Heads in a pickle

andys15

I felt it relevant to post here as this is my ultimate aim. Since 2 years ago when I doubled my mortgage payments I have wanted to be a mfw. We have built up considerable debt since being in my current house. We have renovated all downstairs and extended and had a garage conversion. This has led to an official valuation of my home being 325k and a current mortgage of 178k. This is currently got a term of 9 years 8 months.

Good parts. Income 96k wife's income 51k with 7 k guaranteed yearly bonus.

Bad parts. My debt 26k( 16k currently interest free)
Wife's debt 40k (8.5k interest free)
We are desperate for 2 x new bathrooms and carpets upstairs and a boiler.

Now my choices. I have just been accepted for a tesco loan for 15k at 7%. A reckless application when my toilet had leaked onto my new kitchen ceiling. I am yet to return the signed form to accept the loan. I then decided to look at natwest mortgage. They will( subject to full credit check) remortgage me, with a 200k mortgage over 25 years.
I have snowballed all debt and both scenarios with tesco and natwest. My decision is one or the other.
Now if I do nothing,( we are left with the depression of our upstairs, a dodgy boiler and a broken toilet, and bath, and probably rotting ceiling.) I could be debt free and mortgage free in 66 months. If I took out the mortgage or loan it then adds about 9-11 months.
My head is saying, do nothing. My heart wants the mortgage ideally, but then my head butts in and says take the loan.
My only non compromise is that I will pay the 0% credit cards prior to them accusing interest, and this takes away the possibility of doing what is fundamentally the right thing to do, and save for bathrooms, boiler etc etc. I have crunched the numbers considerably and will be debt free by jun 17, and if I remortgage with natwest on 5 year fixed@ 2.58%, by the time the fix is up, I will have saved 116k and have a mortgage of £169k. My plan was then to throw that at the mortgage and then have a nice mortgage of 50k( probably use the 10% overpayment) but the results will be roughly the same. Why am I so concerned though. Think it's the thought of going to a 25 year mortgage, I tried to keep it at 9.8 years, but I then didn't pass affordability.

bexster1975

Wow! Loads of information there!


Ok, if you took the 25 year mortgage I think it gives you the cash to sort the remaining renovations you want to make (?)

Importantly, this should free up cash to clear debt ( any interest carrying debt has to be a priority over mortgage payments). You earn a huge combined salary ( that's not a judgement, just a statement of fact) with such an average mortgage once you are debt free reducing the mortgage term should be straightforward ( assuming future earnings match current earnings). I would say take it one step at a time. As I read your post I felt you were trying to juggle too many balls all at once. Remember what they say about how to eat an elephant?

You may want to complete a statement of affairs. ( SOA) as people here can help identify where spending can be reduced. Be warned, not everyone is constructive when people post these which is a shame. I would say I think people find the very helpful, but you may need a thick skin for comments like " my god how do you spend X amount on Y" more likely based on your earnings!

Could just use the SOA for yourself however and work through what you can cut out/ reduce. Good luck

Bexster

andys15

Thanks bexster. Basically my wife's gives me £850 a month and she sorts out all the groceries, and whatever else she does. She is not onboard with the whole mfw and dfw. That's fine. Now my budget, which has not been tried and tested yet, leaves me with £1000 and uses £3750 to repay mortgage and debt. As each debt is gone, then I still throw £3750 at it. I just don't like the idea of a 25 year mortgage, even though I know in 5 years I could pay off a chunk. Well I say I can pay off a chunk. I also know life doesn't work that way. That is probably my biggest fear. If I have a commitment I repay it. If I am saving it( once debt repaid) I am not sure it will come to plan. I am also hoping the £1000 a month I have allowed myself, will contribute to the debt.

bexster1975

Hi

It's a shame your OH is not on board,it's often easier with support. I see the issue with 25 year mortgage, but if it's your only realistic option I would say try to worry less about it for now. Your own debt is very manageable based in your income. Could you get the remaining £10,000 onto interest free for a time?

Trying and testing your budget is vital, maybe a notebook for a spending diary for a month will ensure your SOA is accurate. I am fully understanding of possible change in circumstances, it has happened to many here including me. I think reducing your liability in terms of debt and mortgage is the best way to worry less about this.

Honestly, if I was you, I would take the five year fix for 25 years ( and ignore the 25 years for now), get as much of my personal debt at 0% as possible and then cut my spending to enable me to throw as much cash as possible at the debt until it's gone. Lots of people here will say it's not worth paying off 0% debt when you can get 3% plus easy access interest. I would say in your case it sounds like the owing money is troubling you, so just get it gone. I suspect there are probably quite a few places a man earning £91,000 a year spends money " unnecessarily". It's up to you what you decide to cut, and how hard but I have found peace of mind to be priceless.

Best of luck whatever way you decide to tackle things.

Bexster

andys15

Thanks bexster. Just hope I get approved for the mortgage. It's with natwest and they are my bank so hopefully it helps.

Secret_Saving_Squirrel

I agree with Bexster. Take the mortgage, pay off everything and keep life simple. You may lose a few pounds on the deal, but you can then overpay the mortgage as quickly as possible and you will have achieved your aim without the stress of juggling lots of loans and cards. You will also have more flexibility to overpay as much or as little as you want to.

I very much doubt that you will be tempted to stop the overpayments as it is quite addictive to see your totals start going down.

Good luck whatever you decide,

Squirrel x

wildesavings

The only word of caution I would throw in here is - Are you committed to living within your means from now on? Building a big emergency fund so you don't get ambushed by unexpected big financial payouts. Saving in advance for all holidays, clothes, car tax, mot and Christmas to name but a few. By taking out a bigger mortgage and clearing all your cards and debts you are borrowing against your home, if your debts start to climb again you are losing your house a brick at a time. If you do go for the new mortgage you must try to disaster proof your finances from now on, which might mean having a chat with your OH as to how/why her debt is now 40k.

All above really isn't meant to sound harsh or judgemental. Promise! Just would hate to see you back on here in 5-10 years having to re-mortgage for a larger sum again.

andys15

Went for the mortgage with Natwest. Just phoned them. It appears we have passed affordability and possibly credit check. They have sent a letter to my employer, which is fine, but when I queried it, they said it was because I started on sept 1. Which is crazy as I started over 11 years ago. Now worried after the fiasco of the last mortgage application the other week,where my broker got my middle name wrong. Passed first time then solicitor noticed and we somehow failed, even though the search with wrong middle name shows on my credit report.