Don't know what to do

Coco10_2

Hi there
I'm looking for some advice as I'm unsure what to do for the best...

I have a DMP through Stepchange, c20k, will take 11 more years to clear. I've been paying into it for about 2 years now

4 years ago my husband and I bought a flat through home buy direct. We have a mortgage if c136k and a second charge of 70k to the house builder. We've just had it valued at 235k (bought for 209k)

The problem we have is that our flat is very small and unsuitable as we've just had a baby. There's no way we can live here for 11 more years!

So, we'd like to move house but I obviously can't get a mortgage and my husband can't raise enough money on his own (he earns 23k and I earn 32k)

We are talking of selling the flat, paying off the dmp and renting, but sadly rent is very high where we live so our costs of living will be higher.

I have 3 questions:

1. Is there any other solution to our problem or is selling the best thing to do? I'm scared to sell and find myself in a position where I can't get back on the ladder

2. Could I offer partial settlements to the creditors? We will need some of the equity for deposit on a rental property plus my husband needs a car. We'd ideally like to hold back £10k for a deposit on our next house but I don't know if that's possible or will I have to declare all of the equity?

3. How long would I have to wait before applying for a new mortgage?

Thank you in advance to anyone who is able to help me. I'm sick of this hanging over me and just want to build a future for my family

Coco10_2

Just to add, one solution I'd thought of was for someone to take out a loan on my behalf so that I could pay off the dmp, but I would make the loan payments. That way, we could stay on the ladder and then move somewhere bigger when my credit file was cleared. I asked my mum to do this for me but she wouldn't

Tixy

Hi

You say your costs of living would be higher if you sold and rented - would monthly rent cost more than your mortgage plus monthly DMP repayment currently?

In terms of offering reduced full & final settlements then yes in theory you don't need to offer the whole amount, you make your offers based on what you can afford/want to pay.
Like a DMP, reduced settlements are a matter for negotiation between both parties.

For a new mortgage - well depends on what shows on your file now and after the settlements. Often the case for people that their credit file improves quicker than they can save a deposit for a new house.

Do you know what your credit files show currently? did your creditors all enter defaults in the first few months of entering a DMP?

Tixy

With the idea of a loan - well even if you could find someone willing to take that risk for you, your ability to get a new larger mortgage would still be affected by your credit file from being in the DMP.

Plus hopefully your creditors have agreed to freeze interest - moving this debt to a loan would mean you'd incur interest on top of the amounts owed currently (and so would take even longer to clear).

If your DMP is predicted to take 20years at the current level of repayment it doesn't sound like you could afford monthly repayments on a loan based on realistic term for an unsecured loan (unlikely to be more than 10years and often restricted to 7).

Coco10_2

Thanks Tixy. It would probably cost about the same. I think I know what the answer is, just feels like a big step!

My credit file shows some defaults and is in the poor category

Tixy

Coco10 wrote: »

My credit file shows some defaults and is in the poor category

Each default will show on your file for 6years from the default date.
After 6years the whole account record (including whether fully paid, partially satisfied or unpaid) drops off your credit file.

Any that don't have a default will stay on your credit history for 6years from the date of settlement. Which is why its often best on a DMP if they all enter defaults in the first few months.

Regarding getting a new mortgage, it can be possible to get a mortgage with settled defaults still visible on your credit file, however usually it won't be possible from mainstream lenders but more likely subprime lenders who will require a higher % deposit and charge a higher interest rate.

Kate_fixing_it

Coco10 wrote: »

Just to add, one solution I'd thought of was for someone to take out a loan on my behalf so that I could pay off the dmp, but I would make the loan payments. That way, we could stay on the ladder and then move somewhere bigger when my credit file was cleared. I asked my mum to do this for me but she wouldn't

Please please don't seriously consider this. None of us knows what tomorrow brings and as much as you intend to pay it back in full the unthinkable could happen and you could ruin your relationship with your mum at a time when you need her most.

I've got my own issues now but have lent a large sum in the past (stupidly wasted a similar sum so it's not all on the borrower) but I still can't help feeling resentful for never receiving an "official" repayment especially when the person regularly mentions a relatively small bill they paid when I had literally nothing (and hadn't asked for help) and it's been over a decade. I don't know where I'd be if I hadn't lent it or where I'd be if it'd been repaid and it's perfectly possible I'd have wasted it but I'd have a very different relationship with the person instead of the situation we're in.

I guess what I'm trying to say is take your situation by the nether regions and be proud to be tackling it. By all means ask your mum for emotional support but it's not worth the risk of destroying your relationship if things go out of your control.

Kate x

[Deleted User]

Coco10 wrote: »

I asked my mum to do this for me but she wouldn't

You can't really blame her, as she would become liable if, for whatever reason, you couldn't pay.

When_the_going_gets_tough

Do you have very high expenses? Your debt payment looks low compared to your joint income and mortgage costs - at a first glance. Could you commit to an earlier payment of your DMP?

Coco10_2

Yes I agree it's not worth falling out with mum over

I'm on maternity leave at present and will have astronomical childcare costs when I go back so can't afford to increase my payments unfortunately

tking

Could you sell now, release the 20K equity (after costs etc), pay off the DMP (full and final offers at about 75% would mean you have 5K remaining - and you might settle for less).

Live where you are for 12 - 24 months saving the payments you would have made into the DMP for the new deposit and then look to get a mortgage when your file is looking better and you have a deposit.

Just an idea!