SOA - Best way to tackle this?

Taiko

A lot of the impulses were digital goods, and as such aren't available to resell. I entertain myself with online gaming, one and of the other assets was a £1200 gaming PC. I also use this for work related tasks, as the high spec of it enables me to be more efficient. There's also some kitchen equipment, and a solid oak desk, 4k TV, robot vacuum. A large amount was on digital though. 
Current account is currently sat at £925, next payday on the 26th. All my food is purchased until then, and have another £80 of DD's due. 

I think why I was leaning towards the additional mortgage is a psychological thing, seeing that the credit card balance had gone whilst my monthly mortgage payments stayed the same. My credit rating on Clearscore is currently 527, but expecting that to drop. I'll explore the DMP option on this. 

Taiko

kimwp said:

Forumites with more knowledge than me; what would the effect of entering a DMP have on remortgaging?

It sounds like remortgaging would be a sensible decision, but without adding the unsecured debt, it's not a good idea to increase the risk of losing your home. 

Ran the calculations, and remortgaging without the extra, without fees brings it to £268/month, fixed for 10 years. Not a huge difference in the monthly figures. Aware obviously if I increased the borrowing its the longer term interest. 

kimwp

Ran the calculations, and remortgaging without the extra, without fees brings it to £268/month, fixed for 10 years. Not a huge difference in the monthly figures. Aware obviously if I increased the borrowing its the longer term interest. 

It's not the additional monthly payment that is the risk, it's the additional 10k (I think). Over the 25 year term, it would cost you £1500 (ignoring inflation and mortgage interest changes), which (according to your earlier  comment) your credit card debt is costing in ten months, so I can see your logic. However the collective wisdom on this forum is that swapping unsecured debt for secured debt is not a good idea.

I've just noticed your SOA shows you are not making monthly payments against some of your debts, is this right?

TheAble

Taiko said:

kimwp said:

Forumites with more knowledge than me; what would the effect of entering a DMP have on remortgaging?

It sounds like remortgaging would be a sensible decision, but without adding the unsecured debt, it's not a good idea to increase the risk of losing your home. 

Ran the calculations, and remortgaging without the extra, without fees brings it to £268/month, fixed for 10 years. Not a huge difference in the monthly figures. Aware obviously if I increased the borrowing its the longer term interest. 

I'm not quite following you. Notwithstanding that remortgaging to pay off this credit card is a bad idea, where are you getting £268/month from? £10k over 10 years @ 2.19% is £93/month. Are you planning on remortgaging a larger amount or something?

kimwp

TheAble said:

Taiko said:

kimwp said:

Forumites with more knowledge than me; what would the effect of entering a DMP have on remortgaging?

It sounds like remortgaging would be a sensible decision, but without adding the unsecured debt, it's not a good idea to increase the risk of losing your home. 

Ran the calculations, and remortgaging without the extra, without fees brings it to £268/month, fixed for 10 years. Not a huge difference in the monthly figures. Aware obviously if I increased the borrowing its the longer term interest. 

I'm not quite following you. Notwithstanding that remortgaging to pay off this credit card is a bad idea, where are you getting £268/month from? £10k over 10 years @ 2.19% is £93/month. Are you planning on remortgaging a larger amount or something?

I believe Taiko is considering a remortgage of the full outstanding amount on the flat, plus the £10k, for 25 years, fixed for ten years at 2.19%

Taiko

Sorry that's correct. A full remortgage, using a fee free product. 
There are 4 cards in total. Some of the cards have different interest rates at present, and payments are being allocated against those at the highest interest rate on each card. Every card is being paid, and I've not missed any payments. 

ryanm8655

So on your SOA you won’t be spending anything on online gaming anymore? No more consumables? I’m still amazed at how low your electricity is, especially if sitting at a high end computer gaming for hours.

It might be tempting to stick the debt on your mortgage but it’s a really bad idea. Why are you so keen to lengthen your mortgage as well? Presumably to give you a tiny bit more disposable income?

With a DMP you’ll be paying no interest and the debt will be gone far more quickly.

Stick the debt on your mortgage and I can almost guarantee you’ll be back here in a couple of years in the same boat. As someone that did the same, albeit with a consolidation loan.

You need to solve your spending problem and putting the debt on your house and increasing the length of your mortgage is just a way to kick that can down the road.

The alternative is, if your SOA is correct, you set all of your DDs to the current minimums and put the £100 surplus into the highest interest card. Do the same with any bonuses from work (not sure how often you get these) and your £3k inheritance and see where you are in a few months and revisit then. Once you’ve had the inheritance you may find you can get more 0% offers and lower the interest on debts that way as that’ll make a decent hit.

