Selling to clear debt....what next?

trying2bbrave

Hi All,

I went into a DMP with Payplan in 2006. I've been paying regularly, but with the prospect of it taking over 25 years to pay it off I decided to try and sell my flat.

It's now been 3 months since I accepted an offer and we are in the final stages of negotiation (I hope).

I have, with my Dad's help and the prospect of getting the Equity from the sale, cleared two accounts already. M&S agreed a 35% settlement figure and Lloyds agreed a 60% settlement figure. I am currently negotiating with Egg, which is proving hard - as I have to deal with the India call centre (they only respond to my letters by asking me to call!) And the CCJ I have, with a charging order, will be cleared on completion. Hurrah - so nearly debt free!

After everything is clear I will have about 18K left over and was planning to try and buy again.

My credit file for my current mortgage is clear - all paid up to date and no arrears. However my mortgage statement shows 3 late payments, the last one was March 2009.(basically my wages weren't going to be paid into my account in time so I paid a nominal amount up front and suspended the DD for that months payment and then paid the balance by card). My mortgage company did not regard this as arrears but obviously new companies do!!!!

With the help of London and Country (really helpful and understanding of my situation) I applied to Kensington, but was declined due to the mortgage statement and Platform couldn't help because of the mortgage statement and my CCJ being over £500!

My last hope was Who's Lending, the mortgage company attached to Payplan and I am able to get a mortgage with MBS Lending, but at very scary rates, not that I am surprised I got into this mess so don't blame anyone but me! I have passed their credit score but it's an 8% Variable with 50% deposit. I can do this with my families help, but do I really want to? There is no ERF so I could re-mortgage as soon as I am able but how long would I have to wait?

That's the background, the options are this;

Move in with my parents and save up some more money and then get a mortgage (my only worry with that is I will not have any proof of paying my way when it comes to applying for a mortgage and as much as I love my parents I've lived on my own for too long and I'm slightly worried about getting stuck there for a year or more)

Rent - but the costs in the area I am looking at are SKY HIGH - the same as getting the mortgage with MBS

Get the mortgage with MBS.

Another question is once all my debts are clear how long before I could gain a better mortgage? (the CCJ was registered in April 2006, so by April 2010 all the default and CCJ's will have dropped off my record).

I know I am really lucky to have my family around me and they are so good to help, I just feel so ashamed of needing help and getting myself into this mess.

Sorry for the 20 questions, but I know you are all really helpful and won't pull any punches when offering advice!

Thanks

KingElvis

CCJs last six years and not four, it will be 2012 (if in the UK)

trying2bbrave

Sorry I meant 2012.

trying2bbrave

Any thoughts would be much appreciated.
Thanks

MrsTinks

Personally I'd look at maybe a houseshare? I don't think I could live with my parents (but then I moved out at 16 lol) and should anything happen I don't know if I'd want to live on my own again (not counting a daughter LOL) but a housemate(s) is different if you find a good one I've had a few over the years and financially it worked out cheaper and there was the company too... that should allow you time to save more up, let the CCJ drop off and get a better mortgage rate
Moving home won't matter for "not showing you paying your way" - what you need is to show you are managing your money and debt... so get a CC and use it each month and pay it off in full! This will help you rebuild your credit file in addition to having a nice savings chunk that is building

trying2bbrave

Thanks for your advice.

Sadly, I don't think a houseshare is going to work for me. I'm moving away from London, back to Kent to be near my family and I don't really know anyone who needs to share. I will give it some thought though. Also, an added difficulty is I have cats!

Once again. Thanks

milliemonster

For the sake of just over a year I think I would move back with your parents rather than get this mortgage, yes 8% maybe manageable to you now, but this is a variable rate, they can alter the rate each month if they so wish, what would this mean to your payments if they went up to 12%, 15%????

debtdesperado

I would tend to agree with Milliemonster... 8% is seriously hefty, particularly as it will only ever go up.

I would be very cautious, unless you have an absolutely cast-iron guaranteed job or a seriously chunky savings cushion of taking on a mortgage at that rate at this point in the recession.

Maybe better to calculate the cost of renting for say 3 years (as after 3 years your 'minor faults' on your credit record will be gone), and then find out from a mortgage lender what rate they think you could get if you just had a CCJ and no other faults on you credit record in 3 years, work out as well how much you could save in that time which could be put towards a bigger deposit, and then compare that with the cost of getting the 8% mortgage now (including stamp duty, solicitors costs etc, plus the costs of remortgaging in 3 years time). Then run the calculations if your mortgage increases in the next 3 years up to 12%. THEN you can see whether you would be better off renting or buying.

IMHO House prices aren't really going to move anywhere (they definitely aren't going to go up for a while, and I don't think they will drop too far as people simply won't sell for a loss unless they absolutely have to), so you don't risk being 'outpriced' in that sense.

I think your next step though is to teach yourself to live within your means for a bit, otherwise, you will end up in the same situation, which is no good.

trying2bbrave

Thanks for all your advice.

I do have a permanent job, which is really secure (a private vocational school for HE) so no worries there. And I was thinking of renting out a room to help with the mortgage - I've checked out the rent-a-room scheme and it would work out that my outgoings would be the same as now. (The reason I got into this mess into the first place was due to my trusting people who ripped me off - I've learnt now!)

I know you are all right, but guess I feel like i'm going backwards. At my age (don't ask!:o) going back to live with the folks is really hard!

I'm think I'm going to live with my parents for 6 months and then see where I am. Be good to know if, in 6 months, I'd be more likely to get a mortgage or realistically 1 year.