Non Judgemental advice please :) mortgage after IVA...

Sophie8916

Hi All,

Just popping on here to share my story as I know your all supportive.

In a matter of weeks I will be exchanging and completing on my property and then moving in with family until we buy a house. The reason I'm selling is to clear my debts, any tips on ensuring I dont rack it up again?

Also, my partner had a IVA discharged in 2019, looking for positive stories for getting a mortgage after an IVA...

EssexHebridean

Best way of ensuring that debt doesn't rack up again? Learn to budget, "go through the process" of paying it off - the hard grind of months or even years of seeing a great lump of your income going to clear debts is hugely motivating to make sure you never want to get there again, and remember how truly grim being in debt feels - remember that sinking feeling when another envelope drops through the door, or the phone rings again - do you want to feel that again? Nope - I'm guessing not. when you are considering using credit for something stop and ask yourself whether you realy need it, is it budgeted for, do you have anything else that will do the job instead - and the most important one even if the answer to "need" is yes - can you afford it. If you can afford to buy it, then buy it using a method other than a credit card or loan - or use the CC for section 75 protection and transfer the money straight to the card account afterwards. Build an emergency fund for use if things break unexpectedly, or you need an urgent and unplanned bit of work done on your home or car. 

Consolidation doesn't work - hopefully you've now realised that though. Similarly selling bricks & mortar to clear what was presumably unsecured debt is about the worst thing you can do - IMO even worse than consolidation, I assume there's not time to stop that process now though? Not sure who advised you that it was a good way to go but sadly that was not good advice - I wish you'd posted here sooner asking for advice and help - in the grand scheme of things sub-£30k of debt is very likely to have been DMP territory - hard work, but not impossible by any means. 

First step is to complete your SOA - statement of affairs. You can post that into this thread and we can take a look and help you to go through things step by step so you are budgeting properly. Without a proper budget at best you will be stumbling from month to month getting caught out by things like car servicing, christmas, or the fridge breaking down. At worst you will be back here in a few years looking to sell your next home to clear more debt....(if that happens - don't, come here and we will help - but frankly we'd rather you sorted things now!) 

Sophie8916

EssexHebridean said:

Best way of ensuring that debt doesn't rack up again? Learn to budget, "go through the process" of paying it off - the hard grind of months or even years of seeing a great lump of your income going to clear debts is hugely motivating to make sure you never want to get there again, and remember how truly grim being in debt feels - remember that sinking feeling when another envelope drops through the door, or the phone rings again - do you want to feel that again? Nope - I'm guessing not. when you are considering using credit for something stop and ask yourself whether you realy need it, is it budgeted for, do you have anything else that will do the job instead - and the most important one even if the answer to "need" is yes - can you afford it. If you can afford to buy it, then buy it using a method other than a credit card or loan - or use the CC for section 75 protection and transfer the money straight to the card account afterwards. Build an emergency fund for use if things break unexpectedly, or you need an urgent and unplanned bit of work done on your home or car. 

Consolidation doesn't work - hopefully you've now realised that though. Similarly selling bricks & mortar to clear what was presumably unsecured debt is about the worst thing you can do - IMO even worse than consolidation, I assume there's not time to stop that process now though? Not sure who advised you that it was a good way to go but sadly that was not good advice - I wish you'd posted here sooner asking for advice and help - in the grand scheme of things sub-£30k of debt is very likely to have been DMP territory - hard work, but not impossible by any means. 

First step is to complete your SOA - statement of affairs. You can post that into this thread and we can take a look and help you to go through things step by step so you are budgeting properly. Without a proper budget at best you will be stumbling from month to month getting caught out by things like car servicing, christmas, or the fridge breaking down. At worst you will be back here in a few years looking to sell your next home to clear more debt....(if that happens - don't, come here and we will help - but frankly we'd rather you sorted things now!) 

Thanks that’s really helpful, it’s not just for that, my property has bad memories for personal reasons so I’m better off out of it, it works for me, and luckily I have a huge amount of equity so after clearing everything I’ll still have £20-25k ish.