Can you increase your disposable income? Second job or look to progress at work? Even if you had no debt your disposable income is on the low side. 

kimwp

Taiko said:

There are 4 cards in total. Some of the cards have different interest rates at present, and payments are being allocated against those at the highest interest rate on each card. Every card is being paid, and I've not missed any payments. 

I understand now, thanks!
To answer my earlier question, it looks like (from the Step change website) a DMP may prevent you getting the best mortgage rate, so it might be worth doing that first. Probably worth taking advice from someone who knows more than me though, it's not my area.

enthusiasticsaver

Taiko said:

A lot of the impulses were digital goods, and as such aren't available to resell. I entertain myself with online gaming, one and of the other assets was a £1200 gaming PC. I also use this for work related tasks, as the high spec of it enables me to be more efficient. There's also some kitchen equipment, and a solid oak desk, 4k TV, robot vacuum. A large amount was on digital though. 
Current account is currently sat at £925, next payday on the 26th. All my food is purchased until then, and have another £80 of DD's due. 

I think why I was leaning towards the additional mortgage is a psychological thing, seeing that the credit card balance had gone whilst my monthly mortgage payments stayed the same. My credit rating on Clearscore is currently 527, but expecting that to drop. I'll explore the DMP option on this. 

Adding it to your mortgage is an awful idea precisely because psychologically you have kicked the can down the road and avoided dealing with your debts.  You accumulated £20k debt and that needs paying for but remortgaging and  potentially risking your home plus having this debt around your neck for 10 years is not sensible.  That is even assuming you will get a secured loan at a low rate.  

If the soa is correct you have a surplus and from the sound of it normally you live frugally (if you currently have £925 in your account this backs it up) and the debt was accumulated from a mad spending spree in a bad mental health period which hopefully you are now past. I would say that a DMP may be worth considering (although you would need to increase some spending categories and put in emergency savings to get the payment any lower than the £410 you are paying at the moment). I actually think you can deal with this on your own though and get it cleared in about 4-6 years paying £450 approx. per month, maybe quicker if you get offered any 0% deals.  Try using a debt snowball calculator to see how to deal with this but the lower you get the debt the more 0% deals you will be offered.  

enthusiasticsaver

Taiko said:

[b]Unsecured Debts[/b]

Description....................Debt......Monthly...APR

Card1..........................968.34....0.........17.62

Card1B2........................5860......150.......0 Expires Feb 2021

Card2B1........................2410......100.......27.3

Card4..........................5200......100.......18.9

Card3..........................5124......60........0 Expires Feb 22

Card2B3........................453.......0.........4.94

Card2B2........................357.......0.........0[b]

Total unsecured debts..........20372.34..410.......-  [/b]

[b]

Monthly Budget Summary[/b]

Total monthly income.................... 1,585

Expenses (including HP & secured debts). 1,059

Available for debt repayments........... 526

Monthly UNsecured debt repayments....... 410[b]

Amount left after debt repayments....... 116[/b]

[b]Personal Balance Sheet Summary[/b]

Total assets (things you own)........... 134,100

Total HP & Secured debt................. -54,000

Total Unsecured debt.................... -20,372.34[b]

Net Assets.............................. 59,727.66[/b]

[i]Created using the SOA calculator at www.stoozing.com. 

Reproduced on Moneysavingexpert with permission, using other browser.[/i][/font]

My theory for this is pretty much as follows:
- Pay down card 2B1 each month as much as possible. This is a balance transfer card. 
- Explore a remortgage to a new rate, add in additional £10k to mortgage and use to pay down highest credit balances. Currently looks possible to obtain a 10 year fixed mortgage with TSB with the additional amount, fee free at 2.19%. Monthly repayment would be £273/month. 
- This should leave just the 0% balances to pay, so then aim to pay as much as possible in order of expiry to clear the balances. 

I think you are right to concentrate on card 2 as more than half the £100 you are currently paying is going on interest.  You presumably have put in your soa the payments you are currently making to the cards rather than the minimums but if you can up the payment to card 2 to £250 a month it will be gone in a year. Some of the extra £150 can be found from your surplus but I think you are currently overpaying on card 1 and card 3 so some could be clawed back from those.  If you get an inheritance that will help bring the debts down further. I would tackle card 4 after card 2 as card 1 presumably by then (after Feb 21) will be at 17.62 which is a lower rate than card 4. Leave card 3 until last as you have the longest deal on that one.  Obviously as the debt comes down further you may get further 0% offers. 

So in summary, Card 2 first then Card 4 then Card 1 and lastly Card 3.