Which way to go ?

whatstheanswer?

We have a £100k mortgage on a house worth approx £275k.
Some years ago we managed to secure an excellent rate for the last 7 years of the mortgage ( 0.5 % tracker ) however as our income dropped ( self employed ) we changed the mortgage over to interest only.
The main reason for this was to try to keep on top of the huge credit card bills which we were basically having to live on while the income decreased.
The problem we have, is that all of our income is going into paying back the credit cards: Total £45k between 6 cards.
Although we managed to switch a few and get lower or interest free, we do try to pay over and above the minimum, but of course nothing is going to change in a big enough way to get the mortgage back onto repayment.
We are really stuck and want to take advantage of the great deal on the mortgage but the 7 years is ebbing away with the total £100k staying static. Due to the bank not paying one mortgage payment some months ago ( it was paid, but late ) the mortgage company won't look at any remortgage yet but not even sure if that is what we should be doing ? To borrow the £45k to pay off the cards doesn't mean that further borrowing on the mortgage is going to be a decent rate ?
Its got to the stage that we don't know when or if our income will increase so if it drops further we will only be able to pay minimum payments and we are desperate to do something now before we default in anyway. What would you do ? Any advice would be very gratefully received as we are wasting time just trying to decide which way to go. Thank you

Aston83

I won't confess to being the fountain of knowledge on here, but after seeing what others have posted on this forum, aswell as what i have done personally, hopefully this idea may work.

As you well know, the only debt out of all of that which is truely important, is the mortgage. You could lose your house if unkept. I personally would do an SOA, find out how much money you have to service your debts, then prepare to ask your cc's to freeze all interest and charges and ask to repay a smaller amount, any extra going to the smallest debt first. This means that you can 'snowball' your CC debts.

Try to be able to cover your mortgage monthly payments entirely. Also, one of the great mantras on here is 'every little helps' and it is so true, so get on and claim the ppi, the switiching fees, the CC charges etc etc

Maybe ask each creditor for a copy of the CCA to see if each debt is enforcable.

All this money you can throw at your mortgage or preferebly to the CC's

You can find all material needed to claim or ask for lower payments on the national debt line website

Hope this helps

Jinx

I just wanted to add if you have a good credit history and you want to remortgage in the near future - I would advise you do not go into any arrangements with your creditors. As far as I know, any request to stop interest or reduce the minimum amount is considered an arrangement to pay and your credit record would have AP marked on it to reflect this. This would not sit well with a mortgage company looking to offer you a deal. Happy to be corrected if anyone knows better.

On the other hand if you are really struggling and end up defaulting, your debts will then be sold and you can then ask for interest etc to be frozen and reduce your payments to an affordable level. But this trashes your credit rating, again limiting the good deals you can get on your mortgage.

I think you need to do some more reading/posting on this forum to really understand your options properly and of course others with more experience will be along who may be able to help more than I. Good luck

whatstheanswer?

Thank you both. I think its a real case of concentrating on the mortgage and changing that back to repayment as soon as we can sort the credit cards. As you say, they will have to be approached with the details of our lower income to see if we can freeze them as far as interest in concerned. It will spoil what is a current good credit rating but to borrow more from the mortgage to cover them will just keep moving the debts about rather than address them. Congrats Jinx on getting those figures of yours down.. Wow. Lets hope ours can start looking like that soon ?

Jinx

whatstheanswer? wrote: »

Thank you both. I think its a real case of concentrating on the mortgage and changing that back to repayment as soon as we can sort the credit cards. As you say, they will have to be approached with the details of our lower income to see if we can freeze them as far as interest in concerned. It will spoil what is a current good credit rating but to borrow more from the mortgage to cover them will just keep moving the debts about rather than address them. Congrats Jinx on getting those figures of yours down.. Wow. Lets hope ours can start looking like that soon ?

Okay, this is purely MY opinion....

If you are going to trash your good credit rating by paying less than the minimum and asking for interest to be frozen etc then I would go the whole hog and default on them all (the credit cards I mean)... This would mean that your credit rating would go down the drain; however you would be defaulted by all your creditors at roughly the same time.

Once you are defaulted or have made an arrangement to pay, usually creditors stop interest (you request it) and any other charges and quite often the debts are sold to a debt collection agency. This would give you the breathing space to pay the capital rather than just servicing the debt.

It would trash your credit rating for 6 years as you would have defaults across the board.

It may reduce the favourable mortgage rates you are seeking.

If you are managing the payments just about and have a good credit rating its worth trying to hang onto. If not, then the above scenario may be an option.

If you do go down the DMP route its stressful to start then once its up and running, is mostly smooth and the time passes really quickly. As you can see from my signature, Ive been chipping away for ages - but slow and constant works and there are some here who have paid it much more quickly. Its all about what works for you

Good luck