Debts, mortgage and self employment

welshwonder

Hi everyone,

As you may have guessed I'm in debt thats why I'm here. By almost £18000, a series of job losses have meant I have now set up my own company so I am self employed now and I am happy and have been self employed now for 6 months and in that time I have earnt more and enjoyed my job more than I ever did working for other people! I also live in a shared house (bills are split between 4).

so any way my current SOA:

Monthly Incomings:

My salary - £1,419

Total - £1,419

Monthly Outgoings:

Mortgage/Rent - £260
Council Tax - £50
Gas - £20
Electric - £20
Phone - £30
Water - £20
Food - £100
Car Insurance - £26.66
Car Tax - £16.25
Petrol - £20
Laundry - £20
Provision for tax bill - £220
other sundries £50

Total: £852.91

Debts:

Co-op CC – Balance £9,335.94 (limit £2,500) APR 15.9% Min Pay 2%
Capitol1 CC - Balance £5213.97 APR 15.4% Min Pay 3%
Smile CC - Balance £3137.20 APR 12.9% Min Pay 2%

Total: £17,687.11

However my dilema is this I am easily meeting my current minimum payments and have paid off in full two other cards I have by employing the 'snowball method' and did have debts of £22,000 not so long ago. But now my landlady is selling the house I live in, for financial reasons I set up my business in a rural location (it was far cheaper) I am tied into a 3year deal with the landlord of my work premesis. And at the moment I cycle to work so only need fuel to go to the shops and such and also have a limited milage policy on my car so insurance is cheap.

I have to move out, but the nearest town (with rental property available) is 20-30 mins away by car and my fuel bill will jump from £20pcm to £25+pw and my rent and council tax will increase, I estimate increased costs of £150-£250 pcm which I can't afford.

I have looked at the sums above and would agree I'm not left with much if anything at the end of the month currently and can't afford such hikes in living costs. I am considering getting a mortgage, I know it sounds silly, but I currently share with 3 other people all paying the same rent as me £260. I have looked at some houses for sale in the area and they are £70,000 (two bed) ish, an interest only mortgage on the property would be £350-£400 pcm, and I could rent the spare room (as all of my house mates are in the same predicament) very easily, albeit at a lower cost as the house isn't as nice as the one were in now.

So I would end up having an extra £200 ish pcm, with only a £90-£140 increase in expenditure, Did you follow all that?

What I'm asking is for advice to handle my debt, and if any one has experiences of getting a mortgage with such high debts, is it possible? have I done my maths right? Does any one think its a good/bad idea and why?

Also I should mention, I would have to self cert my mortgage (self emplyment) so have that against me, but I have £4500 cash saved for fees and deposit, and also my dad is willing to act as a garuantor on my mortgage (he owns a £250,000 property with no mortgage and earnings of £20,000 per year also self employed and semi retired though!) this is a last resort tactic though, I fear if I can't get one on my own I probably couldn't afford it anyway, mortgage companies must know what they are doing!

Sorry for the long post, and I hope some one can help. Please help.

welshwonder

Probably shoud add I understand what an interest only mortgage is, I plan to have an interest only mortgage so that I am left with enough extra to get my credit cards paid off and then switch to a repayment mortgage.

Being that my CC APR's are far more than a mortgage rate would be.

welshwonder

Can anyone offer any advice or similar experiences?

gibboking

when my husband and i bought our house 5 years ago we had debts, we were able to include these into the mortgage. we got our mortgage through northern rock and we are still with them now.
We bought our house for £60000, had no deposit (included in mortgage 110% i think) and had debts included making our total borrowing £73000 and payments of around £450pm. Im sure it can be done. we got all of our advice free through the estate agents independant financial advisor, who also got us quotes for all of the insurances etc.
good luck

all_hours

You will probably get a more accurate response on the mortgages forum. I think there are mortgage brokers that post there.

http://forums.moneysavingexpert.com/forumdisplay.html?f=15

This is just what I've picked up so I don't know if any of this is accurate.

If you do a self cert wouldn't you need 15% of the property value? If so £4,500 wouldn't be enough to cover fees and the deposit etc.
If you have accounts prepared from the previous years aren't you able to get a regular 95% mortgage. - edit - I see you've only been SE for 6 months so scrap that idea.
When they calculate the amount you can borrow - your existing debts will be taken into consideration.
Is it feasible paying interest only until the cards are paid off? How long before you will be able to start putting aside to pay of the actual loan?

Have you tried putting any of those credit cards on low life of balances to reduce the interest you're paying? Barclays have 6.9% card and M&S have one with 3.9% LOB.

welshwonder

Hi all

Thanks for the advice it was exactly what I'm looking for, I guess I'll just pay the 4,5k off on my debts and maybe that will bring my payments down to what I can afford with having to move!

Then in 6-12 months save some more for a mortgage and get a 95/90% mortgage like suggested. It just seems daft because it would actually be better off buying.

But thanxs all and I'll try and let you know how I get on, I'm applying for a M&S card like suggested, to try save myself some money, at least this way my debts will be clear (or significantly lower) than now when I buy.

Thanks

Dolly_Smith

We did the same - included the debts when we got the mortgage out (because a mortgage will be the cheapest debt you can get). It's a large loan over a long time but at least you get something out of it at the end!