Is there a template for SOA so I can post?

EssexHebridean

Template is either the one in my signature, or there is a different one in one of the sticky threads at the top of the board Sophie - you might find one or the other works better for you.

Fair call on the house - I'd still be cautious about using so much of the money to clear the debts though as the issue of not "going through the process" still applies. It's the same reason that you go into debt again (and let me guess, to a higher level?) after consolidating - you need to fix the behaviours that are causing the over-spending - without that, you'll just find it will happen again.  Also - the money that remains from the equity? You need to make sure that is put away somewhere you're not tempted to spend it! If you know it will be a year before you buy again then look for a one year fix somewhere that won't allow you to withdraw. Otherwise it might be a case of being very strong willed! 

Sophie8916

Thanks for your non judgement so far, please see below, this is based on after completion

[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......... 

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

Monthly Income Details[/b]

Monthly income after tax................ 2300

Partners monthly income after tax....... 2500

Benefits................................ 0

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

Total monthly income.................... 4800[/b][b]

Monthly Expense Details[/b]

Mortgage................................ 0

Secured/HP loan repayments.............. 401

Rent.................................... 820

Management charge (leasehold property).. 0

Council tax............................. 145

Electricity............................. 45

Gas..................................... 45

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

Water rates............................. 29

Telephone (land line)................... 35

Mobile phone............................ 150

TV Licence.............................. 15

Satellite/Cable TV...................... 95

Internet Services....................... 33

Groceries etc. ......................... 200

Clothing................................ 0

Petrol/diesel........................... 80

Road tax................................ 18

Car Insurance........................... 44

Car maintenance (including MOT)......... 0

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

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

Childcare/nursery....................... 0

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

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

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

Buildings insurance..................... 0

Contents insurance...................... 0

Life assurance ......................... 15

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

Presents (birthday, christmas etc)...... 0

Haircuts................................ 0

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

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

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

Total monthly expenses.................. 2170[/b]

[b]

Assets[/b]

Cash.................................... 20000

House value (Gross)..................... 0

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

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

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

Total Assets............................ 20000[/b]

[b]

Secured & HP Debts[/b]

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

Mortgage...................... 0........(0)........0

Hire Purchase (HP) debt ...... 21000....(401)......14[b]

Total secured & HP debts...... 21000.....-.........-   [/b]

[b]Unsecured Debts[/b]

Description....................Debt......Monthly...APR[b]

Total unsecured debts..........0.........0.........-  [/b]

[b]

Monthly Budget Summary[/b]

Total monthly income.................... 4,800

Expenses (including HP & secured debts). 2,170

Available for debt repayments........... 2,630

Monthly UNsecured debt repayments....... 0[b]

Amount left after debt repayments....... 2,630[/b]

[b]Personal Balance Sheet Summary[/b]

Total assets (things you own)........... 20,000

Total HP & Secured debt................. -21,000

Total Unsecured debt.................... -0[b]

Net Assets.............................. -1,000[/b]

[i]Created using the SOA calculator at www.LemonFool.co.uk.

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

EssexHebridean

I'm always wary of SOA'd done "ahead of time" like this because the risk is that they are what the writer feels is expected, not what will actually happen. You only really learn how a budget will work when you have lived with it. 

That's a lot of rent to be paying family, with other bills on top - is this in a rented house owned by a family member but that you're paying market rate on? 

The top part with utilities etc looks pretty OK until you get to TV, Mobiles & internet. £150 is an extortionate amount for two mobile phones - how soon are these out of contract?  That TV package is massively high especially allowing it doesn't include internet or landline. TV license should be £13.XX not £15.  The internet and landline on their own are also both high - why so much? To give you an idea - you're currently paying, across just those areas - more than £3500 a year. have a look at the main site to give you an idea where savings can be made there - and have a think about how much of that you really get value from, too. 

