Fixed term mortgage due - 20k debt - Is it worth securing against the house

Sharp1986

I know as a standard thing this will be frowned upon instantly but I'm going to ask anyway so I can read the rationale from people and make my own decision. 

5 years ago we bought our first house by stretching and took on 10k debt, the debt never really came down and we sold that house and bought a much bigger house again by stretching (went from 180k with a 5% deposit house to a 315k with a 15% deposit house), but once again we're in debt due to stretching early doors just to get in.

1.52% paying £809 is obviously going to increase considerably when my 2 year fixed term is due in January. 

At the moment we generally pay £500 on debt and live a fairly want for nothing comfortable lifestyle, few things I'm looking to tighten up but by and large we don't spend willy nilly, although in the grand scheme of this forum I'm sure people would think we do. We give ourselves £80 each a week to have in our personal accounts, mine goes on socialising or 20 quid on gambling. 

Our wages have gone up considerably since buying our first house in 2018 and we both got promotions this year. Cost of living awards plus moving up on pay scale brackets are still to come for the both of us, I go up a grand a year plus whatever our firm gives us cost of living and the o/h will be going up 5% cost of living this year plus after 2 years her wage (band 7 nhs) will go up another couple of grand.

We don't really take on more debt other than to pay off instantly, i.e. bought a wardrobe last month for £500 but paid it off the following month, had the cash to do so straight away but I always try to keep cash in the spare account just in case anything comes up but then generally the following month I look at where I can lump it on stuff to bring everything down. 

It's hard to say how well we're doing as we haven't had the benefit of the 3/4k of the wages going up as of yet as it's just happened so when I've worked out what income is left over it seemed much higher than it felt but I did work it out on current wages not what they were 2 months ago. 

The concern is that when the mortgage is due in January we're looking at going from paying £809 to £1250 ish which when adding the debt repayments to that it doesn't leave us any room to build up any money for a rainy day or help protect us should we have a child which we are trying for. The house has gone from £315k to £380k so we've got quite a fair bit of equity in now. Taking 20k would cost me an extra £100 on the mortgage so £1350 instead of £1750 (Mortgage + Debt). Now it's madness to take 20k debt and pay back 50k over 30 years but with overpayments, remortgaging and general investments I don't envisage it being as black and white as that but ya never know. 

We can tighten up come January, afford both the mortgage and the debt but I have a fear of anything going wrong or us having a child and maternity screwing us when we didn't have enough spare cash to prepare whereas doing the remortgage no matter how daft on paper it sounds does provide us the opportunity to finally put some money behind us.
There are fears of car problems, house problems, we haven't even bought a sofa since moving in (not that I'm going to go out and buy one as I'm tight af but I want to be at the stage in life where those purchases are saved up for because there is enough cash flow).

Oh and I have £7500 in investments that has been built up since 2019. 

Thoughts. Be gentle as I'm on the fence, part of me knows it's stupid but part of me feels the security of it in the short term. I'll regret it in the long term, although having said that, with her NHS pension, potential family inheritance and what investments I can make between now and retirement then the long term isn't as concerning to me as the next 5 years. 

Soundgirlrocks

I think you know what the general consensus will be - don't turn unsecured borrowing into secured, consolidation rarely works. Start with a SOA - links in the stickies, from the sounds of it you have decent jobs that are paying well so hopefully with a bit of shuffling you can get these debts onto low rates or 0% balance transfers and if you follow the advice get this cleared in a reasonable space of time 

Martico

My reasons against the idea?
It looks like you've turned 10K of unsecured debt into 20K of unsecured debt without worrying about it too much until now.
That suggests that you're not living within a budget.
A 5% cost-of-living raise isn't all that great with inflation in double digits 
Turning the unsecured into secured debt puts a risk on you losing your house, and you may also be tempted to start racking up the unsecured debt again (which you'll still have access to) once the process is done. 
I worry that an attitude of not worrying overly about overstretching and putting things on the tick might end up landing you in trouble if you don't address the root cause, which is an out-of-kilter budget. Sorry
What are the APRs you're paying on the unsecured debt at the moment?
If you can hammer away at the unsecured debt before January, you'll get yourself into a much better place.
Filling out (and posting, if you're willing to share) a Statement of Affairs (SOA - link here) might help to clarify things as they currently stand.

