Consolidating...Is this a stupid idea???

Cneaaadfw2023

So I just back at work after maternity leave (have posted before!!) I have realised we have a considerable amount of equity in the house which we were hoping to release with a view to renovating our very old farm house (rewire/new roof etc!). It needs done and interest rates are low atm.

Anyway given current building market I imagine it will take a while to get each stage done (have accommodation arranged for us so no rush there!) However i have realised we could use the money to pay off our loan and car hp, then save that money or overpay on mortgage. It seems daft to have it sitting in a bank account getting very little interest! 

Plan to release £70000.
Debts £34000
Leaving us £36000 to do roof Roof (£12000) rewire (£8000) and replumb initially. 

I have read about this on the board and I completely appreciate its a bit of a risk to be taking. If we don't save the extra £735 we'd be saving each month  then we won't be able to complete our home. However it is potentially an opportunity to free ourselves from the debt cycle and then we can overpay the mortgage and outright own our own home.

I've chatted to a mortgage advisor who actually was pretty enthusiastic but I know I'll get sensible, pragmatic answers in here.


[tt][b]Statement of Affairs and Personal Balance Sheet[/b][b]

Household Information[/b]

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

Number of children in household......... 2

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

Monthly Income Details[/b]

Monthly income after tax................ 3000

Partners monthly income after tax....... 0

Benefits................................ 180

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

Total monthly income.................... 3180[/b][b]

Monthly Expense Details[/b]

Mortgage................................ 220

Secured/HP loan repayments.............. 735

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

Management charge (leasehold property).. 0

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

Electricity............................. 120

Gas..................................... 0

Oil..................................... 120

Water rates............................. 0

Telephone (land line)................... 15

Mobile phone............................ 24

TV Licence.............................. 0

Satellite/Cable TV...................... 0

Internet Services....................... 50

Groceries etc. ......................... 250

Clothing................................ 30

Petrol/diesel........................... 400

Road tax................................ 25

Car Insurance........................... 100

Car maintenance (including MOT)......... 50

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

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

Childcare/nursery....................... 120

Other child related expenses............ 0

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

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

Buildings insurance..................... 20

Contents insurance...................... 5

Life assurance ......................... 0

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

Presents (birthday, christmas etc)...... 35

Haircuts................................ 10

Entertainment........................... 0

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

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

Total monthly expenses.................. 2469[/b]

[b]

Assets[/b]

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

House value (Gross)..................... 140000

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

Car(s).................................. 15000

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

Total Assets............................ 155000[/b]

[b]

Secured & HP Debts[/b]

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

Mortgage...................... 52000....(220)......2.9

Secured Debt.................. 24500....(495)......9.9

Hire Purchase (HP) debt ...... 9500.....(240)......7[b]

Total secured & HP debts...... 86000.....-.........-   [/b]

[b]Unsecured Debts[/b]

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

Bank of mum....................1300......50........0[b]

Total unsecured debts..........1300......50........-  [/b]

[b]

Monthly Budget Summary[/b]

Total monthly income.................... 3,180

Expenses (including HP & secured debts). 2,469

Available for debt repayments........... 711

Monthly UNsecured debt repayments....... 50[b]

Amount left after debt repayments....... 661[/b]

[b]Personal Balance Sheet Summary[/b]

Total assets (things you own)........... 155,000

Total HP & Secured debt................. -86,000

Total Unsecured debt.................... -1,300[b]

Net Assets.............................. 67,700[/b]

[i][/i][/tt]

Grumpelstiltskin

Is your SOA totally accurate?

No water rates? Scotland?
No TV licence?
No medical?
No life assurance?
No entertainment?
No holidays?

It doesn't seem accurate

TheAble

The basic risk is that if you haven't eliminated the behaviours that got you into debt in the first place, you will simply get into them again. This is why consolidation tends to be a bad idea for most people. It can work, but you have to be very disciplined and have had a change of mindset.

Why not just pay for each of these improvements using your current monthly surpluses?

Cneaaadfw2023

Grumpelstiltskin said:

Is your SOA totally accurate?

No water rates? Scotland?
No TV licence?
No medical?
No life assurance?
No entertainment?
No holidays?

