Final decision on this please

Beatle_Ray

Hello,

Quick overview and then I need some guidance please. I'm 48 and coming up 49 in October, been at same company since 1981 and it looks as though by the end of the year we'll go bust/into voluntary liquidation or the company will be sold either way I'll be out of work. At present I owe about £50,000 on credit cards, this has slowly been getting me down since the debt is not really reducing, my problems are compounded by the fact that in the past year we have had a 25% salary reduction and just recently some of the cards have upped their minimum payments which means i'm about £600 a month short. My property has about £100-£110K equity in it. I have three options as i see it
1 Carry on the way i'm going and eventually pay off the debts in about 7 years, assuming I remain in employment
2 Sell the house and move somewhere else and use the equity to pay off the debts and put the remainder down as a deposit on a new house, a relative has said they can fix me up with a broker who can get me a good deal
3 Remortgage the house and get a better deal on the mortgage and borrow a little more to do a few bits round the house that need fixing.

Either option two or three seem the better option particularly when you consider my redundancy pay out will be about £9400 and I intend to start my own business with this and to start to earn the salary I'm on at the moment at the begining is unrelastic so with no debts and a reduced mortgage I think I'm just about able to sustain myself for a couple of years. I'm of the opinon if i sit here and do nothing then thats exactly what I feel will happen. For the record the wife works part time and no children at ther moment. Have looked at everything to reduce costs but can't reduce anything anymore. Do you think I'm being sensible and what is the best option and way out of this mess.

Thanks in advance for the replies

Beatle Ray

Tixy

By option 3 do you mean remortgage to cover your current mortgage an and a bit extra and consolidate the £50k debts on to it as well?

If you do this and do end up being made redundant how will you afford the mortgage repayments? Presumably the repayments will be quite a bit more than your current repayments? I would be very cautious about turning unsecured debt into secured debt when you know that you might have employment issues/need to take a further salary drop.

If my income were at risk I think I'd want to keep the unsecured debts unsecured. That way if you do have to default on these payments you are only risking your credit file and CCJs and not your property.

If you are currently £600 a month short then I would say option 1 is not an option - if you cannot keep up with minimum payments or only by reusing credit then I would have thought it would take much longer than 7years to clear the cards - are you sure your figures are correct?

2 might be a better option. But only you know how attached you are to your house. Would you intend to end up with a mortgage that is no larger than your current one? Will you be happy to downsize by £50k or so in terms of house value? If you end up with a bigger mortgage than you have now then this option won't really be much different to option 3 - except you'll have the stress of moving etc.

Just my thoughts anyway

Beatle_Ray

Hi Trixy,

Thanks for the response, i agree with you, option one is not an option, i cannot carry on like this. I think moving is not an option since it entails the moving costs/legal costs. I'm confident that i can meet slighly higher payment on the new mortgage but aware i'm moving a secured debt to an unsecured debt but if the work situation goes the way i think its going and if i fail in my business i can still sell the property and walk away with £50K at current market prices, is that sensible. I have read elsewhere on here how people make savings by doing this and doing that but i don't have that option. Debts were run up by having treatment at fertility clincs sadly not by extravagant living

Beatle Ray

Tixy

I suppose it depends on how much better a mortgage deal you can get than the one you are on now - have you looked into this, compared current monthly repayment to the best rate a broker thinks you might get with an extra £50k added on to the mortgage? i assume you are hoping to keep the mortgage term the same? if you are thinking of extending it then I would be very cautious and think about the overall long term cost not just the current montly payments.

It sounds like you currently have about £100k equity in the property - is that right? Will increasing your mortgage by £50k for the debts take you into another more expensive bracket in terms of LTV?

I suppose the other thing to consider is that if your business is not successful and you cannot keep up with mortgage repayments you will incur additional charges and might need to sell quickly and not get the full market value, plus you might have quite large penalties for the new mortgage - all these thing could soon start to erode a chunk of the £50k you'd hope to walk away with - and then might that leave you in a position where you couldn't buy another house for a while? (I'm not saying don't do it, I'm just trying to think of potential issues you might have).

Have you spoken to one of the debt charities at all about the monthly shortfall at all? Have you considered a DMP perhaps? Would wife be able to increase the hours she works to make up the £600 monthly shortfall?

Beatle_Ray

Hello Trixy,

Currently owe £130,000 on the mortgage and property i consider to be worth £240,000, having it valued on Saturday, no less than £230,000 that's for sure, just guessing from other properties in the area. So by increasing the mortgage to £180,000 you can see the LTV ratio.

Wife can't work any more hours sadly and with the current monthly shortfall aside from the more drastic option of selling up and moving into rented accomdation i don't see a way out.

Am i being relasitc?

CH27

Option 2 sounds best.

If you enter a DMP it may have an adverse effect on your own business plans.

Tixy

I'm not very up with mortgages but I know they tend to increase in cost if the LTV is 75% or more, so you'd look to be right near that limit. That said I guess it depends on what value the mortgage co would use. I think the thing to do would be to get the valuation and then speak to a mortgage broker and see what they say before you make a decision.

Back to option 2 - If you could sell and clear £100k then even with moving and solicitors costs and paying off the debts you could still end up with £40k, so I guess you'd then be looking at buying property around £160k or so - how would you feel about that?

Are you looking for other employment now? might you be likely to find another job that would take you back up to what you used to earn in your current one?

Beatle_Ray

Thanks once more Trixy, unlikely to get another job in this industry at my age sadly. When i started thinking about taking a positive step to correct all of this i only thought about moving but then i thought well if i do move i have all the extra costs of moving and legal fees so why not remortgage and as someone else mentioned if i default on my debts then that will hinder my chance in busienss later on,

Beatle Ray

Pee

Setting up a new business is a scary financial step, especially when your wife doesn't seem to be doing her share. I have a lot of sympathy as no doubt the fertily treatment and failure have taken their toll and if you are still tryiing, the last thing she needs is more stress, but she must be aware of the debts and if I was her, I'd be keen to step up to the plate to take the stress off you now.

Do you really think another job at 48 would be hard? In lots of industries that would be seen of as prime.

I really value my house and see it as a way to have free accomodation in my retirement. If I was you I'd be looking at a management plan for the debt and not endangering the house. Moving and then paying rent would be expensive and mortgages are not so eay to get at the moment, especially if you are newly self employed, so the time to make the decision is now...

I wish you well.

BeautyandtheBeast_3

i would go for option 2. what line of work are you in? could you retrain?

firesidemaid

is your debt still increasing?

do you have anything to sell that so that you can raise some money to chuck at your debts?

how are the debts split and what are the % rates on each of them? can some be moved to 0%?

finally, have you thought about posting your SOA, income and outgoings to see if this forum can assist you in your way forward?

good luck