Hit by coronavirus. Lots of debt! Determined to get out of it. Anyone else? Also mortgage advice.

Louise1234

This last year and a bit has been absolutely awful. We are both self employed and had absolutely no income at all for almost 9 months. The last 5 months my husband has had maybe 3 days a week (before minimum 5 sometimes 7 days) and I am advertising but not getting anywhere. My industry is normally quiet now and I will be busy again by September / October. 

We were fortunate to have some savings at the beginning and managed to live off that for around 6 months but now we are £23,000 in debt, had our full mortgage holiday and it all starts again next week and I am dreading it. 

I am determined to sort this out again and once working should hopefully be able to do this quite quickly but it has given me a massive realisation that nothing is guaranteed. 

We have a mortgage of around £440,000 and currently pay just under £1600 a month. Has anyone overpaid on their mortgage to pay it off quicker? Would you recommend it? Would you pay as much as possible or just pay a little extra? I've heard mortgage is cheapest loan you will get but equally it is a lot we pay out a month. 

Any advice would be amazing. I'd love to hear from others maybe in a similar situation too.

Thank you. 

[Deleted User]

Paying off the mortgage is only a good idea if you have significant savings in place to live off, or the rate is higher than your savings are earning.

What's your situation?

Louise1234

I wish we had savings! Just thinking of ways to reduce our outgoings. They are currently around £3600 a month. Without debt would be £3100. With over half being mortgage. We will also be paying off for another 32 years 😫. 

Mortgage rate is 1.97% if that helps? 

DayDreamerandGeneralWaster

Well it's not 'only' a good idea if you have savings to live off. My savings are pretty limited but we overpay our mortgage by £400 a month. 

However you might want to get your debt to a more comfortable place before you think about that. One step at a time.

Louise1234

DayDreamerandGeneralWaster said:

Well it's not 'only' a good idea if you have savings to live off. My savings are pretty limited but we overpay our mortgage by £400 a month. 

However you might want to get your debt to a more comfortable place before you think about that. One step at a time.

Yes, will definitely clear that first. 
Do you pay off as much as possible or just a little bit? Undecided if just pay loads off and clear quickly or just pay off a little more but still take say 5 years off 

Vikipollard

I finally persuaded my husband to remortgage our house from the mortgage-in-his-name-only on a standard rate (because he isn't a rate tart), to a 6 year joint mortgage on a much lower rate, fixed for 5 years, with the intention to pay it off before the end of the fixed rate.  We paid it off in 4 years by paying £300 extra each month.  I should say that it started out at £34,000, with agreed payments of £503/month to meet the six years, but I set the direct debit for £705 and then made an additional £100 payment once a month on pay day.  That was my fail safe in case we were a bit tight for money in any given month, so that I wouldn't have to touch our savings.

Personal opinion, but once you get back on your feet and are more comfortable with your level of debt, I would definitely over pay.  Nothing is guaranteed as we all know only too well (if we didn't before).  We are fortunate in that we work in the public sector and have been working throughout, however when it comes to paying back the bill for Govt borrowing, it's always the first place they stick the hatchet.  We got to this position so that if either of us lose our jobs, we can keep a roof over our head (though if we both do it will be more challenging...).

comeandgo

I dont agree with others.  You are both self employed, you had savings but are now over £23k in debt and had to use the mortgage holiday to its full.  You may have difficulty in getting future mortgages due to all this.  As mortgage interest rates are usually a lot lower than credit cards or loan interest rates I’d concentrate on paying off higher interest debt first and try and put something aside for emergencies.  Have you submitted your tax returns and checked if any tax repayments due?  

TheAble

comeandgo said:

I dont agree with others.  You are both self employed, you had savings but are now over £23k in debt and had to use the mortgage holiday to its full.  You may have difficulty in getting future mortgages due to all this.  As mortgage interest rates are usually a lot lower than credit cards or loan interest rates I’d concentrate on paying off higher interest debt first and try and put something aside for emergencies.  Have you submitted your tax returns and checked if any tax repayments due?  

Yes - I also don't understand this focus on making mortgage overpayments. Given the other debts, end of mortgage holiday and reduced income, surely the main concern right now is just making the actual payments?

Louise1234

comeandgo said:

I dont agree with others.  You are both self employed, you had savings but are now over £23k in debt and had to use the mortgage holiday to its full.  You may have difficulty in getting future mortgages due to all this.  As mortgage interest rates are usually a lot lower than credit cards or loan interest rates I’d concentrate on paying off higher interest debt first and try and put something aside for emergencies.  Have you submitted your tax returns and checked if any tax repayments due?  

Yes will pay the other debt off first. Mainly so we have less outgoings but they are all interest free. Definitely clear those first though, I agree x 

theoretica

Pay off current debt.

Sort out pensions - if needed.

Safe a safety net.

Overpay mortgage.

One of the reasons overpaying the mortgage is valuable is it is something more emotionally concrete than just saving to compete against the temptation to spend earnings. 

rugbymadfamily

Agree with @theoretica, get the debt paid, build you Emergency Fund again (as you are both self employed, I would advise a minimum of 6 months worth of all outgoings saved), sort pensions and continue paying in regularly. Then you can think about mortgage OPs. Best of luck and I hope that things pick up for you soon.