I've snipped the lower section to make commenting easier - but it certainly shows why you need to start budgeting:

Clothing................................ 0 Pretty sure this isn't going to be right... ;-) 

Petrol/diesel........................... 80

Road tax................................ 18

Car Insurance........................... 44 assume you shop around for this following Martin's methods over on the main MSE site?

Car maintenance (including MOT)......... 0 Neither car ever needs an MoT. service or even new tyres of a splash of screenwash? You need to budget here - even lease deals don't include absolutely everything! 

Car parking............................. 0 You never pay anything for parking, anywhere? 

Other travel............................ 0 There's never a train trip somewhere, or a few stops on the bus, or a taxi back after a night out?

Childcare/nursery....................... 0

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

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

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

Buildings insurance..................... 0 

Contents insurance...................... 0 Even in rented accommodation you MUST have this.

Life assurance ......................... 15 why will you need this when you're renting? 

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

Presents (birthday, christmas etc)...... 0 Again - it seems implausible that you never buy presents for anyone at all? 

Haircuts................................ 0 Both either bald or skinhead style with clippers? No? Probably needs to be budgeted for then! ;-) 

Entertainment........................... 0 I'd love to think that the gold-plated TV and internet fulfil all your entertainment needs, but I'm guessing it's not the case...

Holiday................................. 0 No holidays, at all, ever? No plans to go anywhere, even trips to visit family?

Emergency fund.......................... 0 Already covered - you need to build this ASAP

So, allowing that you will need to be budgeting into the categories above, after that is taken account of once you have moved (I take it you have money put aside to cover associated costs, or is that coming out of the equity as well?) you should have around £2000 a month surplus. It's vital that you make sure this does get managed properly otherwise you'll potentially just fritter it.  The APR on the HP debt is high - so it would be worth exploring options on overpaying that. Also assuming that is car finance, you may need to think about setting money aside for balloon payments? with that level of surplus you should be looking at budgeting monthly towards insurance renewals too and then paying those upfront, before budgeting again ready for the next year - that will also make your premium cheaper too, but you MUST set aside the relevant amounts monthly.

The big risk with the money from the house is that you will fall into the trap of seeing it as a "safety net" - it's not - it needs to be ringfenced for ONLY using towards buying a new house, unless the sky quite literally falls in. You *could* look at using that to clear the HP debt, but my concern will be that you will then not put the work in to rebuild that pot again, so I suspect you're safer considering it as "someone else's money" until you are ready to use it as a deposit.

What is your plan for savings with the surplus you will have?

EssexHebridean

A bit more info on the subject of BB, TV & Phones: Check to see how long you are in contract for - and use that time to re-evaluate what you actually use (you may be paying for channels you never watch, for example) then you can start to keep an eye out for deals that might prove suitable for the stuff you actually use. Often bundling phone/BB & TV together can be cheaper, but not always. On the mobiles, lose the expectation that you'll replace phones when a contract ends - modern phones last FAR longer than a 2 year contract! For a start you will be able to switch to a cheap SIM only deal, and while on that start to stash aside a sum each month to build a fund for your next phone - then when you actually need to replace, you'll have a pot of money there to fund an up-front purchase, which is also often cheaper! Start looking at your mobile deal a month before your contract ends - often a supplier will let you finish the contract early to retain you if they think you're going to leave, so calling 30 days ahead to "cancel because I've found this great deal somewhere else" can save you a month - chances are your current supplier will match the deal you've found, and maybe even beat the price. 

Sophie8916

Thanks - love the support here!

Thrugelmir

When it comes to financial matters. Time most certainly heals. Don't fall into the same traps again in the future. Take the sobering experience on board and you'll be fine. People suffer financial distress for a vast range of reasons. Stay positive and most certainly don't get hung up on credit scores. 

Sophie8916

Got some info I want to share 

I called NatWest today who I bank with, poured my heart out about my situation… and the refunded me 2 months worth of interest fees for my overdraft (£280 in total!) as a gesture of good will !! 

EssexHebridean

Well there you go - THAT’s good news isn’t it!