Phase 1 of being debt free woohoo! Opinions on Phase 2?

Optimisticred

Hi Folks,

Long time reader short time poster. First of all thanks for all the indirect encouragement! Great board!

Today we (me and my finace) have finally finished our Phase 1 of our being debt free programme that’s taken us 12 months!!! Yeeeahh!!! and to be perfectly honest are over the moon!! Our programme was:

Phase 1 (now done!)
HSBC overdraft -£200 (now paid and closed)
NatWest Overdraft -£1,400 (now paid and closed)
Vanquis Credit Card -£200 (now paid and closed)
Barclaycard -£800 (still open but for emergencies only)
DIY Store Credit -£600 (now paid and closed)
Total = £3200

We now have Phase 2.....We've called it Phase 2 as the debts in Phase 1 we thought were excissive and needed paying off first while Phase 2 are reasonably accepatble as we use these every day as it means we now only have 1 bank account each, 1 credit card (joint), 1 loan each.

We are selling our house (expected resultant equity £14000) as we are moving cities due to work reasons (don’t worry more money etc). Due to our poor-ish credit ratings (due to our debt and a few late payments) and small deposit we can’t really afford to buy the type of house we want or even port our current mortgage. Therefore, we’ve decided to use the expected £14000 equity to pay off all our remaining debt (see Phase 2) and then re-save for a deposit over three years (say £800 a month but £300 of that would have been money we would have spent of paying off loans/debt in phase 2 anyway) saving up hopefully £25,000 to £30,000!

Phase 2 (still to come)
Barclays Overdraft -£2000
Barclays Overdraft -£1400
Halifax Credit Card -£3000 (Now at £2800)
Barclays Loan -£3200
Barclays Loan -£4100
Total = £13700

The reason I am posting is well just to shout how reasonably happy we are plus to see what everyone’s opinions are of what we’re doing? For example, Are we mad for selling up? Are there other options we could consider? Has anyone else done the same thing we have? Are we going about things the correct or wrong way etc?

Another fact is that we just can’t see the property market improving anytime soon and feel we’d get a better return from our money by paying our debts off now therefore saving us £300 a month interest and then our subsequent savings in ISAs etc.

Thanks again.

Mowgli87

How Much is your mortgage and what is your house like?

Odd advice I know, but a friend of mine does this:

they have a 3 bedroom house in cardiff. Their mortgage is around £500 per month. they changed it to a B2L mortgage, and rent the rooms out seperatly at £350 per month each - totalling £1050 per month. This pays the mortgage and the rent for their flat they now live in - allowing them to pay off alot of debt quickly!

Butterfly

Wooohooo! Well done for completing Phase 1 - I love it when a plan comes together! I've no idea about the answer to Phase 2 to be honest....but my gut feeling is that if you can pay off your debt in one fail swoop from your house sale profit then do that as it would make you feel amazing. You'll then be able to rent for a while (nothing wrong with that) and start off with a clean slate. Or if the B2L option works for you then go for that but you will still have to budget for maintenance/repairs etc and also times when a room or two has no tenants..... might work out ok if the rent covers your mortgage and then some, but is also abit of a risk if all you want to do is put your money away for your dream house in your new city. Good luck whatever you decide! x