PLEASE LOOK ...remortgaging to pay off debts... good idea or bad?

thebaddeleys

Hi,

We have a repayment mortgage of £158000 at the moment and our house is worth £185000. We have £25000 of debt in various different loans all with an average of 7% apr. At the moment if my husband doesn;t earn any commision at work we end up being £400 short every month which is eating into our overdraft that is nearly at its limit. so we need to do something fast as we are going further and further into debt every month. should we remortgage and release the equity in our home to pay off the £25000 as is we add it onto the mortgage it will only cost us £142 a month whereas at the moment it costs us £600 plus which we can't afford. I don;t currently work as i;m at home with our one year old son. We do get all the tax credits etc that we are entitled to. should we move house to pay off debts and use the equity that way or remortgage, are there any other options? we need your help and fast! thanks.


House hold bills

Mortgage- 975.4
Mortgage Life cover- 24.38
House insurance- 30.35
TV licence- 10.59
Child maintenance- 270
Council Tax- 119
Talk Talk- 20
Tiscali- 15
Gas / Electric- 43
United Utilities- 39.68

Extra items

HFC (Dinning Table) 0%- 23.17
David Llyod gym- 55
Sky- 36
Blackhorse (TV) 0%- 43.77
Sofa (Blackhorse)- 50
Car (blackhorse)- 205

Tesco car insurance- 42


Loans

Abbey Loan (9.6%)- 163.13
Tesco loan (7.3%)- 252.09

O2- 60

Food- 200
Gold HSBC card- 35


Totals Outgoing-2627
Total income- 2891.24

the figures above may be slighty out as they are off an old post i've done before but from my numbers above them you get the idea!

please help us with any advice many many thanks x

thesaint

Hi the baddeleys,
Can't offer much in the way of advice, but 7% APR doesn't seem to bad for a loan rate especially if they are't secured on the house. At least if they are unsecured, you don't have to worry about losing your house.
For your repayments to slash by such a big amount, you must be extending the term by a great deal, hence paying loads more in interest.

I don't know if anyone on here can give you such a life changing information because it is dependent on so many external factors other than just money.

flea72

you may get better help in the DFW forum

rather than moving your debt from one place to another (7% is a fairly good rate), perhaps you should try cutting out non essential spends until you are in a better position to afford them - ie sky, gym, cutting down on food shopping bill, spend less on mobiles etc.

The main problem with adding general spending debt to your mortgage, is you will be paying it off over a much longer term. do you really want to be paying for your car over 25yrs, when in all likelihood, you wont still own the car then, and will most likely have taken out more finance, to buy another?

Flea

KTF

What are the end dates of all the loans?

I would look to trim the spending first before putting it all on the mortgage. Do you really need Sky or the gym membership, change mobile phone tarrif to one with more free minutes so the overall cost per month drops, etc.

Cypher

I would look at cutting non essential spending as mentioned above.

Consolidating your debts into a larger mortgage could end up putting your home at risk, also the underlying problem is your spending more than your earning If you do consolidate you debts without sorting out the spending you run the risk of being in the same position again, but the next time it will be with an even bigger mortgage.

I wasn't in the same situation as you, but my wage was reduced substantially though changing jobs. Sky (well Cable) had to go I now have freeview. Mobile Phone went to pay as you go infact I more or less stopped using it. I now rarely drive unless I have to (Petrol Saving). I stopped going out, bought cheaper food at the supermarket and cut out the takeways. If I had Gym membership that would defintiely have gone as well. I also tried to get overtime at work and even considered getting a part time job in the evenings (I managed to avoid that one). I then put myself on a pretty tight budget and set about paying off my debts. I threw everything I could at my smallest debt. Then when that was paid, I threw everything (now including the smallest debts previous payments) at the next smallest. This quickly started to snowball until I was paying off decent amounts on the bigger debts.


Good Luck.

Jarlawuk

I'd suggest cutting the non essential spending down such as the gym membership and reducing the tariff/calls made on the o2. Also you have talk talk and tiscali for £35 together but talk talk do a internet package for £20 including the landline, if your broadband (I assume the tiscali is broadband) contract is nearly up then you might want to switch over to talk talk, if they don't provide coverage then see if sky will.

You could remortgage thought another alternative is perhaps a A&L loan - they currently only charge 5.9% which isn't bad for a unsecured loan.

But the best thing you can do is go down to the C.A.B as they can give you the best advice for free i.m.o

thesaint

To anyone thinking of posting on this thread, It has been re-started on the debt free wannabe board.

roger56

OP, have you read Martins article I mentioned in your other thread?
http://www.moneysavingexpert.com/cgi-bin/viewnews.cgi?newsid1103204730,72152,

there's one on budgeting also, it will help you
http://www.moneysavingexpert.com/cgi-bin/viewnews.cgi?newsid1089226742,17582,