Wow wee oh my - trying to hack away at my £54k debt (was even about to book a holiday)

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  • enthusiasticsaver
    enthusiasticsaver Posts: 15,556 Ambassador
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    You have made a good start but I would caution you against transferring the debt to your mortgage. Firstly because turning unsecured debt to secured is unwise as it risks your home. If you were made unemployed or got sick you would have to find the money to pay your now larger mortgage and having taken a mortgage payment holiday this will be a mark against you anyway. The second reason is because shifting debt on to your mortgage deludes yourself you have sorted the debt. You haven't and it means you have no motivation to change your spending habits which are the reason for the debt in the first place. Transferring your debt to the mortgage sounds like a quick and easy fix. In reality it means you will be paying off this £50k plus the rest of your mortgage over the next 25 or 30 years along with the interest. A much more expensive way of clearing it. 
    Wise words as always and thanks. I genuinely forgot that I did this just over two years ago with my rental property as a 'fresh start' then quickly booked a holiday to the US for christmas! And i take it you are not a fan/it is not advised to do the 50/50 approach - so get my debt down to circa £25k then pay the rest off with a remortgage? Please don't laugh but i remembered that i (used to)  have a £50 pedicure and manicure each month. Was looking over old statements and could not figure out the £50 cash withdrawal each month 
    There is no such thing as as fresh start with debt.  You either repay it or you consolidate it which is more expensive and leads to higher debt in the long run.  Never heard of the 50/50 approach and no I am not a fan of consolidating debt ever.  Moving high interest credit cards to 0% is acceptable providing people actually pay it off within the deal period and do not just use it as an excuse to carry on with minimums. Your £50 pedicure and manicures will have cost you a lot more if you take interest into account.  It is enlightening isn't it to go over past bank statements before the penny drops?
    I’m a Forum Ambassador and I support the Forum Team on the Debt free Wannabe, Budgeting and Banking and Savings and Investment boards. If you need any help on these boards, do let me know. Please note that Ambassadors are not moderators. Any posts you spot in breach of the Forum Rules should be reported via the report button, or by emailing forumteam@moneysavingexpert.com. All views are my own and not the official line of MoneySavingExpert.
  • You have made a good start but I would caution you against transferring the debt to your mortgage. Firstly because turning unsecured debt to secured is unwise as it risks your home. If you were made unemployed or got sick you would have to find the money to pay your now larger mortgage and having taken a mortgage payment holiday this will be a mark against you anyway. The second reason is because shifting debt on to your mortgage deludes yourself you have sorted the debt. You haven't and it means you have no motivation to change your spending habits which are the reason for the debt in the first place. Transferring your debt to the mortgage sounds like a quick and easy fix. In reality it means you will be paying off this £50k plus the rest of your mortgage over the next 25 or 30 years along with the interest. A much more expensive way of clearing it. 
    Wise words as always and thanks. I genuinely forgot that I did this just over two years ago with my rental property as a 'fresh start' then quickly booked a holiday to the US for christmas! And i take it you are not a fan/it is not advised to do the 50/50 approach - so get my debt down to circa £25k then pay the rest off with a remortgage? Please don't laugh but i remembered that i (used to)  have a £50 pedicure and manicure each month. Was looking over old statements and could not figure out the £50 cash withdrawal each month 
    There is no such thing as as fresh start with debt.  You either repay it or you consolidate it which is more expensive and leads to higher debt in the long run.  Never heard of the 50/50 approach and no I am not a fan of consolidating debt ever.  Moving high interest credit cards to 0% is acceptable providing people actually pay it off within the deal period and do not just use it as an excuse to carry on with minimums. Your £50 pedicure and manicures will have cost you a lot more if you take interest into account.  It is enlightening isn't it to go over past bank statements before the penny drops?
    Thanks. Enlightening is one way to describe it. In all honestly it never occurred to me that I should put the £50 manicure towards paying off my debt. Same with taking a mortgage holiday to pay for a holiday. Even at 2% exchanging my £50,000 into secured debt would cost me £1,000 per year for 25 years, more if the interest rate rises (which it inevitably will!). I will pay it off and not remortgage. One other thing i wanted to run by you please. I appreciate you are not a financial advisor but my rental property lets for £950 and the mortgage and service charge also comes to £950. In March 2022 I will be able to put this on a BTL interest only mortgage (it is currently a repayment mortgage). My idea is to put it on an interest only mortgage, use the balance to pay for any tax and the rest to save for other investments (not lifestyle spending!). Have you come across this before?
  • alt80
    alt80 Posts: 4,204 Forumite
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    @Rainbowtrousers Mate I’ve been there with the investment property remo, did it with my whole portfolio to get out of £100k credit card debt. Wound up harming me and that business as well as paying the tax man additional to get it out (mine’s all through ltd spv), extra personal guarantees and ltv covenants. No bigger regret for me now I’m SLOWLY coming to terms with having a massive problem with some really self destructive behaviours. 