Sharp1986

Martico said:

My reasons against the idea?
It looks like you've turned 10K of unsecured debt into 20K of unsecured debt without worrying about it too much until now.
That suggests that you're not living within a budget.
A 5% cost-of-living raise isn't all that great with inflation in double digits 
Turning the unsecured into secured debt puts a risk on you losing your house, and you may also be tempted to start racking up the unsecured debt again (which you'll still have access to) once the process is done. 
I worry that an attitude of not worrying overly about overstretching and putting things on the tick might end up landing you in trouble if you don't address the root cause, which is an out-of-kilter budget. Sorry
What are the APRs you're paying on the unsecured debt at the moment?
If you can hammer away at the unsecured debt before January, you'll get yourself into a much better place.
Filling out (and posting, if you're willing to share) a Statement of Affairs (SOA - link here) might help to clarify things as they currently stand.

Just to clarify the only additional debt since 2019 is house related. I.e. we moved in with zero flooring to a new build so payed for flooring throughout. 

I would say we are in within budget but could be tighter. 

0%

I'll do the SOA tonight/tomorrow and post. 

Sharp1986

Soundgirlrocks said:

I think you know what the general consensus will be - don't turn unsecured borrowing into secured, consolidation rarely works. Start with a SOA - links in the stickies, from the sounds of it you have decent jobs that are paying well so hopefully with a bit of shuffling you can get these debts onto low rates or 0% balance transfers and if you follow the advice get this cleared in a reasonable space of time 

Jobs are 39k rising to 41k in 2 years and 43k rising to 45k in 18 months then to shy of 50k. 

Martico

Sharp1986 said:

Martico said:

My reasons against the idea?
It looks like you've turned 10K of unsecured debt into 20K of unsecured debt without worrying about it too much until now.
That suggests that you're not living within a budget.
A 5% cost-of-living raise isn't all that great with inflation in double digits 
Turning the unsecured into secured debt puts a risk on you losing your house, and you may also be tempted to start racking up the unsecured debt again (which you'll still have access to) once the process is done. 
I worry that an attitude of not worrying overly about overstretching and putting things on the tick might end up landing you in trouble if you don't address the root cause, which is an out-of-kilter budget. Sorry
What are the APRs you're paying on the unsecured debt at the moment?
If you can hammer away at the unsecured debt before January, you'll get yourself into a much better place.
Filling out (and posting, if you're willing to share) a Statement of Affairs (SOA - link here) might help to clarify things as they currently stand.

Just to clarify the only additional debt since 2019 is house related. I.e. we moved in with zero flooring to a new build so payed for flooring throughout. 

I would say we are in within budget but could be tighter. 

0%

I'll do the SOA tonight/tomorrow and post. 

Ah, that's good to know - thanks. Apologies for the misunderstanding there

Martico

If the unsecured debt is at 0% and you're generally paying down 500 per month, the total debt should be falling by 500 a month, right? Is that happening? 

Sharp1986

So this is our SOA (done really roughly as I'm shattered).

It makes me wonder where the surplus is but I keep having to remind myself that this is based on the wages as they will next come in this month, so between us there has been around a 3k difference which doesn't cover everything but plays a part. There is definitely some working out where money is going to be done. 

I mean it's hard, as that's a regular monthly outgoing and doesn't account for things like I mentioned above a new wardrobe for £500 (we've been relying on clothes rails since moving in last January so nobody can accuse me of not being tight, we make do with 1 car whilst a lot of people would have added a second at some stage, the car is being run into the ground as well, 17 years old). 

