Struggling to be able to afford to pay off mortgage balance

missi1

Hi
I'm just after some advice on my situation and would really appreciate any.

Currently I'm single and live with my teenage son in a mortgaged flat which was purchased off the council 5 years ago on the right to buy scheme.

I have adverse credit for defaults and unsecured debt for approx £12,500 which is curently paid through Payplan at a reduced amount of £50 month as I am recently unemployed but desperately looking for work.

The mortgage is with Preferred through Acenden for £74,500 on interest only and the flat is probably worth approx £82,000.
Acenden have never been able to transfer me to a repayment mortgage as they don't allow it.

The problem I have is I can't move to another lender for a lower rate due to credit history and debts and to be honest I don't think I would be able to afford a repayment mortgage anyway.

In approx 6 months my child tax credit, child benefit and child maintenance will stop as my son will finishing education which will leave me in a worse position, even if I am working but my main concern is that I will never be able to pay off my mortgage as I have no money set aside to pay the balance when it ends in 25 years. I probably won't be able to afford a repayment mortgage as if my earnings are say £1050 per month, which is what I was previously earning, £658 of that goes on food and bills and can't really rely on board from son as he might not get a well paid job until at least a couple of years time when finished apprentice and then who knows, he may move out.

Here are my monthly outgoings

Mortgage £40 (£20 arrears and £20 to cover difference from housing benefit
Home Contents Insurance £10
Leasehold fees/service charge £40 (spread over 6 months) This varies each year
Ground rent £10 per year
Electric £110 (includes £50 arrears, total £645)
Gas £25 month (pre payment, variable)
Pet insurance £10
Tv Licence £13
Phone/Broadband £25
Mobile £10
Groceries £220
Fuel £40
Car Breakdown £10
Car Tax £10
Car Insurance £ 55
Payplan £50
Water rates £28
Total £658

Monthly income

Job Seekers £270 (includes small deduction for crisis loan soon to be cleared
Child Benefit £82
Child Tax credit £176
Child Maintenance £136

Total £664

If I was working and not receiving any of the child benefits (which will happen in 6 months) I would then be paying council tax of £65 per month and mortgage of currently £235 which would then make it a total of £938 per month and earning say £1050 per month, it would still prove difficult to switch to a decent rate repayment mortgage.

Was considering a mortgage rent back scheme but not too sure. I have looked at a debt relief order but do not qualify as the flat is an asset.

If I did'nt have the £74,500 balance at the end of the term would they go in for reposession? I would be almost 60 by then so it's doubtful I could remortgage or extend.

I realise that once my debts are paid off I will have more spare cash but that could be a few years yet.

Thanks in advance

[Deleted User]

Hi missi,
Maybe those on the Mortgages and Endowments board could be of more help as they probably have more knowledge on mortgages.

missi1

Hi amazonian17, thanks for the reply. I posted on that forum earlier on but was advise i may get more help on here so shall see if anyone reponds.

Niv

If you sold your house and rented it back, wouldnt it cost you the same (or more) than your mortgage? If so, I dont really see the advantage in doing that.

In the short term, while your son is still at home (once working), you could charge him rent as this would cover some of your monthly bills that are effectively shared (gas/electric/food). When he moves out and you stop recieving rent you would also eat half as much food and probably use a little less electric / water etc. and get a discount on council tax.

Also dont forget, your arrears are not forever (i assume) so once they are paid you will be in a much better position.

DVardysShadow

[Deleted User] wrote:

Hi missi,
Maybe those on the Mortgages and Endowments board could be of more help as they probably have more knowledge on mortgages.

This is not a mortgage issue, it is a debt issue. Whatever happens with the mortgage, OP is not going to be able to pay it. And the DMP will make a new mortgage difficult.

Niv

Just wanted to add, you seem to be worrying about 25 years time and using your current financial which will change over time. Dont over panic, its good to think about how you will pay your mortgage capital but you have to take into account your financial position will change.

Let give an example: Five years time, arrears paid off, son left home. You earn £1050pm. Monthly electric bill reduced by at least £50 (more as son would have left), food bill would have gone down, council tax bill gone down. Using your figures:

Mortgage 235
Home Contents Insurance £10
Leasehold fees/service charge £40 (spread over 6 months) This varies each year
Ground rent £10 per year
Electric £60
Gas £25 month (pre payment, variable)
Pet insurance £10
Tv Licence £13
Phone/Broadband £25
Mobile £10
Groceries £150 (assumed you on your own eat less than two J)
Fuel £40
Car Breakdown £10
Car Tax £10
Car Insurance £ 55
Payplan £50
Water rates £28
Total £781
Income £1050
Surplus £269
I know bills go up but so do wages. Its an example, just a little rosyer than yours maybe?

[Deleted User]

As the above poster says plenty of time to sort this out.

Don't sell your house only to pay rent, maybe even more rent!

You need to post your statement of affairs so that people on here can help with that.

