clear debt in time for mortgage - sorry bit of a long one!!!

claire999

I have been looking at this forum for a while and i have now decided that it is time to post my first thread,

Me and my other half currently have approx £18,760 of debt, with no thanks to the bank just giving it to us!!!

We are only 20 and in full time employment with poor wages but v.long hours.

We are hoping to buy our first home when my other half is 21 in march and from now until then we are going to try and clear as much of our credit cards as possible,

our mortgage broker - who is no fee has suggested for a couple of years that we go with northern rock as they will allow 125% - 95% mortgage & >£30k loan to cover the loan with HSBC, i am now a bit unsure about doing this after reading what has been said about these type of mortgages on here.

my OH works shifts and his wages can vary, but on average he gets £680 & an i get £830 basic - i work in insurance.

I am going to try and save about £700 per month and put £300 of that into the cc and the rest in saving for legal fees etc

Please could you advise on how we could cut back - we live at oh parents as our landlady sold out rented house.

Income - £1510

Outgoings -

HSBC Managed Loan £15900 £207pm 16.6% APR - this should be reviewed in DEC
GE Finance (CAR) £4200 £116pm 5.9% APR - this is approx settlement 4 years left and no overpaments.
Mint CC £1002 £30pm 15.9 APR - this is also approx unsure of APR
EGG CC £980 £30pm 21.9% APR - v.angry about them increaseing this a few months ago
Halfords EDGE store Card £900 £38pm 29.9% APR - OH wants to keep this ??

Other expenses

OH £160 this is for petrol and tobacco
Phone £35 - contact ending in June - lowest tarraff
Rent £240 - £60 per week
Bus £43
Car insurance £69.19 - this is the lowest i have found.

Total £978.19
-income
Leaves £531.81

OH at mo is working o/t and getting approx 240 per week and i also work o/t and get 940 per month which then on a good month we could have £920 left

I want to clear at least the credt/store cards my march, and have £1500 for legal expenses, survey etc we are only looking for a house of £89,000.

we proberly spend approx £50 for going out etc.

The main reason i think that we have got into so much trouble is due to my other half, he always want everytingt now and has tantrums if he dont get what he wants especailly when it comes for parts for his car, all the credit is in my name apart from the store card, the loan in is joint names, i have now taken away hes debit card so he has no access to the bank and has to ask me for money. all the CC have been cut up so we cant spend on them.

I also have got my credit report to day and will get OH next week, it shows that i have 9 current accounts and 1 previous but there are only 5 current the rest is settled so is this correct? or does 'previous' me previous address?

Also back in june i had trouble with AVON i was trying to get some extra income and it failed - i actually owed them money, which on several occasions i did try to pay but they woulnt accept my card or send me the correct paperwork for paying at the bank or post office so i got a delinguant payment of £84 noted on my file - do you think this could affect my chances of getting a morgage???? i am appealing to AVON with this as they never sent me the correct 'default' paperwork.

Sorry its such a long one,

Your advises are appreciated.

skintasusual

I know i had trouble getting a mortgage before, and that was when my credit file was perfectly clean! They wouldn't let me get one unless i cleared my other debts, as they were worried about affordability - they were right

I dont think the managed loan looks great either, my OH has one and it appears to be what affects his ability to get credit.

I have no idea these days though, might be different.

be careful you don't overstretch yourselves - remember if you dont keep up the payments on your mortgage they will take your house away!

good luck.....property market is a scary place!!!! especially if you're starting out in negative equity!

djdymond

morning claire999

im in a similar position although mine and my other halfs debts total 4 and a half thousand.

we are also trying to save for fees as were going through northern rock too and getting a 100 per cent morgage.

my question is, do you only need one and a half grand for fees? and does fees for a place depend on the price of it then? its just that ive been trying to save every penny that comes in the door (or from the pavement!!) to save up FOUR thousand for just fees. and we can only afford a mortgage of about 140 thousand, which round here, will only get us a small one bedroom flat.

sadly, were not living with parents but renting a 650 a month flat, but were still managing to save 100 a week.

anyway good luck, let me know how you get on and how you got to that sunm of 1 and a half thousand for fees (im hoping this means we can actually start looking sooner than i thought!)

Helena
xxx

claire999

thanks for your message,

we originally we were paying 600 rent until we rebelled and got it down to 240 per month, for the properties we are looking at £90k (by the way this is in norfolk) - the £1500 is for legal costs @ 600approx, survey @ £500approx and the left over 400 for anything other like the increased 1st mortgage payment, i have been looking for a house for over 2 years and kept being told wait until OH is 21, we were going to SO but in the long time it is too expensive.

