Sinking Faster than the Titanic! - Debt has become all consuming

EssexHebridean

NiteEyez1980 said:

Hi everyone, 

Well don't know what to say. I'm so touched and flabbergasted and touched  by the comprehensive, thoughtful and quick responses.

I am worried about my mortgage though. Could Nationwide pull my mortgage due to credit rating?

Luke

No - for two reasons. The first is that your "credit rating" isn't a thing - it's a made up number that credit reference agencies use to either scare you (if you are in debt) or to make you feel special (if you're not). The second is that the ONLY thing realistically that would mean you could lose your home would be if you failed to make your mortgage payments or payments to any other debts secured on your home - and you're not doing that, are you. 

One thing I'd ask you to reflect on - 10 years ago you were paying £350 a month for the mortgage - now you're paying £1100. If that increased payment had been as a result of overpayments, with no further borrowing, it's my guess you might well have completely cleared off the mortgage by now, and been outright owners of the property. Now there is no point in dwelling on "what you should have done" BUT it is worth remembering that the decision to add extra borrowing to a mortgage, particularly when coupled with a lack of savings and budgeting, will almost always leave you worse off financially. 

The pro-active things you can do now:
- don't be tempted to add any more borrowing to the mortgage now - in the future if a job need doing on the house, either it is an emergency, in which case you will use your emergency fund (more on that shortly) or it's planned for, in which case you budget, and save. 
- Start to budget properly right now for your everyday living costs. That includes all your priority bills, and all the things that you need to pay to maintain a decent quality of life. That's not "living in luxury" you'll note. Where you have annual expenses that are paid as a lump sum, remember that not only do you need to know how much needs setting aside monthly to cover them, you need to actually put that money aside, to, so it's there when needed!
- Save an emergency fund - this will get you out of trouble when the small things go kaput. As a starting point, aim for £1000, over time continue to pay to it though and let it build - if you can get to 6 months income in the longer term then brilliant - that's real peace of mind. These savings are NOT to be dipped into when someone wants a new iPad, or when you decide a holiday would be nice, or when new school shoes are needed - this is a fund of money which is genuinely to be used only when an entirely unexpected expense comes up. Those other things I mentioned, they all need planning for.

Most of all don't delay dealing with this now you know there is a problem - there is a link in my signature to the SOA (Statement of Affairs) calculator we recommend - get your bank and card statements together and make a start on completing the SOA, then get it posted in here and let's take a look and see how we can help you fix things, and move forwards. 

NiteEyez1980

Thanks everyone, the additional borrowing was doing the house up. Every promotion I borrowed more (loft conversion, new bathroom, kitchen, stairs, carpets, electrics etc etc) 

RAS

There was a T-shirt walking round town on Saturday; "I remember when I saved for things first"  basically.

Not getting at you and understand the pressure to make room for a growing family, but you've paid a fortune out to cover the interest on those loans. It would have been much cheaper to wait a year or two.

Regardless, you need to start taking charge from now on.

fatbelly

You've had excellent advice so far and if you post a statement of affairs here the advice on debts can be more specific.

Bear in mind that there are other boards that can help with e.g. mortgage issues, car issues, house repair issues. Everyone here is dedicated to helping you save money. 

kimwp

I think something you need to realise is that when you were borrowing more to finance improvements to your house, you weren't "ok", as you say in your first post, but getting deeper into debt. Hopefully you have already realised this, otherwise it's something you really need to understand in order to make it worth this next financial step, otherwise you will find yourself back in this situation.

NiteEyez1980

Thank u guys

I'll get the soa done asap

enthusiasticsaver

I agree with most of the others that debt consolidation should be avoided.  You also should not have to sell your house.  What you do have to do is stop spending and anticipating money and spending on the back of it whether for home improvements or not. Borrowing from the equity in your property continually means the mortgage just goes up and up as yours has done.  Not too much of an issue with low interest rates but there is every indication they will rise so you have to stop now. 

If you cannot afford minimums on your debts or have high interest and cannot transfer to 0% deals then a DMP might be the answer.  If you can afford minimums but just keep running out of money then better budgeting and getting into the savings habit may be enough.  If you post the soa we will advise further.