joint salaries less the £30,000 you owe (around £65-70,000)

althesmiler wrote:

We are now accounting for each penny and are aware of what outgoings go out when.I am in control to some extent meaning that although I may end up overdrwan all the bills and loans and minimum balances are paid, sometimes I make sure that more than the minimum balance is paid back.

Does it make sense financially for you to go overdrawn in order to pay more on your credit cards? Do you mean go over your overdraft limit, or into an authorised overdraft? If you go over an agreed limit you will pay MUCH more in the long run than if you keep paying the minimum payments. And you might want to think about looking at reclaiming any fees you've been charged by the banks.

If you are in the position where you can normally only pay the minumum balances, you should be thinking about how you can remedy this situation - coming here and asking for advice is an excellent start, but you also need to start thinking about how to get to a more comfortable situation

althesmiler wrote:

Please advise on a course of action so as to reduce the debts and help us get on the property ladder by being eligible for a mortgage.
Many thanks

There is no magic formula for clearing debts - you need to pay more. The ways you manage to pay more are where a lot of people on here can help - whether it be advice on spending less or earning more. You might want to put up a statement of affairs so that people can pick through your incoming and outgoing money and see where you can make a difference.

Buying a house might not be the best plan for you right now - if you are having to go overdrawn to make ends meet then all it would take would be a small rise in interest rates before everything starts to collapse. The housing ladder will still be there in five years time and by then you will hopefully be in a much better position to get onto the bottom rung.

Sorry to be the bearer of bad news!

Kat

moriarty888

Sorry to be a bit of a party pooper, but I think getting on the property ladder should be the last thing you need to worry about at the moment. Until your debts are under control, buying a property will only add to them.

If you are only paying off the minimum, or a little more, each month, it will take you years to clear off your debts. Use the snowballing site to give you a debt free date according to your current repayments.

There are brilliant people on this site, who will give you fab advice, so get your SOA up, make a cup of tea and sit back and watch the advice flood in.

Best of luck and congratulations on your recent marriage, having a happy, healthy marriage is worth millions more than a house owned by the bank and no disposable income for the next 25 years.;)

althesmiler

Thanks for your replies so far. I would stress that I do get overdrawn but never over my overdraft limit.

althesmiler

What about shared ownership- should I dismiss that?
Admittedly my priority is to eliminate my debts but my wife and I are keen to get onto the property ladder

CLAPTON

post a statement of affairs (SoA) it's impossible to give good advice without details of income, spending and debt details.

see for moire details

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

KatrinaC_2

althesmiler wrote:

Admittedly my priority is to eliminate my debts but my wife and I are keen to get onto the property ladder

Can I ask why you are so keen to get onto the property ladder?

Try having a look at Martin's blog from the 18th of September ( http://blog.moneysavingexpert.com/ )

Kat

Hello

Hello, welcome on board! :hello:

IMHO home owning isn't all it is cracked up to be. After doing both the no hassle, 'call someone and it's fixed' renting is great. There is no way I would want to increase my debt way past my earning potential, which is what I would have to do to afford a house in the South West.

Post an SOA and concentrate on reducing the debts, you will have a much more secure future when you do buy a house and I am sure your family will thank you for it. It is such an eye opener doing the snowball calculator, give it a try and let us know how you get on.

Good luck!

Hello

althesmiler

Thank you for your advice.The reason I want to get onto the property ladder is because I am tired of renting. I do need to reduce and ideally eliminate my debts but this will take time.I am 31 and newly married and feel I should be in my own property.