Debt - Help me stay in the house we love!

marko9

Hi
Looking for some advice here on what to do!

Firstly my SOA, then I’ll explain!

Income
My Wage : £2500 I tend to make an extra £300 a month in overtime (not guaranteed tho)

Partners: £1100 not inc bonus ranges from 200 to 1000 so don’t take any into account
Child Tax: Approx £130 (2 children)

Total: Say £3800

Outgoings
Mortgage 700.00 variable rate and interest only
Lloyds Loan 389.10 - 20k loan over 5 years (I think)- 6% rate
Child care 412.00 Little one goes to school in Sept however just had another boy last week!
N/Rock Loan 229.87 6 years remaining balance £17800 5.8% rate
Cahoot 180 Flexable loan – gits just increased rate to 19.9%
Council Tax 103.26
Gym x 2 70
Gas & Electric 89
Sky Digital 78.00 full package plus phone and broadband
Mobiles 70.00 both on £35 package deals
amex 242 was a credit card from American express but they stop the use of it!
bed 34.16 - 0% option for 24 months
Dentist 24.9 family plan
BT Line rent 11
Water Rates 23.85
TV 11.37
Student Loan 26.78
Sofa 64.79 - 0% option for 24 months
Natwest Loan £230.00 – 15k Loan over 7 years
Car £189.57 – BMW finance Lease Purchase
carpets 71.25 - 0% option for 24 months
barclaycard 91 – Balance £3700
Diesel £60 approx

Total approx £3400

Total unsecured debt
AMEX 9000
Mastercard 3700
Cahoot 9000
Natwest 14000
bed 1100
Sofa 2000
carpets 2565
Rock 18000
Lloyds 18500
77865 not inc car loan of 10k

It looks bad, but we do tend to get regular bonuses etc and place 200 a month in savings!

However, child care costs will go up end of the year with the new born going into to private care and the older child starting school in sept, he will need after school care.
Our mortgage stands at 144k and on an interest only mortgage until some loans are paid off.
However the house is worth approx 185k min!! so I was thinking I could sell the house and pay of the following:
Cahoot – 9k
Amex – 8.8k
Barclaycard - 3.7k
…and maybe the interest free options so least there paid up and gone.

Leaving just the 3 big loans and by downsizing to a 140k max house for now??

HOWEVER, The thing is we love the house we are in, and was looking for some ideas in possibly getting a mortgage deal tying the debt into the property or getting a home owner loan upto 110% of the value giving me something like 50k to pay off debt into one big loan, and maybe leaving the Lloyds loan, then in 5 years time we can start overpaying the mortgage once the Lloyds loan is finished plus the child care should reduce a lot too.

Fishing about firstplus offer 6.9% upto 120% value of your home. anyone any advice on these guys? I know there not the best option, but the high street banks generally only offer up to 95% of your homes value and they charge huge fees!! Although I suspect first plus early/over payment fees are high too, evening them out.

A quick calc makes one big payment of approx £1200 inc mortgage but only on interest only basis on the house capital (repayment places approx an extra £200 on the mortgage figure), which leaves approx 150 a week spare not inc any bonus that month.

18 months ago my credit scoring was excellent, i dont know what it is now but i have applied and been declined for 0% credit cards, however this maybe down to affordablility?!

i dont have an over draft.

Let me know your thoughts and ideas on saving money and paying off these huge debts…thanks Mark

Ytaya

Don't consolidate! I think almost everybody here will tell you that. Why? Because people consolidate, then run up the debts again, then consolidate again... It's a vicious cycle. Look at my sig to see how I know this

How much do you have in savings? What's it for? You shouldn't be saving when you have debts to clear - it's costing you money. That's an extra £200/month you can throw at debts.

At first glance at your SOA:

marko9 wrote: »

Gym x 2 70 This will need to go. Walking is free! Get a bike?
Gas & Electric 89 Are these the cheapest deals? Look on uswitch, see if you can change to a cheaper supplier. Then go via Quidco for cashback when changing if possible.
Sky Digital 78.00 full package plus phone and broadband This is very high! Can you cancel this and get Freeview? Or reduce it right down to a basic package?
Mobiles 70.00 both on £35 package deals These are high. Are you on a contract? You can reduce it right down to a lower tariff if you're tied in. If you're not on a contract, consider switching to PAYG - and using your phones less!

