Mortgage Payment Holiday Vs Debt

Smith15

Hi All

I currently have a loan of just over 7k outstanding which is at a really high rate (over 30% interest) as well as a credit card of 3,5k with similar interest rate. Would I be more benefical by taking a payment holiday for around 5 months to clear down the loan as the interest rate is so high and the current repayments ion the above are nearly half my mortgage repayment...Also would my provider allow me to take a holiday for this reason?

Thoughts please!

Thanks so much

HappyMJ

It would be better to pay the debts with the highest interest rate first.

But...that's effectively securing your debt and if you now cannot afford the higher repayments on the mortgage then your home is at risk. It could also cost you more paying a lower interest rate over a longer term (although at 30%+ rates I find that unlikely).

Can you reduce your expenses until the end of the year to clear these unsecured debts?

Smith15

HappyMJ wrote: »

It would be better to pay the debts with the highest interest rate first.

But...that's effectively securing your debt and if you now cannot afford the higher repayments on the mortgage then your home is at risk. It could also cost you more paying a lower interest rate over a longer term (although at 30%+ rates I find that unlikely).

Can you reduce your expenses until the end of the year to clear these unsecured debts?

Thanks for your reply - much appreciated! I am currently living on 140 a month which includes food and toiletries so have literally budgeted as much as I can and also trying to find a second job to work weekends to help budge some of it.

HappyMJ

Smith15 wrote: »

Thanks for your reply - much appreciated! I am currently living on 140 a month which includes food and toiletries so have literally budgeted as much as I can and also trying to find a second job to work weekends to help budge some of it.

In that case I would continue to pay the requested payment on the mortgage and find other ways to reduce the outstanding credit card debt.

The mortgage payment should be one of the first things you pay in a budget.

If you could post a SOA then I think that might be helpful.

Smith15

HappyMJ wrote: »

In that case I would continue to pay the requested payment on the mortgage and find other ways to reduce the outstanding credit card debt.

The mortgage payment should be one of the first things you pay in a budget.

If you could post a SOA then I think that might be helpful.

Okay great, what's a SOA?

HappyMJ

Smith15 wrote: »

Okay great, what's a SOA?

Statement of Affairs. It's basically a budget. It shows how much income you have and if that income can support a mortgage of that level and over £10,000 of debt. As you only have £140 spare each month for your living costs after the mortgage is paid you are either over indebted compared to your income and a repayment holiday will not help or spend too much on what you feel are essential bills which a repayment holiday will also not help. If you can get your expenses down then a payment holiday will allow you to commit the spare cash to your unsecured debts. I fear that by getting a payment holiday on your mortgage you'll not only use the spare cash on living costs (as £140 is not enough to live off long term) and will be worse off after 6 months as you will now owe the bank 6 months of mortgage payments which will be spread over the remaining term.

The SOA might show that a DMP (debt management plan) might be a good idea which is where you come to an agreement with your unsecured creditors to repay the outstanding debt in around 5 years and any interest can be frozen whilst you repay the debt and agree not to go into any further debt in that time frame.

Smith15

HappyMJ wrote: »

Statement of Affairs. It's basically a budget. It shows how much income you have and if that income can support a mortgage of that level and over £10,000 of debt. As you only have £140 spare each month for your living costs after the mortgage is paid you are either over indebted compared to your income and a repayment holiday will not help or spend too much on what you feel are essential bills which a repayment holiday will also not help. If you can get your expenses down then a payment holiday will allow you to commit the spare cash to your unsecured debts. I fear that by getting a payment holiday on your mortgage you'll not only use the spare cash on living costs (as £140 is not enough to live off long term) and will be worse off after 6 months as you will now owe the bank 6 months of mortgage payments which will be spread over the remaining term.

The SOA might show that a DMP (debt management plan) might be a good idea which is where you come to an agreement with your unsecured creditors to repay the outstanding debt in around 5 years and any interest can be frozen whilst you repay the debt and agree not to go into any further debt in that time frame.

Thank you, see below my SOA:

Mortgage 617.89
Ground Lease / maintenance for flat 110
Travel 365
Experian (being cancelled) 14.99
Equifax (being cancelled) 8.99
Loan 211.44
Npower 45
Water 14.75
Council 73
Next Catalogue 25
Ccard 95
Ccard 60
Gym 56
Sky Phone/TV/Broadband 46.15
Friends Life Insurance 19.95
TV License12.12
Sofa Finance 20.56
O2 56
Overdraft interest fees 25-30

Total Income 2059
Total Outgoings 1880/1890
Remaining 169 = Food, Socialising, Clothes etc

longtermplanner

I suggest you cancel the gym and Sky - you can get broadband for much less than that.

When does your phone contract end? Plan to keep your phone and go sim only at that point.

Does your mortgage have a clause which allows holidays? Some do, many don't.

Smith15

longtermplanner wrote: »

I suggest you cancel the gym and Sky - you can get broadband for much less than that.

When does your phone contract end? Plan to keep your phone and go sim only at that point.

Does your mortgage have a clause which allows holidays? Some do, many don't.

Thanks for your reply

My gym and sky cannot be cancelled for another 6 months as are on a 12 month min contract basis and my phone has another 9 months too.

Im with Halifax and they have payment holidays

Thanks,