Also the bank said that the managed loan should really affect anything- is this not true???

quantumleap

Would you consider using the money to pay off you're debts rather than saving it for mortgage costs. £700 per month added to what you are currently paying, aimed at those cards with the highest APR wouldn't half help you shift you're debt quite quickly. That is certainly what I would do. Other will come along and advise you in more depth if you'd consider this.

If you take on a mortgage, with you're income as it is at the moment I think you might find it difficult to pay you're mortgage and household cost and make any sort of reasonable hole in you're current debt level. To be honest, if I was earning a similar wage and had similar debts to you guys, I'd be loath to take on a mortgage.

Also, I note you mention that the banks had just given you the money. I think the reality is that you expressed an interest in getting it from the bank, they couldn't have given it if you didn't want it. This is not a criticism it just that I think you need to except that you have to accept some blame in this too. Whilst the banks are careless, it is up to us to understand what we can and can't afford to pay back.

I wish you well.

claire999

thanks for your message, before we were lodging with the inlaws we were renting paying 600 per month and we managed ok plus we both were on much less than what we are now, also we only originally got a loan for £4000 to pay the initial depost and furnishings - we would have saved for this but i was having v.bad family problems and had to move asap. the rest of the credit was for OH motoring hobby, he originally didnt tell me that he got his own loan and CC until it had reached what it is now.

quantumleap

I think you really need to address the reasons why you are in so much debt. It seems you're OH's hobby is an expensive one.

Is he prepared to give this up in order to clear the debts and become a home owner? Also, you need to ensure that you speak to each other about things like debt and in particular adding to it.

I really can't help but think that adding a mortgage to the existing situation would not be the correct course of action at this time.

CLAPTON

i think you are somewhat under estimating the real cost of buying a house and the costs of running it.
although you say you managed when you were paying rent, but in fact you build up 18,000 worth of debt in a year or so? What was it all spent on...surely not only the car, how much went on just living?
i would take advantage of your current cheap living arrangement to pay as much back as possible and delay house buying until that debt is at least halved.
start a spending diary to see whether or not your budget above is realistic... it seems to lack loads of things to me...do you really only spend 50 per month going out etc, nothing on meals/coffees at work, nothing on clothes, nothing on haircuts, present, xmas.... the car will need taxing and servicing etc.

how much is the car worth..have you considered selling it and buy a cheap run about instead?

try building up a real budget for when you have a house, in particular remember all the yearly costs (divide by 12 and include in the monthly budget because you need to save these amounts so you dont need to pay these bills on CCs).

claire999

thanks again for your advise, we have discussed our problems and he for over 3 months has been with out his bank card and store card so he has no way of spending anything, at the moment we are living with his parents and have been for the past year, they are now sick of us and we have said that we will move out in March, houses - there are no flats near us rent out for about 600 - 900 per month compared to if we mortgaged it would be 380 - 550 depending on what type of mortgage to go for 100% or 125%, so i think that getting a mortgage would be our best option?

Do anyone have any advises on the delinquant payment of £84 i have and how this would affect me and obtaining credit?

lynzpower

Welcome :wave:

I have to agree with Quantum leap.

there are a few things that alarm me about waht youve written

1. Your OH wants everything hnow & has tantrums.
He needs to sit down and be realistic. He quite frankly, cant have. Your salaries by your own admissions are low, and this doesnt extend to wanting everything now.

2. He wants to keep the highest APR debt
Why on earth would he want to keep using a debt service that charges him arguably the highest APR in the market. I sense convenience, and because he buys on debt a fair amount of stuff from Halfords.

You guys are in a lot of debt for your salaries, and I really dont think that a mortgage is a good idea. Given your debt situation, and your low incomes, IF you are offered any kind of mortgage it will be the expensive kind. No cheap deals for you I woulod have thought. Also interest rates are going up again, so more expensive mortgages for all of us who already have them in the offing.

Additionally, when I bought my flat, the lender took my debt & multiplied by 3 then subrated this from the amount that they were willing to lend me. At that time it meant a reduction of 30k. I found another lender in the end who didnt do this, but more do this all the time due to all the problem debt thats in the papers etc.

Your best bet AS A COUPLE is to sit down and start thinking more realistically about when this debt could be paid off.

If you really have 581 per month, then I would pay this off all your debts. Plus cutback too, with a bit of luck you could have 600pm EXTRA to pay off your debts. Use the snowball calculator to work out when a debt free date is.

ONce you are debt free you'll be able to save 800 per month, which in 2 months will give you your legal fees, then a few months later, you will have a deposit of say 5k, which will give you access to mortgages of the non-rip off variety. Which will save you an absolute FORTUNE.

Good luck Claire
Lynz
x

lynzpower

for gods sake dont wehatever you do go for 125% mortgage. this is the worst idea you can have. you will automatically be in negative equity.