    I was 100% looking for a remo deal on my res home to clear the current lot of debt. Found that right now I can’t get it due to the affordability criteria set on res mortgages. Even considered if I could sell my res home to my ltd and rent it back to myself as I can get commercial loans easy. Still am looking to remo the res home in 2 years but that’s to plough into the BTL business it’s not going to be to pay card debts. 

    I have absolutely no right whatsoever to criticise other people’s decisions but I think you’re just going mad on the lifestyle. I’d assumed you probably took home a similar amount to me from your earlier posts seeing your soa, turns out you don’t but do have a lot more areas that are ‘easy’ to cut. By ‘easy’ I mean not tied in etc. Have a look through and think about what you can live without. Not going to lie I still have Champagne and still drive a Supercharged Range Rover with no intention to give either up - 100 I’ve been criticised for that and seeing the incomes some of the others are working to on here or realising they don’t care for the lifestyle stuff I know I took it the wrong way. Gives you something to think about though.
  • Understood and thanks. So your debt free journey has been coming up to 2 years. How has it been? Have you taken a very strict approach and not had holidays etc? Can i ask was your debt as a result of overspending and a lack of a decent budget too?
    Yes, my debt was entirely the result of overspending and lack of a budget (well I had lots of budgets, I just didn’t stick to them). Holidays, clothes, nice food....I grew up poor and the second I started earning a ‘good’ salary I decided I could afford all the things because that’s what people on good salaries do, despite all evidence to the contrary. There was also a bad break up and a hefty dose of anxiety behind it. A lot of my colleagues are incredibly high earners, often from family wealth too, and a lot of the clothes, holiday spending was driven by feeling not good enough and wanting to fit in.

    I also have some chronic illnesses which I ignored - basically at the same time I ran up debt I worked ridiculous hours and didn’t look after myself. Realising I was trapping myself in the high stress job and making my health worse basically to service debt contributed to my light bulb moment, as did getting a hefty pay rise and seeing it be swallowed up in minimum payments. It was tough at first, the urge to spend was still there and probably 50% of my diary is me telling MSE I want to buy something. Over time I’ve got better at stepping away and realising when something is a want rather than a need. My clothes budget went from hundreds per month to maybe 70-ish and now it’s about 25. I sold a lot of clothes to fund some home repairs that were needed at the same time. I’ve spent probably days of my life planning in detail luxury holidays or city breaks that I haven’t taken (I always did like the research stage though!). I haven’t had a holiday in the past couple of years other than one trip to see family, but mostly because my health sort of collapsed so I’ve been working from home part time for quite a while. I still spend on yoga because the health benefits for me are absolutely worth it, and I have a cleaner because I have such limited energy its worth it to have someone do that (consultant advised it even!). 

    It still doesn’t quite feel real that I’ve paid off so much, but the feeling that I get from living within my budget and knowing I have money saved for if the washing machine breaks or to pay for annual insurance is so good. I think the proudest I’ve been in the debt journey was my first year where I lived within my means for the entire year.

    A couple of things that have really helped me have been zero-based budgeting and tracking every single penny I spend (i used YNAB which people tend to either love or hate), and also for me realising that other people don’t notice or care what I have. It’s actually brought me closer to some friends when I told them I was paying off debt and they admitted they were too. Though I’ve always been too embarrassed to share the figures!
    Yes well i am not using it as an excuse but i also grew up in a poor family living month to month with the odd takeaway as a treat. Was the first one to go to university and the only one from my friend group. Ironically my friends that left school at 15 and became plumbers are now rolling in it ha ha. Sorry to hear about your health and i am really chuffed that you decided to share that here with me/us. Noted with the cleaner and yoga, sounds like they do for you as my gym/pool does for me. i also struggle with anxiety at times and those activities are my reset. 
    I bet the feeling must be awesome. I took my first loan at 18 and have been in debt since. So debt free and savings would be totally totally alien to me. You must actually save so much more money now. The feeling i get is that it is an upward spiral (being able to pay for annual policies which are cheaper etc). If i can do 2021 within budget that would be a huge huge step.
    Thanks for the helpful tips. I too have had to share my debts with friends. One friend who i was on the recent holiday with (he is excellent with money) could not believe it when i said it was part funded by mortgage holidays! Crazy ... He said i seemed so happy and content and could not believe that i had taken more debt to finance it. Oh my .... 
    Thanks again for the helpful tips.
  • alt80 said:
    @Rainbowtrousers Mate I’ve been there with the investment property remo, did it with my whole portfolio to get out of £100k credit card debt. Wound up harming me and that business as well as paying the tax man additional to get it out (mine’s all through ltd spv), extra personal guarantees and ltv covenants. No bigger regret for me now I’m SLOWLY coming to terms with having a massive problem with some really self destructive behaviours. 

