Lots if issues in one! Advice needed

cfcboy

Hi all, this might be a bit long winded so hopefully i get to the point!

So all was going fine in life until i accidentally came across an article in regarding to leasehold.. here starts issue A....

I purchased me leasehold property for 175k in 2007 but being a first time buyer, slightly over keen and not having the correct advice from FA or solicitor I purchased it with 78 years left on the lease not realising the issues it would have for house value or costs to renew.

Damage done, nothing i can do now but not bury my head in the sand and confront the issue head on. But onto Issue B...

I have no money, I have zero savings, just managing to live by my means and its a all just keeping a float. I had a quote from the freehold and they quoted me £10k plus costs to renew an additional 99 years onto the current lease (which now stands at 71 years). Not the kind of money i have in my backpocket im afraid.

Ive also looked into getting a new mortgage but my bank has said i can at a laughable £100k due to my outgoings and debts. The misses and I take home £60k pa between us and we have one dependent. I have two creidt cards with maxed £5k limit and can just afford to pay the min so not knocking anything off the balance.

So i think i may have a plan but not sure its the right idea going forward though it would resolve a few things:

If i sell my property for what the valuation came in at I have equity of £30k. With that equity i would pay off all mine and the misses debts (£13k) and wipe £700 pm off our monthly outgoings.

I put the extra £15k into some kind of investment/savings account for 12 months to keep it safe and work towards a deposit (ideally around £21k mark).

I then look to rent a property for approx £1000 pcm for around 12 months

This enables me to be completely debt free for a year,

I've two major concerns:

My current mortgage is interest only £460 as im tied to libor rate (though is on the move), i also pay £600 buildings insurance pa and £100 ground rent pa. A large chunk of the debts are not paid for 2 years so im tied to severe outgoings for that period. The total outgoings now are £700 more than if i would sell up and rent (yes, seems odd when mortgage is £460 but rent would be £1k!)

Second concern is the leasehold, with every passing month it seems to rise and rise, looking at various figures it could rise another £2k in a year which is then almost below the 70 year mark.

The selling bit seems like a good idea but when i do some more maths im not so sure:


Current:

ground rent - £100
Buildings Insurance - £600
Mortgage payments £6000 (assuming libor doesnt move too much)
Leasehold rise - £2000?
Total - £8700

Then you compare this to the £12000 pa rent then there is a serious gap but ive got rid of the leasehold, totally debt free, credit rating on the rise, savings in the bank etc etc

So total remaining spend currently pm - £1100
Remaining spend pm if i sold - £1700 (includes £1000 rent)

So i spend more over renting by the year but im saving almost £600 pm as debts are paid so seriously dont know what to do

If i sit around and wait for two years until debts are paid im worried the leasehold would have risen lots, still struggling from month to month and the hassle that brings.

Sorry if its all confusing but any advice would be greatly appreciated.

cfcboy

To add to this, if i pay off my loan early (im only 6 months in to 9.5k) i get around £2.5k in early settlement. So in total with credit card interest, loan interest etc its about the same value as projected costs if i go rent only. £1200 pa

cfcboy

closed wrote: »

Where is the 60k take home going - If the aim is getting out of debt, 5k/month should enable you to do that without moving. You may not get as much as you expect for the house, if it sells.

shop around for house insurance.

The house insurance is tied in to the lease (so freeholder are in charge of it, i just pay what they send)

Mortgage - £460
Car (hp, fuel, insurance etc) - £350
Loans - £450
Store Cards - £250
HP - £125
Household bills (water, leccy, council tax etc) - £330
Credit Cards - £180
Food - £400
Comms (sky, bb, mobiles) - £150
Trains - £150
Insurances - £200
Socialising - £250
smoking (sadly) - £100
Child care - £250
Misc (haircuts etc) - £60

Total - £3.7k approx, which leaves me with about £100 a month on paper but normally gets spent somehow :S

We just short of £60k (£28k and £30k), so rough take home of £3.8k per month.

