Dilemma....

mrsmag

I am struggling to make a decision on what is best for our finances, and I need some advice on what you would do in my situation, I suppose you need some background info here is my state of affairs before I ask my question:

Outstanding mortgage £125,000, interest under 2%, house worth around £310/£320,000
Credit card debt £17,000, interest 0% till Dec 2012, used to extend the house and new kitchen, bathrooms etc
Mortgage linked current account £15,000, interest 4%, used for landscaping garden after building work

My dilemma is this, I am stressed out about having credit card and current account debt. I am considering remortgaging to pay off the credit card.

This is because I have a budget and we can currently afford to pay around £600 per month on visas, but even stretching ourselves to this will not clear our credit card debt before the interest free period is up. I have also begun to rent out our family holiday home which will give me a profit of at least £1500 this year, and I'm estimating £2000 next year (could be more). I am also hoping to have another baby within the next year. I work part time and earn £21,000. OH works full time and earns £25,000. So there is a possibility that we could have this paid off mid 2013, which just seems so far away to be constantly under this cloud.

If I remortgaged for the amount we want, I've been quoted a really reasonable monthly payment and we could probably afford £100 or maybe up to £200 per month overpayments without the credit card payments, and it would mean I could get a new car which is much needed as my car isn't child friendly or pocket or environmentally friendly at the moment.

So my options are, remortgage if approved - pay more for the debt in the long term but be comfortable month to month, and have another baby without worrying about paying the bloody credit cards (remortgage for the same time period as now, 16 years left)

OR

Stick with the evil budget and pay off the credit cards, keep my current car, sell lots of stuff to afford Christmas etc (except nobody's buying my stuff on Gumtree), but have something like £50,000 less on mortgage by the end of the 3 year period it takes to pay off the debt (that's not even including the current account debt)

Sorry its a bit of a ramble, but I swing back and forwards about 20 times a day whether I want to stick to the pay-off budget or cheat and remortgage

I don't know what I'm asking, I suppose its just - what would you do?

Mrs_Jojo

Don't make unsecured debt secured debt!

Keep at it, you need to make the spending changes that will ensure you won't run up the credit cards again, consolidating onto the mortgage ultimately risks your home, suffering for another year or so to pay it all off is the better option - not easier you understand, but better!

Good luck :-)

lvm

I'm with Mrs Jojo on this! Definitely option 2. Although as well as not making the unsecured debt secured, you'd also be paying interest on the debt.

I would 100% keep that credit card and only pay the minimum until the end date - I'm sure as long as your credit file stayed in tact you would just be able to transfer the remaining balance to another 0% card when the time came.

Think the best thing you could do is post an SOA (Statement of Affairs) as there may be other things you could be cutting back on .

Sounds a great idea about renting out your holiday home - I'm sure this will do wonders when your next baby makes an appearance.

Good luck x

mrsmag

Mrs_Jojo wrote: »

Don't make unsecured debt secured debt!

Keep at it, you need to make the spending changes that will ensure you won't run up the credit cards again, consolidating onto the mortgage ultimately risks your home, suffering for another year or so to pay it all off is the better option - not easier you understand, but better!

Good luck :-)

.... but I seem to run out of money and need to spend on the cards so I suppose this is the answer below, and doing that would free up some more cash each month so that I didn't have to spend on the credit cards. (which I really really don't want to, but this is how I have been in the past)

lvm wrote: »

I'm with Mrs Jojo on this! Definitely option 2. Although as well as not making the unsecured debt secured, you'd also be paying interest on the debt.

I would 100% keep that credit card and only pay the minimum until the end date - I'm sure as long as your credit file stayed in tact you would just be able to transfer the remaining balance to another 0% card when the time came.

Think the best thing you could do is post an SOA (Statement of Affairs) as there may be other things you could be cutting back on .

Sounds a great idea about renting out your holiday home - I'm sure this will do wonders when your next baby makes an appearance.

Good luck x

I am sort of worried that if I keep the cards, I'll spend again. Getting rid of them would mean I could cut them up!

I can post my budget, but its an excel spreadsheet - could I link it somewhere?

mrsmag

I just re-read that and it sounds bad, I mean for example - we've spent everything we had, and now are budgeting but we haven't got to the point where our £30 per month for car servicing has built up, and the car service is due and was £850!!! So that went on credit card. Do you see what I mean - I need rid of them!

But I totally agree with your POV, and this is my dilemma! I know option 2 is the most sensible.

Also, what do I do about the car? I might have to sell both of our cars and get one to replace them and hubby cycle to work

mum2one

I've found the link for the SOA (statement of affairs)

http://www.makesenseofcards.co.uk/soacalc.html

when u get to the bottom click the mse link, and it will format it ready so you can put it on thread. Inbetween times I would get a notebook and use it as a spending diary.

bottleofred

Hi Mrsmag,

Post your statement of affairs and you'll get loads of tips/advice on how to save cash which can then go towards the debt on the credit cards. I would never swap unsecured debt for secured debt, so don't rush to do anything just yet.

Bored

mrsmag wrote: »

I am sort of worried that if I keep the cards, I'll spend again. Getting rid of them would mean I could cut them up!

I've read that some users find it's helpful to freeze their card within a block of ice in the freezer to prevent them from spending on it, whilst still having it available for emergencies!

MrsTUS

mrsmag wrote: »

I am sort of worried that if I keep the cards, I'll spend again. Getting rid of them would mean I could cut them up!

You can still keep the credit card accounts running BUT cut up the cards so you can't spend.

I can see how it would be tempting to cheat, but the second option is clearly the most sensible - don't be disheartened!

mrsmag

I've had a look at that one, I've added what I can to it but it doesn't have a space for things like professional fees, union membership etc which my other one does. Be assured that I have accounted for my spending, I do keep a diary, I have an accurate budget (not saying there aren't places to save, just in the process of doing that). So I could upload the one I filled in there but its not accurate, my budget is, but I don't know how to upload it!

mrsmag

Ah there have been other posts since! oops, I'm talking about my budget vs the online state of affairs obviously! I'll see if I can incorporate everything I have onto the online one.

Thanks everyone