Should I remortgage to pay of debt even though I have a £9k indemnity

TildaBella

Hi , I have never posted before (on this or any other site!) I am married with 4 small children under 10. My husband and I both have reasonable jobs he is a teacher and I work in admin. We are in a lot of debt around 30k in loans and CC. I have just over spent at Christmas and feel awful. I was brought up with really bad attitudes to money. To save was seen as something that 'boring' people or 'tight' people do. . I have for most my adult life lived beyond my means and tried to 'keep up'. Im not lavish but I overspend. We then had some bad luck and my husband was in a bad accident in the middle of a house renovation so we used lots of tradesman that cost a fortune. We then had a surprise 4th baby which is wonderful but has stretched us to the limits. My dilemma is that the commitments have got to much and we are thinking of remortgaging. our home is worth £325K (min) we have a mortgage of £170K if we come out of the mortgage we have a £9k indemnity and it is with Santander so they will not allow debt consolidation  it ends in feb 2022( I have asked) the demands on our finances are huge as we have 4 kids.  My car needs to be replaced also it is 18 years old and worth about £300 so need a solution for a car.

Loan Hitachi £4000 £181 a month

Loan M&S £7000 £250 a month

Credit Card Llolyds £ 6000  £120 a month

CC MBNA £4000 £100 a month

CC Virgin £4000 £!20 a month

CC Halifax £4500 120 a month

WE bring in £3500 a month.

Should we consolidate ?

I also really want to change my attitude to money. I have been raised to think that over spending is a way of life as is lying about money and what you spend. I regularly use my credit card just to do a weekly shop. I have been reading some of the stories about paying off the debt and ust worry that it will be awful for the kids and they will miss a huge part of childhood if I have to watch every penny and no holidays.

Pease do you have any advice ….

Thanks Alice

ryanm8655

First step is to complete a statement of affairs and post for advice.

Personally wouldn’t recommend remortgaging your way out of debt, even without the indemnity.

Consolidation is seldom a good idea (as someone who has done it several times and ended up in more debt every time).

You need to really deal with the root cause of your debt and that means setting all expenses out, identifying savings and living to a budget. There is no shortcut sadly (I’ve tried my best to find one over the years ).

A lot will depend on your income (you may need a debt management plan or other solution) but my first step was an SOA, committing to pay a certain proportion off of debts a month and then switching existing debts to 0% offers as they emerged (which they do when you start reducing the debt). It’s tough but I have now finally learned to live within my means.

TheAble

What is an indemnity exactly? Never come across that before.
To answer your question though, no you shouldn't consolidate. It sounds like you've had a bit of bad luck with your husband's injury but on the plus side you do have a good combined income. I would imagine you can rectify this problem by making some savings and efficiencies to your expenditure.

ryanm8655

TheAble said:

What is an indemnity exactly? Never come across that before.
To answer your question though, no you shouldn't consolidate. It sounds like you've had a bit of bad luck with your husband's injury but on the plus side you do have a good combined income. I would imagine you can rectify this problem by making some savings and efficiencies to your expenditure.

I’m assuming some kind of charge for remortgaging early?

enthusiasticsaver

No you should not consolidate and definitely do not secure unsecured debt on your home.  That is a cardinal mistake and never ends up well.  
Before you can sort the debt you need to sort out your attitude to money and your spending habits which got you into debt and to start addressing that you need to really stop using credit altogether. Are you paying interest on those debts? The car will have to wait until you have got a grip on your spending and sorted out how you will get rid of the debt.  You need a plan and an soa is the first step in that.  There is a link on the sticky on this forum. You have a reasonable income though and the payments on the debt are less than £1k so with only £170k mortgage you should have enough spare to start paying down the debt.  The fact you say money is  tight is probably because you have got in the habit of not budgeting or saving and just spending what you like.  None of us can do that even with reasonable incomes and especially if you are not lumbered with £33k of unsecured debt. 

The first step should be to make a budget.  The second is to put the credit cards away so you are not tempted to spend on them.  You need to save a basic emergency fund in case something happens to the car or the house which has to be dealt with.  This is to stop you using credit as the default option.  Normally £1k is the recommended emergency fund but if you are paying high interest on those debts I would start off aiming for £500. If you are paying interest and your credit rating is still ok then you can try moving the debt to 0% deals.  None of this is a quick fix.  You have by your own admission taken years to get to this point and there is  no quick way out of it.  No doubt you have probably tried consolidation before and it never ever works because it does not address the root cause of the debt which is you overspending. It also delays the point where you are forced to actually deal with the debt and repay it so normally the debt is higher by the time you have consolidated once or even twice or more.  You have to draw a line now and say no more.  It will be tough but there is no short cut.  I am not sure what the indemnity is but you will not find anyone on this forum who recommends securing unsecured debt on your home.  

If you really cannot live within your income and the debt is rising due to high interest rates you may need to look at a debt solution like a DMP but I would say that your income should be enough to deal with this without going down that route.  Put a statement of account up and let us see the interest rates and your other outgoings.  You also need to get in the habit of saving for things like Christmas, holidays, school uniforms/shoes and car expenses etc.  Boring but it will help you regain control of your spending. 