19lottie82

Comms? Reduce this, cancel sky, lower phones tariffs and go PAYG asap.

Socialising...... £250 this is a LOT cut it back to £100

Food £400 - this is a lot for 2 adults and one child. Meal plan and brand degrade to shave it back to £300 Max.

Smoking £100. If you won't give up try e cigs or rollies to slash this.

Money_Bunny

I really feel for you and I don't want to make it worse but ..... isn't a property with 71 years on the lease going to be quite difficult to sell? It could be that any would be buyer will want you to extend the lease yourself before they will purchase. Its my understanding that the buyer wouldn't have the right to extend the lease that you have because, I think, right to extend only comes in when you've been there two years.

cfcboy

19lottie82 wrote: »

Comms? Reduce this, cancel sky, lower phones tariffs and go PAYG asap.

Socialising...... £250 this is a LOT cut it back to £100

Food £400 - this is a lot for 2 adults and one child. Meal plan and brand degrade to shave it back to £300 Max.

Smoking £100. If you won't give up try e cigs or rollies to slash this.

Comms - Yep, did that. Had an IP5 on 35 pm but sold the phone and lowered contract to lowest i could go. Other comms include broadband and tv license and they at a low point as well. Sky is on £40 package which includes sky sports, if i got to stay in to save on socialising i need at least something to watch!

Socialising - Always bee a sore point, live in the high st so pub is only a few doors down. granted this can be cut down by going out once every fortnight.

Food - also includes dog and cat food. Though we try to shop at lidl now so hopefully cuts back a bit.

Smoking - Doing Stoptober so hopefully on the right path to quit.

Bit of saving here is great but not sure if helps with my op. Ive still got the leasehold to consider, rise in mortgage etc.

cfcboy

Money_Bunny wrote: »

I really feel for you and I don't want to make it worse but ..... isn't a property with 71 years on the lease going to be quite difficult to sell? It could be that any would be buyer will want you to extend the lease yourself before they will purchase. Its my understanding that the buyer wouldn't have the right to extend the lease that you have because, I think, right to extend only comes in when you've been there two years.

It is indeed, thats why ive hit the panic button now! Got a couple of estate agents saying they have sold with similar leaseholds recently but knocked a bit off the value. Leave it two more years and its going to even worse. Serious catch 20/20 situation. do i look to bale out now while i can still make money, never go leasehold again

Okydoky25

2 HP assuming these are both cars and Train fair? Could these be cut down at all?

Innys1

£200 a month on insurances?

What exactly are you insuring? Ave annual house insurance should be around £500.

Yet you're paying five times that. If the extra's on life insurance, you're being ripped off, big time.

Also, you have nearly £1k a month going out on unsecured loans. It may be worth you tackling that as well, if you can.

cfcboy

Okydoky25 wrote: »

2 HP assuming these are both cars and Train fair? Could these be cut down at all?

Car is infact being handed back in October and im getting a work car which hopefully saves me £150 pm

mlz1413

I don't think the problem is your lease, I think the problem is you live to your earnings.

I'm sorry to be harsh but there is a lot in your outgoings that could easily be reduced, but rather than cut down on going out and saving some cash you are thinking of selling..........

I think if you sell and have £30k equity in your pocket it would just get spent.

For the next month really look at what your money goes on, keep all the receipts regardless if for a store card, credit card or out of the bank. Log your cash spending too.

At the end of the month split your spend into
Heat / Light
Shopping / Eating in
Eating out/ takeaways, drinks
Clothes
Shoes

This should help you see where you could stop spending to cut out the £250 per month on store card payments.
Put the £250 pm off a loan and that will pay it down without an early redemption.

Really look at your insurance policies and the cost of home entertainment, they really do seem a lot!

Fill out Martin's Budget Planner - it has loads of sections and helps you see where your cash goes.