    I was 100% looking for a remo deal on my res home to clear the current lot of debt. Found that right now I can’t get it due to the affordability criteria set on res mortgages. Even considered if I could sell my res home to my ltd and rent it back to myself as I can get commercial loans easy. Still am looking to remo the res home in 2 years but that’s to plough into the BTL business it’s not going to be to pay card debts. 

    I have absolutely no right whatsoever to criticise other people’s decisions but I think you’re just going mad on the lifestyle. I’d assumed you probably took home a similar amount to me from your earlier posts seeing your soa, turns out you don’t but do have a lot more areas that are ‘easy’ to cut. By ‘easy’ I mean not tied in etc. Have a look through and think about what you can live without. Not going to lie I still have Champagne and still drive a Supercharged Range Rover with no intention to give either up - 100 I’ve been criticised for that and seeing the incomes some of the others are working to on here or realising they don’t care for the lifestyle stuff I know I took it the wrong way. Gives you something to think about though.
    Well i have already done it once. Not wanting to fan the flames of spending but i flipped my BTL onto a resi so i could get up to 90%. That is now down to about 75% so figured switching it to a BTl interest only could be the way to go. Did you realise it at the time? For me remortgaging to pay off debt then days later flying to NYC for xmas and NYE seemed like the right thing to do. 
    Yes you are totally right. I used to earn double what i earn now working and living in Switzerland. Again though due to my bad attitude to money i settled for a very easy lower paying lawyer job on my return to london. Still decent money and should be enough to have a decent life, save for the overspending!
    Are you talking about barclays lowering the multiplier etc?
    Funny as i love champagne too and the range rover has always been a dream (i am a big surfer so 'need' a big 4wd)
    I will get there. Thanks for the tips. I know this is the start of a long journey and back to a normal life within budget. Ultimately I know i will be happier if things are finite and will hopefully have more value to me. 