I suppose the key is the repayment of the debt management plan, how long this will take and what changes you can make to bring in extra cash. Do you have spare rooms?

You need to look at a long term plan to free up money - someone on here will help you, but they tend to only like the mse style statement of affairs.

Memory_Girl

Can I be the one dissenting voice?

On a really low income I managed to pay off 10K of debt in less than 2 years(in fact for one year I was on benefits) - I wouldn't say it was all fun and games, but I did it nonetheless.

Since achieving that last Nov I have paid more than 2K off my mortgage (I too am on interest only) and have an emergency fund aside too. I'm still earning less than £800 per month - but I am focussed on getting the mortgage paid as soon as.

I have one boy about to start High School and another is a year off staring Primary so childcare is an issue - but I have set up on my own so I can work around the kids.

My mortgage is £126K and I put all my focus into finding the next £125 to pay off.

So how can you put your focus into finding a better paid job in the next 6 months and combine that with developing some seriously frugal habits you can begin to claw back some control .................... if you want to keep the house that is, and I did.

MG

missi1

Thanks for all the replies, really appreciate it.

I think alot of my fears are that I will only get a job that pays minimum wage which could be £200 or so less which basically leaves me with not much left after all the outgoings.

When I tool out my interest only mortgage I was quoted a repayment figure of £450 per month which is just not possible on the spenditure that Niv has shown. If I was earning £1050 per month it's possible, but would be living on borderline hence the reason I was thinking of renting it back from housing association. The council are the leaseholders on my property but the trouble with leasehold is that the invoices each year can vary, 3 years ago I had one for £2000 for the windows then last year £1000 for roofing and plumbing. Sometimes a new invoice can come out in Sept depending on whats been done to the blocks.

Assj, no I don't have any spare rooms and it is a very small, 3rd floor property.

Memory Girl, you did really well paying off 10k, I was looking at doing that when I was employed last year but everytime I tried to do it, something else had to be paid.

Will have to just pray that I get a reasonably well paid job and try and chip away at the debts as much as possible.
Statement of Affairs and Personal Balance Sheet

Household Information
Number of adults in household........... 1
Number of children in household......... 1
Number of cars owned.................... 1

Monthly Income Details
Monthly income after tax................ 0
Partners monthly income after tax....... 0
Benefits................................ 528
Other income............................ 136
Total monthly income.................... 664

Monthly Expense Details
Mortgage................................ 40
Secured/HP loan repayments.............. 0
Rent.................................... 0
Management charge (leasehold property).. 40
Council tax............................. 0
Electricity............................. 114
Gas..................................... 25
Oil..................................... 0
Water rates............................. 28
Telephone (land line)................... 15
Mobile phone............................ 10
TV Licence.............................. 13
Satellite/Cable TV...................... 0
Internet Services....................... 10
Groceries etc. ......................... 220
Clothing................................ 0
Petrol/diesel........................... 40
Road tax................................ 10
Car Insurance........................... 65
Car maintenance (including MOT)......... 0
Car parking............................. 0
Other travel............................ 0
Childcare/nursery....................... 0
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 0
Pet insurance/vet bills................. 10
Buildings insurance..................... 0
Contents insurance...................... 10
Life assurance ......................... 0
Other insurance......................... 0
Presents (birthday, christmas etc)...... 0
Haircuts................................ 0
Entertainment........................... 0
Holiday................................. 0
Emergency fund.......................... 0
(Unnamed monthly expense)............... 0
Ground Rent ............................ 0.75
Total monthly expenses.................. 650.75


Assets
Cash.................................... 0
House value (Gross)..................... 82000
Shares and bonds........................ 0
Car(s).................................. 3000
Other assets............................ 0
Total Assets............................ 85000


Secured & HP Debts
Description....................Debt......Monthly...APR
Mortgage...................... 74500....(40).......0
Total secured & HP debts...... 74500.....-.........-

Unsecured Debts
Description....................Debt......Monthly...APR
Payplan .......................12500.....50........0
Total unsecured debts..........12500.....50........-


Monthly Budget Summary
Total monthly income.................... 664
Expenses (including HP & secured debts). 650.75
Available for debt repayments........... 13.25
Monthly UNsecured debt repayments....... 50
Amount short for making debt repayments. -36.75

Personal Balance Sheet Summary
Total assets (things you own)........... 85,000
Total HP & Secured debt................. -74,500
Total Unsecured debt.................... -12,500
Net Assets.............................. -2,000

Created using the SOA calculator at https://www.makesenseofcards.com.
Reproduced on Moneysavingexpert with permission, using Firefox browser.

missi1

Just to say that I have now added a statement of affairs

[Deleted User]

DVardysShadow wrote: »

This is not a mortgage issue, it is a debt issue. Whatever happens with the mortgage, OP is not going to be able to pay it. And the DMP will make a new mortgage difficult.

So just wondered as a compulsory interest only mortgage, if it's practical/worth having if unable to repay at the end and maybe consider selling.