I don't see any mention of groceries in here - how much do you spend on food and household consumables? Is money 'disappearing' from your budget every month? Keep a spending diary to see where all those pennies go - it can be startling to realise how much those lattes and Mars bars add up to over a month!

Once you've worked out what you can save and where you can find a few extra quid a month, you need to figure out what order to tackle your debts in. Go to the Snowball calculator and put all your debts in. It'll show you when you can be free of your debts and how much interest you'll pay over that period. It will also tell you what order to pay your debts off in. Basically, throw as much money as possible at your highest APR debts first.

I reckon we can help you keep your house, but it will take some discipline. But whatever you do, don't consolidate! Good luck

poppy_f1

how much do you have in savings and what intrest rate is it
sometimes theres no point in having much savings when the debt intrest is way higher
may be worth thinking about using some of the savings to throw at the debt and keep some as a rainy day fund

marko9

the 200 savings is the xmas fund with having 2 kids and a part time child too!

having said that we have had to dip into that for the new baby leaving only 400 or so max in savings.

i aggree with the sky and the posibly looking to reduce the gas/elec however we are both very keen fitness people and the gym is a must for us and we use it twice a day so would really like to keep the membership. we are both tied into contracts on the mobile phones.

the debt has built up from a previous marriage couple of years back and tbh i have paid 25k off in 2 years...:T

am also possibly thinking of selling this house then renting for 5 years to pay off the debt and save for a deposit, but this is last resort and would rather stay on the property ladder.

yatya, i know you say dont consolidate, but my thinking was to consolidate so much and leave 1 or 2 or the big unsecured which comes to 600ish a month for 5 years then once these loans are paid start eating away at the consolodated loan!! :j i think i learnt my lesson and wont be getting more debt in the future.

i am determined to get debt free leaving only a mortgage and a car payment leaving the rest to live a very comfortable life :A although i know its going to be a long road.

Ytaya

At the moment, the debt you have is unsecured. What if the worst happens and either you or your spouse become unemployed? It happens, and there's never a good time for it. What if one of you becomes unwell and unable to work? With unsecured debt, there are limits to what they can do if you can't pay - you have more options to pursue payment plans and debt management plans. If that debt is secured on your house, they can take it. Just be careful

marko9

yes i aggree and i would be stupid to risk that.

esp since i dont have no insurances against that!

even if i cut back the 'good' things i.e. gym, sky etc it wont save much will it?

i prob could carry on the way i am at the moment and get by just, unless a nasty surprise comes along then am goosed.....the more i think about it the more i know we need to sell the house to more forward quicker :eek:

chivers1977

why do you have to have a BMW. It seems an unaffordable extravagance in your position.....

surely your wife isn't using the gym at the moment - she must be far too busy/ trired - can you cancel for a while?

Are you making sure that you use childcare vounchers as that will save loads if you are higher rate taxpayer and £80 per month for your wife.

whatatwit

Before you sell the house, are there 'suitable' properties in your price range, and did you have these loans/debts when you got your current mortgage?

If you both use the gym every day, and have a new baby and a youngster, how much time do you have for watching Sky?

Whilst cancelling Sky and Gym may not save you a huge amount, it may help to provide a cushion in your budget.

Before you make any decisions, I think you need to a full check of every penny you spend over the next month and this will help you decide about moving.

Is your partner on maternity leave at the moment, if so, she should really be able to cut food spending, have a look on the old style board for menu plans and batch cooking ideas.

hypno06

Hi there, to put the savings from sky and the gym etc into perspective and to give you an idea whether they are worth changing, put all your debts and the aprs etc with current minimum payments into the snowball calculator on https://www.whatsthecost.com.

This will give you a debt free date.

Then edit the calculator to include the extra payment if you cancelled sky and paid that money to the debt. See what difference that makes to the debt free date.

Then do this again with the gym money added.

And again with the £200 savings money you are putting away each month.

Do you notice a difference? Each time you chuck a little more money at the snowball, it reduces the debt free date.

See why we suggest changing sky and the gym!

Biffa

Just a few quick ideas as I'm supposed to be packing the kitchen ready for moving house

Get rid of the car. It's all very well keeping up with the Jone's and having a nice car sat on the drive, but at the moment you can't afford it. Check the small print and if you've paid back half the original loan you may be able to give the car back and cancel the outstanding balance, saving you £190 a month in payments. You can pick up fairly decent spec Mondeo's for next to nothing - mine's a W reg 2.0l ghia and cost me £850 last October off ebay. You're insurance might be cheaper as well!

