Debt and a mortgage

Timberflake1983

Hi guys,

So a bit of background; I've never been good with money and a few years ago I went into an IVA, settled it up and moved on, repaired my credit profile, happy days.

At the time I was in a relatively low paid job on £19k PA, but a few years later I got a new job on £30k. Having all this extra disposable income, a financially savvy person would have saved for a house but no, I lived to my means and then some! Fast forward 5 years and I now have around another £20k of debt! I can afford the payments each month and still have money to spend but it was still a stupid move.

I've now been thrown another life line in that I've just been given a promotion to £50k and am determined not to fall into the same cycle as before.

As of now my debts are as follows:
Halifax CC:£2000 (paid £1800 off this yesterday)
M&S CC: £1,800 (balance transferred this to Halifax CC yesterday at 4.9% instead of 18%
Barclaycard CC: £14,800 (rang up today and had the interest reduced from 18.9% to 6.9%
Overdraft: £1,600

So as you can see, I've started to try and get this under control as my gf and I really want a house. Our joint income is around £70k and she has a car loan which currently stands at around £8k (at 10% interest).

Can anyone give me any advice on another other things I can do to jig things around to save money and pay off what I owe more quickly, at this point I think I'm going to be able to afford to pay around £1,500 a month and still leave me a few hundred pounds for the month.

A friend of mine has repeatedly told me I don't need to worry about clearing all our debt before buying a house, which is technically true as our joint income would more than cover the type of house we'd be going for (around £200k), but that doesn't sit well with me. After all these years of not being good with money I'm really trying to do the right thing and not go into a mortgage with £10k debt on top (for example).

What are peoples thoughts, listen to my friend or listen to my gut?

EssexHebridean

If it were me...? I'd throw every penny of the extra money from the pay rise at getting the debt cleared and then start saving for a deposit.

That way, when you do come to buy somewhere, you'll be starting out in your own place on a much more stable footing, financially.

Some tips - set yourselves a solid household budget and start to build an emergency fund.
Make sure you both understand how the budget works and what room there is for extras.
Budget for "some" fun and entertainment without going overboard - otherwise you'll start to resent it.
Anything in excess of your budgeted spend for the month, slide across into a separate savings account and then at the end of the month, transfer it all to whichever debt is targeted to pay off first - that way you don't risk forgetting something and leaving yourselves short, which in turn leads to reaching for a credit card.

And possibly most importantly - either stop using CC's at all for the moment, or use them for ONLY particular set costs and set the direct debit to clear the card in full each month. So maybe spend fuel for the car, and food on the card - this will help keep your credit history ticking over until you're ready to apply for a mortgage.

Timberflake1983

Thanks for the reply.

My gut was telling me to clear all the debt first, and we can pretty much clear it all in just over a year, then with H2B we could have a deposit in another 6 months, so within 2 years we could be in a nice new build house with absolutely no debt (apart from the mortgage). Heaven!

Manchester_123

Hi Timberflake,

It sounds like you’ve made a good start on giving your finances a spring clean, this is exactly what I intend to do, new year and all that! Myself and husband are also aiming to start making plans to buy our first home.

I noticed on your original post that you said you phoned Barclaycard and got the interest reduced, I just wondered how you managed to do this? I hadn’t even thought that was possible. We have a Barclaycard with a £14k balance so any reduction in interest rate would make a massive difference!

Any help would be appreciated

Thank you

Timberflake1983

I just told them I'd been offered a balance transfer (I hadn't!) and they offered my a 24 month promotional rate, just give them a call and see what they offer!

zippygeorgeandben

Timberflake - sounds like you have a plan in place. Are you boring your friends yet with talking about how you strive to be debt free?! That's what I kinda did!
Many people join this site as a reaction to something going on in their life. Whether it's realising that they just can't see a way out or an emergency.
Emergencies happen all the time, we can't predict the future. There is a post someone put up recently where they were given a week to move out of rented accommodation with two children under 4!
What I'm saying is, is that think of all the things which could suddenly go wrong (ok I know that is a bit negative) but imagine how prepared you'd be with a secure financial footing!
Hoping you catch my drift and excellent advice from EssexHebrides (as usual!)

Manchester_123

Timber flake I just thought I would give you a heads up do you know that phoning a CC company and asking for a lower interest rate can be interpreted as a ‘Arrangement Plan’ and will most likely be reported to credit reference agencies and will indicate you are have trouble meeting your minimum payments?

Manchester_123

Hi there

I just wondered following the above if you have since checked your credit file and if the reduced interest rate has had any impact on your credit file whatsoever ??

Cheers

Timberflake1983

OK just to be clear I didn't ring up and ask for a lower interest rate, I rang to say id been offered a balance transfer deal with another card and was just checking they didn't have any offers before I went through with the transfer. They then offered me a promotional rate for 24 months.

There's a VERY big difference between asking for a lower interest rate and being offered one when you threaten to balance transfer.

And no, it's had no affect on my credit score.

Manchester_123

:jGood news and well done ! :j

EssexHebridean

How's things going then Timberflake?