Questions about a DMP

boschiba

hi, I have some basic questions which maybe you guys could help me with? have discussed a DMP with CCCS, but hubby reluctant...
so these are my questions:

1. we are hoping to sell house in the spring and cash in equity; will having been on a DMP make it difficult for us to carry on with our existing mortgage? ie stay with same lender, same size mortgage. we have no mortgage arrears atm.

2. when we cash in the equity can we pay off all the remaining debts being managed on the DMP in one fell swoop?

3. income declaration for DMP: I have a basic income per month; some months this can be topped up by eg £200, some months could be an extra £1000. I never know this in advance; do I tell the DMP the base figure - I guess I do, but then what happens with the extra income? ie does it have to go straight to creditors or can we use it to tart the house up to increase likelihood of sale/better price?

4. re the income above, I am self-employed so should be saving 25% a month anyway for tax bill - where does this go in a DMP?

thanks in advance for any answers

eyeopener2

I can answer 2 and 3

2. You can pay of the existing debts with the equity from your house, remember that a DMP is an informal arrangement. Is this a good idea though? If you could tighten you belts for a few years, still stay in your home and pay the debt off. You are risking the chance that you won't get another mortgage anytime soon.

3. I would use your base pay for the DMP and use any extra income to save an emergency fund first, so you do not need to rely on the cards ever again, and then tart up the house after you have a few £k saved up. OR you could save up the extra for Full & Final Settlements this means you would be debt free sonner than just relying on your monthly payments.

4. Your income for DMP purposes is your net income so you need to mention this when speaking to CCCS. You have to save the 25%.

Number 1 is always difficult to answer. If you were staying in your house your mortgage wouldn't be affected so you have no worries there but as your selling and starting afresh then you risk, as I said in 2. that you won't get another mortgage (you probably won't get the best deals as it is).

How bad are things? ie how much do you owe in comparison to your income?

What I would do is this.

1. Stay in the house, unless your really want away.

2. Save as much as you can from the extra income and when the opportunity arises pay Full and Finals on your debts.

boschiba

thanks for that.

total debts excl. mortgage are about £64k but not all are pressing - the 'problem area' is about £35k on hubby's credit cards, which he used to prop up his business; business doesnt have money to pay back (yet, and not in short-term either) but they are his personal cards so his debt.

we DO actually want to move - house and garden way too big, too remote, kids are teenagers & I am fed up of providing taxi service as v. little public transport. its beautiful, but house is crumbling and I am tired of rural bliss tbh.

the ideal plan is to sell, clear about £200k, keep existing £244k mortgage and buy something up to £325k (we are in expensive s.east!!) clear debts with the balance and still have something to put away for a rainy day. I know this is a relatively fortunate position to be in... if only we can make it come right.

so my thinking is that we would not be re-mortgaging per se, just moving it to a new property, but dont know if having a DMP in place would make our current lenders go wobbly on us.

Ribbons473

boschiba wrote: »

thanks for that.

total debts excl. mortgage are about £64k but not all are pressing - the 'problem area' is about £35k on hubby's credit cards, which he used to prop up his business; business doesnt have money to pay back (yet, and not in short-term either) but they are his personal cards so his debt.

we DO actually want to move - house and garden way too big, too remote, kids are teenagers & I am fed up of providing taxi service as v. little public transport. its beautiful, but house is crumbling and I am tired of rural bliss tbh.

the ideal plan is to sell, clear about £200k, keep existing £244k mortgage and buy something up to £325k (we are in expensive s.east!!) clear debts with the balance and still have something to put away for a rainy day. I know this is a relatively fortunate position to be in... if only we can make it come right.

so my thinking is that we would not be re-mortgaging per se, just moving it to a new property, but dont know if having a DMP in place would make our current lenders go wobbly on us.

Before we started our DMP we seriously considered selling our property to release the equity which would have cleared our debt in full.

However when we approached our Mortgage Lender to discuss options even if you 'port ' your existing mortgage onto another property you still go through an application process again, so you cant just take your mortgage with you.

We were told outright that we wouldnt be able to get the same mortgage again as lending rules have changed so much from when we initially took the mortgage out regardless of our debt situation.

So just think this through very carefully.

HTH.

Ribbons473

Also meant to add, are you able to service your debt until you sell your property?

If you can keep up with repayments until then and you have no other adverse credit then you stand a better chance of doing what you want to do.

If you can stay off the DMP until you sell mortgage wise you will be in a better position.

Have you actually spoken to CCCS yet? What have they advised?

eyeopener2

You of course have the option of renting, clearing the debt, banging the money in the bank (not to be touched), and adding to it, and rebuilding your credit rating before buying again.

boschiba

ribbons, thank you - this is my concern, that we will have to reapply as it were.

eyeopener - rents round here seem to be about double what our mortgage is!! although to be fair that is a very cursory look. plus we have 2 adults, 2 teenagers, a dog, 3 cats, 4 rabbits and a hamster to factor into the equation, and I dont know if you can rent with pets these days....

I cant lose the animals, it would destroy the children (and me); dont want to move far because of their school - if we are moving house and all the current financial trauma I need to keep school on an even keel for them.

aargh, all this is doing my head in. I'm not sleeping more than 4 hours a night, on anti-anxiety drugs from GP (which are just starting to kick in, can feel my jaw unclenching a bit). they do say its always darkest before dawn dont they?

eyeopener2

Hi again

Ok if things are making you ill it is time to take stock and think logically about what you want, what you need and what the options are.

tell me to &*&^ o&& if I have anything wrong here!

1. Stay put, organise yourself to pay the debt off, once its gone then you can move and port the mortgage. This will take changing your lifestyle and using all spare cash to pay the debt. You live a frugal lifestyle for a number of years.

2. DMP and pay the debt off with credit hammered and taking your chances mortgage wise.

3. Service the debt for as long as it takes to sell the house, clear the debt then move as planned.

So why not start by writing down the pros and cons of all the scenarios you may be able to see the wood for the trees.

E

boschiba

thanks eyeopener, def no swearing back at you as this is exactly the conclusion I need to reach.

actually its not 'I' its 'we' and I think that is where the difficulty lies... hubby does not have his head in the sand exactly, but seems to think 'it will come right somehow' or that his business can trade its way out of the problem, and meanwhile I am paying the bills/servicing the mortgage/finding the cash the kids need for school every day etc etc.

this is NOT to say he doesnt contribute, but more like I am the one doing the day to day worrying while he has a big picture worry if that makes sense?

boschiba

just to add, looked at rentals online this morning. we have a big and beautiful albeit totally falling down 4 bed period house with huge garden, rural, seaside, mortgage payments are £832 a month.

we could rent a 3 bed town centre small house with tiny garden - not a nice part of town (2 teenage girls, not sure that's ideal), not convenient for school, no offstreet/secure parking for hubby's work van let alone my car for £650 a month.

doesnt seem like much of a deal really to me... seems kind of like we've got to hang on and either sell comfortably or live poorer than church mice for next years.

boschiba

just spoke to b. soc this morning, and no way would we get the same size mortgage again, which makes selling house a No I think.

spoke to Business Debtline and found them more helpful and understanding our situation better than CCS were.

going to write down Eyeopener's options on a big piece of paper and put pros and cons against each.

this is so depressing, I am struggling. another night with about 3 hours sleep.