At the moment, gym membership is also a luxury you can't afford. cancel it and start using your local council gym instead. Then you'll only have to pay for what you use when you go and can save £70 a month.

Reduce your sky package - ring them and tell them you can't afford it anymore and they'll probably give you a deal - such as half price for 3 months.

Can you cancel the dental plan? I know it's only £24 but every little helps as they say! Are you registered with an NHS dentist?

Whatever you do, don't consolidate! When you're in a big mucky hole, which would be more useful - a ladder to climb out (courtesy of MSE) or a spade so you can keep digging (courtesy of the like of all those companies on the TV?).

Looking at your SOA, if you get rid of the car, you'll have £600 a month spare cash (on paper). Like the others have suggested, a spending diary is really useful and you'll see where all your money is going.

Getting rid of gym - £70
Getting rid of car - £190
reducing sky - £35 (guesstimate)
cancel dental - £24

Saving £319 per month = £719 a month to throw at debt.

marko9

Hello again…right since I last posted I looked into a few things and number of others things have changed…I have also come up with what I think is the only way considering my current circumstances and I know it will go against the grain if many of you guys on here, but I still hope you can advise me.

Ok the most significant change is that I have been paid off (well i am a man of leisure for next 6 weeks), however its not all bad cos its allowed me to set up my own ltd company which hopefully should earn me a lot more money, (upto £1000 a month more) however in the mean time I need to chop and change.

As for the SOA well the notices for the gym has gone in and a phone call to sky has taken place, although I am guessing a may get a phone call in the next few weeks with a reduced offer! The dental plan is also going.
The car, hmm well it is an essential tool and is needed although it isn’t a bmw it’s a golf bought from bmw thus bmw finance.

Ok my new plan to pay it off the debt over the next few years however after sitting down and going through it all I have to consolidate the debt in the house for me to move forward! complicated i know and most likely against most your recommendations here but hear me out first...

my house is worth around 190k although say 185k min and have a mortgage of 144k. i have unsecured debt of around 77k. now 37k of that is on credit card or flex loans thus high apr's. the other 40k is tied up over 2 loans around 5.7% apr and about 5 years left on them!
currently I pay my mortgage on interest only and want to continue this.

The complicated bit! The wife is now on maternity leave and due back next year and our current mortgage provider has agreed to a payment holiday of 6 months (great idea me thinks). AND, I am in the process of setting up my LTD company so I can freelance/contract myself out (hopefully making me more money). Now what I was intending to do is remortgage pulling least 40k out of the house to consolidate the high interest debt BUT still only pay as an interest only mortgage!!!

Now few problems to consider before I go on:

I have to move quick before I set up LTD company and use my staff salary wage slips as proof (advice on this would be good)
Because we are on a payment holiday I can’t re-mortgage
I also required almost 100% mortgage (for now)

Now the only way I see to move forward here is to get a home owner loan now through either high street branch or whoever (advice please where?) then come end of 6 months maternity holiday break I re-mortgage the current mortgage inc the new home owner loan so I can then place it on an interest only for now!

Why I want to do this? Well, for the next 3 years I will have around 800 quid min nursery fees to pay and look to pay off the 2 big unsecured loans (Rock and Lloyds) which both equate to around £600 a month payment…thus in 4 years time (say) I can then look to change the mortgage to a repayment cos I will have £1500 a month extra which I can throw at the mortgage then.

If this plan come off I would save a fortune under my current circumstances!!! I.e an interest only on 185k will = £900 but I wont have the following:

Outgoings
Cahoot 180
Gym 70
Gas & Electric 89 – reduced to 60
Sky Digital 78.00 notice in although hoping they come back with an offer of 35
amex 242
Dentist 24.9 family plan
Natwest Loan £230.00 – 15k Loan over 7 years
barclaycard 91 – Balance £3700

but obviously I will have to pay a home owner loan till I manage to tie up a remortgage

Have I made myself understood here or does it all sound confusing? NOW PLEASE DON’T COME ON TELL ME NOT TO CONSOLODATE DEBT TO THE HOUSE COS I ALREADY NO THE RISKS and I have looked at all avenues and this plan appears the only route, unless I sell house and down size but I don’t want to do that right now!

Any advice on home owner loans on short term basis? I need to do this so I can use my staff salary wage slips before I get the ltd company up and running.

God am confusing myself here….