What to do?

Cosmo8

Hi

Am new to here and have been reading through and would welcome any advice.

I have accumulated a debt of £27,000 over the past 15 years and whilst I manage to pay everything on time I don't seem to be moving forward at all. I am still renting after about ten years and know it is probably a pipe dream but in an ideal world I would love to get a mortgage as feel at least that way I would be working towards owning something that was mine. I did wonder whether it would be possible to get a mortgage for £20k extra then what I required and use that to pay off the debt as that would also reduce my monthly payments as currently I pay about £600 towards loans/cards etc each month. Is this a really stupid plan and would I even be given a mortgage with this amount of debt? Any advise or suggestions would be great.

Thanks

Larumbelle

Hi Cosmo and welcome :hello:

It is hard to give any informed advice on the information we have. Could you possibly post an SOA to give us a better idea of your financial situation? How to do it is here:
http://forums.moneysavingexpert.com/showthread.html?t=107280

There is no one-size-fits all answer to our debts, but I really don't think taking an extra mortgage will help. Firstly, becuase you will replace unsecured debt with secured debt, which means that you could potentially lose everything. Secondly, to start off with that much negative equity means that you won't really be making any moves towards really owning your home for some years yet. Thirdly, you would be well and truly stuffed if interest rates rose, most of that extra money you freed up would be swallowed up in higher mortgage payments. Fourth, it would have been hard to find someone willing to make a loan like that after the events of the past few months. The only lender likely to have lent you it before that is um, Northern Rock.

I know that probably sounds really disheartening, but there are plenty of other, less drastic ways to deal with your debts. Post that SOA for us and we will make some suggestions. If that makes you uncomfortable, phone one of the organisations in my sig for a bit of advice.

:grouphug: IO know it is hard, but you will get through this. THERE IS ALWAYS A WAY!

HairyHandofDartmoor

It depends upon what you earn. Also if you have built up debts you need to look at what you are spending your money on and how you could reduce your spending.

Owning a house involves more than just the mortgage, for instance life insurance, house and contents insurance, maintenance (if the roof leaks then there is no landlord to fix it you have to find the money yourself).

Ideally you should reduce your debts first. Unless you are on a good income and would have the self discipline to stop wasting money and make sure you could afford the mortgage and save some rainy day money.

I do understand your desire to own a house. I already own a house but I am obsessed with moving to a bigger one as we are a bit cramped. It is all I think about sometimes!

Post up your statement of affairs and then we can give you better advice.

HairyHandofDartmoor

By the way, we were given a mortgage when we had £16,000 worth of debt, but they said we had to use some of it to pay off the debts, so we had less to spend on the house.

We also had a sizeable deposit as we were moving from our first house to our second slightly bigger (but still not big enough) house.

Cosmo8

Hi

Thanks for responding so quickly, your comments did make sense and guess in someways weren't a surprise and part of me already kind of knows what you have written is true, guess I was just looking for a miracle! Here is my SOA

Salary: £37,000
Monthly take home: £2100 - £2400 (depending upon commission)

Monthly outgoings

Rent

625

Loan 1

268

Loan 2

190

Credit 1

140

Credit 2

60

Food

200

Home Insurance

11

TV Insurance

11

Council Tax

75

Sky

37

Gym

46

Water

5

Electricity

40

Other

300

2008

Debt:
Loan 1; £14,000
Loan 2: £5500
Credit Card 1: £6000
Credit Card 2: £1700
Total: £27,000


God when you list it all out it just is scary isn't it - guess will put on hold for the next ten years buying a house and just concentrate on this!

Thanks for your help

Larumbelle

Cosmo8 wrote: »

Hi

Thanks for responding so quickly, your comments did make sense and guess in someways weren't a surprise and part of me already kind of knows what you have written is true, guess I was just looking for a miracle! Here is my SOA

Salary: £37,000
Monthly take home: £2100 - £2400 (depending upon commission)

Monthly outgoings

Rent

625

Loan 1

What is the interest rate / length left to run? 268

Loan 2

Ditto 190

Credit 1

What is the minimum payment? 140

Credit 2

Ditto 60

Food

This is pretty good, but if you want to shrink it for a while the old-style board is great 200

Home Insurance

11

TV Insurance

Is your TV especially expensive / vulnerable? Would it be covered under your household insurance? Did you buy it off the people you bought the telly off?11

Council Tax

75

Sky

Do you need this? Could you manage without it for a while? 37

Gym

Ditto 46

Water

5

Electricity

This seems quite high. Could you change to a cheaper supplier/ get cashback from uswitch? 40

Other

Could you elaborate on what this amount gets spent on? 300

2008

Debt:
Loan 1; £14,000
Loan 2: £5500
Credit Card 1: £6000
Credit Card 2: £1700
Total: £27,000


God when you list it all out it just is scary isn't it - guess will put on hold for the next ten years buying a house and just concentrate on this!

Thanks for your help

Superficially, you should have a surplus even on your leanest months. You need to chuck that, and any other money you can save, at the highest rate cards. Then move onto your debts systematically until they are all cleared. You are not in dire straits, with a bit of fine tuning you will be out of debt relatively quickly and fairly painlessly!

HairyHandofDartmoor

You are on quite a good salary. Cancel the gym and Sky for a start (you may be locked in to a contract, but try and reduce the amount if possible, and then cancel as soon as you can).

What is other? £300 is a lot to spend on something unspecified. Is the food just for you, because if so that is a lot. Try the money saving old style board for tips on reducing your food bill. Why do you need tv insurance?

Cosmo8

Hi

Sorry meant to put down TV License fee not insurance.

Regarding the interest rates, god how bad is this I don't even know what they are! Will look through tomorrow the documents and see.

Regarding the payment on the cards - yes this is the minimum repayment I make each month. I guess the first thing to do is start using all spare money to pay this one off and the start on the next one.

Regarding Sky/Gym - did look into cancelling Sky but am in a contract for the next 9 months. The Gym I really don't want to cancel if possible, I know it is an expense that I could do without but it is one of the things I enjoy and have quite a stressful job and find that this does help me cope. I know I probably should cancel it but I am genuinely one of those people that goes 3 times a week so its not like I have a dormant membership.

Regarding the £300 - yes this is something I could really reduce down as I probably just waste it on clothes and stuff. Some of it pays for non-work petrol but there is room for cut down.

Food - yes it is just for me and I am a sucker for buying things in supermarkets and not using them so I guess i could try online shopping to help reduce it down.

Thanks - I feel better already and am inspired to try and tackle things.

HairyHandofDartmoor

Good luck. You can do it.

I have a picture of my dream house in my purse to remind me not to impulse buy. Everthing I buy takes me further away from that dream! (my dream house is a 5/6 bedroomed detached Victorian house with a nice garden all around it - so in 30 years time I might even get there :rotfl: )

tigerfeet2006

You haven't included any travel in your SOA. Do you have a car? How much do you spend on petrol? What about MOT, tax and servicing.

What about opticians, dentists, prescriptions and haircuts?

I think you might need to keep a spending diary. Just keep a little notebook and every day note down everything you have spent. Include everything right down to a packet of gum. It will give you a really good idea where your money is going.