It doesn't seem accurate

Ni no rates
Nope no TV licences 
No medical although considering it
No life insurance company seems willing to cover me until I'm 5 years out for admission with pnd and that's not till next September 
We have 4yo and 6m old so park, walks and friends gardens. Obviously fuel and snacks but these are included in their respective categories 
Agreed no hols till money and house sorted

Cneaaadfw2023

TheAble said:

The basic risk is that if you haven't eliminated the behaviours that got you into debt in the first place, you will simply get into them again. This is why consolidation tends to be a bad idea for most people. It can work, but you have to be very disciplined and have had a change of mindset.

Why not just pay for each of these improvements using your current monthly surpluses?

We got into debt after our little girl passed away. I was on maternity and hubby had just started his own business but wasn't in any state to work. The pregnancy also was problematic and ended up costing us a lot in travel/accommodation due to me being admitted for months. We'd actually got our !!!!!! together pre covid and had a good nest egg built up and paid off one of the cars finance. Then pandemic hit, hubby wasn't eligible for grants and I got pregnant!! 

Well be in the unique position as of next summer that my work will pay 80% of my rent for 2 years while I'm based too far from home to commute. It makes sense to do the main works on the house at this time.

Grumpelstiltskin

OK   Northern Ireland and rural, 2 cars and only 1 adult working? admittedly I can see  you are needing to use a car for school run work etc.

Cneaaadfw2023

Grumpelstiltskin said:

OK   Northern Ireland and rural, 2 cars and only 1 adult working? admittedly I can see  you are needing to use a car for school run work etc.

So this was a bit that's probably wrong on the SOA. My husband has his own business but has only just started getting going thanks to pandemic. Since lockdown lifted hes had £1000 coming in one month, others nothing. I didn't really know how to include it and as it's not guaranteed figured it was better to exclude?

Brie

400 a month for petrol?  That's a lot of commuting!  And only 50 a month for MOTs on 2 cars and any other maintenance?

2 children and no life assurance for either of you?  (maybe there's something through work??)

No money earmarked for birthdays or Christmas (assuming you celebrate these)

30 a month for everyone's clothing??  Including someone working in a well paid job and 2 growing children?

And what do you mean about equity release?  Isn't there an minimum age for this?? (genuine question as I thought this was something for the over 50s?)   Or are you talking about remortgaging in some way.

No pensions?  

And when you say no TV license I assume that means you have no TV and never watch live TV via your computer rather than you're simply not paying for it.


If you do have about £600 a month available I would start off by paying off your Bank of Mum just to get one thing quickly off the menu.  Then starting with the highest interest rate overpay on the secured debt and then the hire purchase assuming neither have any penalties for early payment.  That in itself might take you 6+ years unless you can get another income some how.  But I can't see how you can maintain the strict budget for a prolonged period without having any major payment required for something - new washing machine/fridge/car.  I would love for you to be able to do it but am wondering if it's realistic.

Grumpelstiltskin

Personally with your husband's business being new and no one knows how the next few years are going to pan out I would save your excess income and do your renovations one thing at a time.
If your husband's business does take off he may be able to contribute much more to the renovations.
I feel at the moment I would stick and see how things are going forward.

enthusiasticsaver

I am not sure what your intention is here.  You have £34000 debt in HP and a secured loan so the loan is already secured on your property presumably and the HP on the car?  So how will remortgaging help? You are basically saying you want to take on an additional £36k for property repairs but that SOA is incomplete and I guess you do not have £700 spare each month so you do not have enough spare income to take on a further £36k debt.  It is not consolidation, it is borrowing more. 

You will not have enough equity to borrow £70k as the mortgage and loan total £76500 and the house is only worth £140k.  You won't get a decent rate if you go above 70 or 80% LTV. 

Cneaaadfw2023

enthusiasticsaver said:

I am not sure what your intention is here.  You have £34000 debt in HP and a secured loan so the loan is already secured on your property presumably and the HP on the car?  So how will remortgaging help? You are basically saying you want to take on an additional £36k for property repairs but that SOA is incomplete and I guess you do not have £700 spare each month so you do not have enough spare income to take on a further £36k debt.  It is not consolidation, it is borrowing more. 

You will not have enough equity to borrow £70k as the mortgage and loan total £76500 and the house is only worth £140k.  You won't get a decent rate if you go above 70 or 80% LTV. 

Oh I put it in the wrong section then! It's a personal loan so not secured against house. I've been on maternity leave so my income was half of what it is now I'm back at work (literally this month!)