Starting to make a new life...

anewlife

Hi,

Im not sure if I should really reveal some of my financial stuff on here but I guess nobody is here to judge and hopefully some people may be able to offer some support or advice and point me in the right direction.

To cut a long story in my early 20s I ran up huge debts, about £46,000 to be honest so its a lot of money. I didnt really do anything about it until just over 5 years ago when I had to move back home as things got too bad and I just couldnt go on. At this point in time I owned a house that I had rented out, but I had released most of the equity in that property. I sold the house and gave my parents the £20k that I got after selling it and they bought a tiny little house that I live in now. The house and mortgage is in their name but I pay the mortgage. One of the reasons for this is that I didnt want to lose everything and have my home taken from me, this was over five years ago now and I have really started to get my act sorted.

Just under 5 years ago I contacted the CCCS who set me up with a Debt Management Plan, they take no fees, and all the interest and late charged stopped. I have paid off £6000 in the past five years with them, and currently owe £40,000.

The house is now worth £115,000 and the mortgage that is left on the property is only £29,000. I have been doing something which I suppose is naughty, and not quite right. I have got a 2nd job and used the money from it to pay an extra £500 per month on the mortgage ( the maximum that I can pay without paying any fees ).

The reason that I am doing this is so that I dont pay lots of interest and hopefully save money on the mortgage, I figure that although it may not be the right thing to do, its better to pay off a debt that costs me money in interest, rather than paying off the debt with the old credit cards etc that dont charge me any interest. Is this really bad though, I guess I know its not the right thing, but it seems to be the financially correct thing if that makes sense.

I have also currently manage to save £7000, I am thinking of paying this off the mortgage in a lump sum, it will cose me 1% of the £7000 if I do that as a fee, but I think it will work out cheaper in the long run due to the interest being charged on the mortgage, I cant quite work it out, but I think thats right.

That would leave me with a mortgage of only about £20,000, I think I could pay that off in 2 years and then get to work on paying off the £40,000 debt, I thought what I may do is try asking for settlement figures and seeing if they would take a reduced amount, but how much is a reasonable settlement figure? Does anyone have experience of this.

I havent set out to try and not pay anyone back, I am going to pay back what I can, when I can, but because of my stupid mistakes in the past Im also trying to be as smart as I can and make the most of my current situation. Many people told me in the past to go bankrupt as it would be my best option and I could get rid of the debt, I wouldnt do that if I could avoid it as I just dont feel its right and I should repay what I can.

I only really just found this site, I wish I had done so years ago...

Any advice or thoughts would be really, really appreciated, good or bad I guess!

Daniel

rayday2

You are not trying to dodge your debts you are wanting to pay them back ASAP but by paying the mortgage off quicker you are able to save interest.

I think once the mortgage is paid under your belt and you save lump sums you could offer settlements one by one. Lots of people on here have done it - not me I am afraid love the idea of it though!

All I can say is I can see where you are coming from and the creditors are quiet and accepting payments so go for it.

Triker

You say that the house and the mortgage are in your parents names though, just wondering would this have tax implications for them re capital gains when the house becomes 'officially' yours.

Is this something that they have looked into as I know those tax beggers get everywhere.



Also what protection have you got re the house in the event of something happening to your parents.





Sorry to sound a bit blunt but I can't think of another way to word it.

Well done on your progress so far.:T

raq

I agree also. Least you know where you went wrong in the past and now thinking ahead. Great idea to clear the mortgage. ( me, if only ). Paying as much as our debt as possible at the moment as we want a better life style for us and the kiddies.

You are probably aware your credit rating is low due to the dmp??

rog2

I can see absolutely nothing wrong with what you are doing, anewlife. If you manage to become mortgage-free, then it will be that much easier to become debt-free.
Providing you are managing your DMP payments, and are not 'robbing Peter to pay Paul' then you will be in a much stronger position to increase your DMP payments as the 'mortgage' diminishes.

anewlife

Hi, thanks for the comments so far.

The mortgage is in my parents name, so officially the house is theirs. There may be a small capital gains element in the future, but if so I can take care of that. As for if anything happened to them Im the only child so if anything awful was to happen I get everything anyway, so thats not an issue.

Has anyone experience of dealing with some of the companies and making settlement offers? Are some better than others? I was thinking of maybe trying to start offering about 25%? If I did an IVA and got the best outcome that would be about the same!?

betti911

Have they made a will stating that you will get the house when they die?

Shineyhappy

Hiya.

Well done on having such a small mortgage!!! I wish I was in your position.

I think your parents can gift you so much a year so rather than waiting and paying tax on the property, you might be better off if they could give you so much of it a year?

I would get specialist advice on this to avoid the tax man if I were you.

Good luck and keep posting!

Emmzi

I'm a bit of a voice of dissent, I think.

It is costing your creditors money to freeze the interest on your accounts. They could be lending the monmey to csomeone else and getting interest on it. It costs them money to maintain your aqccounts, review your accounts, process payments to them.

They have in good faith frozen your accounts, on the basis of a statement of income and expenditure which is no longer true, and has changed materially. And should you be discovered, possibly through one of them asking for copy bank statement, P60, etc, it could marr someone's judgement against others in your position, and make them less likely to provide the same leeway to others.

I fully expect to be a lone voice on this one, sticking up for the companies who have lent to you - but I think ethically, morally, what you are doing is wrong.

anewlife

The capital gains issue is something that I hadnt thought of, and nobody told us about this possible issue :-(

I have just been trying to look and see how much its likely to be, does anyone know rouhgly what it could be if we were to just sell the house?

I thought I had finally got things sorted, now Im worried that Im going to end up creating a huge tax bill in some way... :-(