TildaBella

Thanks all the indeminity is an early repayment charge for coming out of the mortgage early. I have had a productive afternoon going through the all the debts and outgoings. The credit cards all 0% apart from the virgin which was 27%!!! i have been paying this and ignoring the loan is also 8.9% which is high. 
I just feel a bit overwhelmed as although I have always worked really hard sometimes taken on 2 jobs I have always just overspent. I have months where I don't use credit cards and can be really disciplined and watch every penny. I will then start using for something simple and cant stop and before I know it have spent £1K it gives a buzz at the time and then I feel awful after. I am embarrassed to be in this position I actually think I have real issues with money and linking it to emotions. 
Thanks for your input much appreciated

enthusiasticsaver

Here is a link for an soa.  I think that one is working now.  If not lemonfool also does one.  If the virgin is 27% interest you need to target any overpayments there or try moving to a 0% deal.  Are you up to date with monthly repayments? 

SOA Calculator (stoozing.com)

TildaBella

Great will complete SOA. Yes completley up to date. Although I over spend 'at times' i have never missed a payment on anything ever 

TildaBella

Completed the SOA


[font=courier new][b]Statement of Affairs and Personal Balance Sheet[/b][b]

Household Information[/b]

Number of adults in household........... 2

Number of children in household......... 4

Number of cars owned.................... 2[b]

Monthly Income Details[/b]

Monthly income after tax................ 1500

Partners monthly income after tax....... 2100

Benefits................................ 240

Other income............................ 0[b]

Total monthly income.................... 3840[/b][b]

Monthly Expense Details[/b]

Mortgage................................ 630

Secured/HP loan repayments.............. 0

Rent.................................... 0

Management charge (leasehold property).. 0

Council tax............................. 140

Electricity............................. 55

Gas..................................... 55

Oil..................................... 0

Water rates............................. 33

Telephone (land line)................... 0

Mobile phone............................ 40

TV Licence.............................. 12

Satellite/Cable TV...................... 20

Internet Services....................... 20

Groceries etc. ......................... 750

Clothing................................ 100

Petrol/diesel........................... 50

Road tax................................ 20

Car Insurance........................... 40

Car maintenance (including MOT)......... 20

Car parking............................. 0

Other travel............................ 0

Childcare/nursery....................... 400

Other child related expenses............ 100

Medical (prescriptions, dentist etc).... 0

Pet insurance/vet bills................. 0

Buildings insurance..................... 15

Contents insurance...................... 10

Life assurance ......................... 10

Other insurance......................... 0

Presents (birthday, christmas etc)...... 100

Haircuts................................ 40

Entertainment........................... 200

Holiday................................. 0

Emergency fund.......................... 0[b]

Total monthly expenses.................. 2860[/b]

[b]

Assets[/b]

Cash.................................... 0

House value (Gross)..................... 325000

Shares and bonds........................ 0

Car(s).................................. 0

Other assets............................ 0[b]

Total Assets............................ 325000[/b]

[b]

Secured & HP Debts[/b]

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

Mortgage...................... 175000...(630)......2.9[b]

Total secured & HP debts...... 175000....-.........-   [/b]

[b]Unsecured Debts[/b]

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

Credit Card Virgin.............4000......120.......27

LOan MS........................6000......250.......8.9

Loan Hitachi ..................4000......181.......4[b]

Total unsecured debts..........14000.....551.......-  [/b]

[b]

Monthly Budget Summary[/b]

Total monthly income.................... 3,840

Expenses (including HP & secured debts). 2,860

Available for debt repayments........... 980

Monthly UNsecured debt repayments....... 551[b]

Amount left after debt repayments....... 429[/b]

[b]Personal Balance Sheet Summary[/b]

Total assets (things you own)........... 325,000

Total HP & Secured debt................. -175,000

Total Unsecured debt.................... -14,000[b]

Net Assets.............................. 136,000[/b]

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

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

madaboutspots

Loan Hitachi £4000 £181 a month

Loan M&S £7000 £250 a month

Credit Card Llolyds £ 6000  £120 a month

CC MBNA £4000 £100 a month

CC Virgin £4000 £!20 a month

CC Halifax £4500 120 a month

So with my maths I make this £29,500 but you've got £14,000 outstanding. 

Do you want to check everything again? 

Essentially you've not yet dealt with the underlying issue and that is your spending sprees. If you ever find a way forward with all of this, those spending sprees will HAVE to be a thing of the past. No way round it..... Not sure you've reached your LBM yet. 

TheAble

Yes you do appear to have missed off a few credit cards, if the debts listed in your first post are accurate.
Overall I don't think your SOA looks especially spendy. You've got quite a big grocery bill but I suspect a lot of it comes from having 4 kids, a job and thus lack of time. You could review the entertainment spend a bit - are you getting value from that? If your mobiles are out of contract then consider going sim-only, which can be done from £5/month per sim. Gas and elec you may have scope to trim.
Also double check your life insurance to make sure you're adequately protected - given your family commitments that premium struck me as being a little on the low side.