  • You have made a good start but I would caution you against transferring the debt to your mortgage. Firstly because turning unsecured debt to secured is unwise as it risks your home. If you were made unemployed or got sick you would have to find the money to pay your now larger mortgage and having taken a mortgage payment holiday this will be a mark against you anyway. The second reason is because shifting debt on to your mortgage deludes yourself you have sorted the debt. You haven't and it means you have no motivation to change your spending habits which are the reason for the debt in the first place. Transferring your debt to the mortgage sounds like a quick and easy fix. In reality it means you will be paying off this £50k plus the rest of your mortgage over the next 25 or 30 years along with the interest. A much more expensive way of clearing it. 
    Wise words as always and thanks. I genuinely forgot that I did this just over two years ago with my rental property as a 'fresh start' then quickly booked a holiday to the US for christmas! And i take it you are not a fan/it is not advised to do the 50/50 approach - so get my debt down to circa £25k then pay the rest off with a remortgage? Please don't laugh but i remembered that i (used to)  have a £50 pedicure and manicure each month. Was looking over old statements and could not figure out the £50 cash withdrawal each month 
    There is no such thing as as fresh start with debt.  You either repay it or you consolidate it which is more expensive and leads to higher debt in the long run.  Never heard of the 50/50 approach and no I am not a fan of consolidating debt ever.  Moving high interest credit cards to 0% is acceptable providing people actually pay it off within the deal period and do not just use it as an excuse to carry on with minimums. Your £50 pedicure and manicures will have cost you a lot more if you take interest into account.  It is enlightening isn't it to go over past bank statements before the penny drops?
    Thanks. Enlightening is one way to describe it. In all honestly it never occurred to me that I should put the £50 manicure towards paying off my debt. Same with taking a mortgage holiday to pay for a holiday. Even at 2% exchanging my £50,000 into secured debt would cost me £1,000 per year for 25 years, more if the interest rate rises (which it inevitably will!). I will pay it off and not remortgage. One other thing i wanted to run by you please. I appreciate you are not a financial advisor but my rental property lets for £950 and the mortgage and service charge also comes to £950. In March 2022 I will be able to put this on a BTL interest only mortgage (it is currently a repayment mortgage). My idea is to put it on an interest only mortgage, use the balance to pay for any tax and the rest to save for other investments (not lifestyle spending!). Have you come across this before?
    Glad you decided against the remortgage and are starting to see the light on your spending habits. The suggestion you change the rental to an interest only and invest the difference sounds like a bit of a gamble to me. As interest rates are low I know it is common for people to change to interest only mortgages to keep repayments low but then they usually come unstuck at the end of the mortgage term. With BTL though you do at least have the option of selling up and if the rent only just covers the mortgage repayment and service charges with no residual for tax or maintenance then I would not rule that out. See how the figures stack up in 2022. No guarantees on investment return though
    I’m a Forum Ambassador and I support the Forum Team on the Debt free Wannabe, Budgeting and Banking and Savings and Investment boards. If you need any help on these boards, do let me know. Please note that Ambassadors are not moderators. Any posts you spot in breach of the Forum Rules should be reported via the report button, or by emailing forumteam@moneysavingexpert.com. All views are my own and not the official line of MoneySavingExpert.
  • Well done on deciding against the remortgage. 
    Im with astrocytic_kitten on recommending the zero based budget. I’ve found that zero based budgeting, a spending diary (logging every single freaking spend, as close to the time as spending it, but about once per week) and sinking funds have worked really well for me. 
    It’s funny isn’t it, how people are different. I would 100% not have the headspace for another job after my full time job, but I would happily have a housemate. I think if I was going to get the extra job I’d get the housemate too.... you’ll never be at home to see them anyway!! I’m an introvert too, I just always find an introverted housemate. The thing that puts me off about a second job is the tax on it. Wouldn’t you g rest taxed at 40%? I find it annoying that the govt would take almost half of my very very hard earned extra cash.

    https://forums.moneysavingexpert.com/discussion/6086606/debt-free-by-23/p1

    True LBM, December 2019 = £32934. Current Debt = £12762. 1% Challenge = 61.1%. #51 3-6 Month EF Challenge = £1200/£6000



  • alt80
    alt80 Posts: 4,204 Forumite
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    edited 27 October 2020 at 11:23PM
    @Rainbowtrousers Please don’t take this as judgement but I am seriously concerned you’ve got a BTL on a res mortgage. If this is what I think it is you are (perhaps unwittingly) committing mortgage fraud. Re. what to do with the BTL - you don’t seem to have any real strategy. I/O is quite likely the way to go but equally depending on where the BTL is and your own strategy for investment repayment may not necessarily be the worst idea. As I’m fairly sure someone is going to judge the fact I’m even giving advice in the first place relating to money ... I may be a d**k with my personal finances but I am experienced as a LL and my other business is property so feel free to ask any questions if you’re serious about property investing - what you’re doing now is no way to build a portfolio and there are a lot of pitfalls.

    As for me did I realise it? Yes 100%- I did it to avoid telling my wife I had a smidge under £100k in credit card debt. Not my finest moment.

    I earn similar to you did in Switzerland but was spending £10.5-11k/m living on the income I’d like not the one I have. Earning half your previous income must be very difficult and probably explains a lot of the debt.

    Res mortgage remo - I just have too many financial commitments right now (£1650/m car finance, £1k/m cards, £1k/m school etc.). Currently under 50% LTV on my res home and will only increase to leverage further property investments. Not even saying that’s something most people should do tbh.

    Think we have quite a few similarities tbf. There are a few of us on here who earn well and have issues with mindset / lifestyle / too image conscious.
  • alt80
    alt80 Posts: 4,204 Forumite
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    edited 27 October 2020 at 11:33PM
    @enthusiasticsaver Not sure how much experience in property you have tbh but i/o on a BTL isn’t the gamble it is on a res home. If the investment stacks there’s much less of an issue and remoing to leverage the next property is a legitimate way to maximise growth of a portfolio (increases reward and risk though as with any form of leverage tbf). However, as I’ve said the OP doesn’t seem to have any real strategy (or exit) for the investment and it should not be on a res mortgage. Exit is something he can certainly consider and as you rightly point out no guarantees. 
  • TheAble
    TheAble Posts: 1,602 Forumite
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    I wouldn't worry about March 2022 for now. Tackling your spending problems is the priority.
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