It also doesn't account for the £250 a month I've been pretty much consistently paying for over a month on physios and/or other appointments that have been needed (I'm awaiting spinal surgery). Or the £300 private consultation when the NHS was dragging their feet, the £1000 spent on the car breaking down and needing a new clutch and flywheel last week (probably which has prompted me to worry). 

We are by no means tight with our money when it comes to every day stuff but we are tight when it comes to big things and only buy things when we have to or get so fed up that it's time to do it.

The thing that people question is the allowance we give ourselves of £80 each. On here I see people question that but that's not a lot of money in the grand scheme of things. She uses it for nails, hair and other little bits and bats including birthday presents and what have you and I use mine on a bit of gambling and drinking, then if I do neither for a few weeks I'll go to the football or something and it's all shifted in a day  

[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......... 0

Number of cars owned.................... 1[b]

Monthly Income Details[/b]

Monthly income after tax................ 2278

Partners monthly income after tax....... 2300

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

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

Total monthly income.................... 4578[/b][b]

Monthly Expense Details[/b]

Mortgage................................ 809

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

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

Management charge (leasehold property).. 20

Council tax............................. 200

Electricity............................. 70

Gas..................................... 160

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

Water rates............................. 35

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

Mobile phone............................ 55

TV Licence.............................. 14

Satellite/Cable TV...................... 45

Internet Services....................... 30

Groceries etc. ......................... 450

Clothing................................ 40

Petrol/diesel........................... 200

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

Car Insurance........................... 50

Car maintenance (including MOT)......... 40

Car parking............................. 60

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

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

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

Medical (prescriptions, dentist etc).... 10.8

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

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

Contents insurance...................... 15

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

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

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

Haircuts................................ 30

Entertainment........................... 700

Holiday................................. 150

Emergency fund.......................... 50

Spotify................................. 5.99

Union................................... 14

ISA..................................... 12

Window Cleaner.......................... 16

Gym..................................... 72

Eyes.................................... 35[b]

Total monthly expenses.................. 3423.79[/b]

[b]

Assets[/b]

Cash.................................... 1000

House value (Gross)..................... 380000

Shares and bonds........................ 7500

Car(s).................................. 900

Other assets............................ 5000[b]

Total Assets............................ 394400[/b]

[b]

Secured & HP Debts[/b]

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

Mortgage...................... 260000...(809)......1.52[b]

Total secured & HP debts...... 260000....-.........-   [/b]

[b]Unsecured Debts[/b]

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

Debt...........................22000.....500.......0[b]

Total unsecured debts..........22000.....500.......-  [/b]

[b]

Monthly Budget Summary[/b]

Total monthly income.................... 4,578

Expenses (including HP & secured debts). 3,423.79

Available for debt repayments........... 1,154.21

Monthly UNsecured debt repayments....... 500[b]

Amount left after debt repayments....... 654.21[/b]

[b]Personal Balance Sheet Summary[/b]

Total assets (things you own)........... 394,400

Total HP & Secured debt................. -260,000

Total Unsecured debt.................... -22,000[b]

Net Assets.............................. 112,400[/b]

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

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

Martico

I wouldn't begrudge an allowance for fun things at all but as you say, some money's leaking somewhere else (edit - I see the point about the medical bills. If those are likely to continue, you'll need to have those budgeted for). On that SOA, you should be able to reduce your unsecured debt by about 8K by Jan, and by the sound of it, you're not on course for that at the moment. So a forensic look at statements and where your money's been going might be a good eye-opener

Sharp1986

I've got a target of 7200 by January 1st based on what I've just worked out. So if come January the mortgage is 1200 and what I have been paying on debt is 500 then I am going to start paying 1700 now as that will indicate how comfortable I will be come January and will force me to look at things. So from now till January going to set a standing order to my debt account of £900. Be interesting to see this as that just sounds ludicrous  

Floss

Can I ask what entertainment is costing you £700 a month?