SOA- Working through the debt to get ourselves a mortgage.

welshsarah1

Hi everyone, 

Please can someone look over our SOA. The plan is to clear the debt quickly and be mortgage ready. My partners parents have kindly gifted us 17.5k for a deposit. House prices are cheap around where we live and I can get a lovely home for 140k. 

Can I have some advice on how this budget looks? We do have a lot of spare income which we normally use on the children with days out and experiences etc. I want to get serious now and attack our debts and get out of renting. 

Family of 5 which include two teens and a 10 year old. 

Thankyou. 

[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......... 3

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

Monthly Income Details[/b]

Monthly income after tax................ 1754

Partners monthly income after tax....... 1670

Benefits................................ 376

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

Total monthly income.................... 3800[/b][b]

Monthly Expense Details[/b]

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

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

Rent.................................... 505

Management charge (leasehold property).. 0

Council tax............................. 151

Electricity............................. 170

Gas..................................... 150

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

Water rates............................. 51

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

Mobile phone............................ 85

TV Licence.............................. 13

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

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

Groceries etc. ......................... 650

Clothing................................ 50

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

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

Car Insurance........................... 25

Car maintenance (including MOT)......... 100

Car parking............................. 24

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

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

Other child related expenses............ 25

Medical (prescriptions, dentist etc).... 25

Pet insurance/vet bills................. 25

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

Contents insurance...................... 11

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

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

Presents (birthday, christmas etc)...... 150

Haircuts................................ 25

Entertainment........................... 33

Holiday................................. 100

Emergency fund.......................... 50[b]

Total monthly expenses.................. 2553[/b]

[b]

Assets[/b]

Cash.................................... 1001

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

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

Car(s).................................. 2000

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

Total Assets............................ 3001[/b]

[b]

No Secured nor Hire Purchase Debts[/b]

[b]Unsecured Debts[/b]

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

Tesco Credit Card..............2700......60........0

Halifax Credit Card............845.......22........0

Paypal ........................1400......51........0

Overdraft......................1500......20........0

Next ..........................1250......50........0[b]

Total unsecured debts..........7695......203.......-  [/b]

[b]

Monthly Budget Summary[/b]

Total monthly income.................... 3,800

Expenses (including HP & secured debts). 2,553

Available for debt repayments........... 1,247

Monthly UNsecured debt repayments....... 203[b]

Amount left after debt repayments....... 1,044[/b]

[b]Personal Balance Sheet Summary[/b]

Total assets (things you own)........... 3,001

Total HP & Secured debt................. -0

Total Unsecured debt.................... -7,695[b]

Net Assets.............................. -4,694[/b]

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

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

welshsarah1

Forget to add that at the moment, I'm having driving lessons. Once I'm driving:- I know there will be extra expense but I can also boast my income with some extra work.

At the moment I'm paying £48 a week for a one hour and half lesson. I've had 6 lessons so far so this is going to stay at this cost for awhile. 

lozenlady

Your budget says you have £1044 "spare" every month. 

Firstly I would look at where this is going and include within the budget if its going toward things like driving lessons etc. It's a significant amount to not have accounted for.

fatbelly

If you can live to that budget, you should do so, and overpay your debts £1000 per month so that they clear before interest kicks in.

Then save the 1k per month towards your deposit. 

Also check all your credit files and contest any negative markers. With a bit of luck you can look at getting a mortgage early next year

CliveOfIndia

It depends to a large extent on how many cutbacks you're willing to make in order to pay off the debts quickly.  Overall your SOA doesn't look too outrageous, but a few observations from my point of view:

Car maintenance seems a little high.  Depends on the age and type of car, of course, but for any repairs you're unable to do yourself then I hope you're using a decent independent mechanic rather than paying main-dealer prices?

The amount you've set aside for presents could probably be cut a little - although I know it's easier said than done with 3 kids (and potentially nephews and nieces and whatnot) !

You need to look at the APRs on your unsecured debts.  Any spare cash you do have needs to target the highest-rate debt first.  One caveat - I'd be tempted to clear the overdraft first of all.  It may well be the highest-rate debt anyway (they're usually quite expensive), but regular use of an overdraft tends to be viewed pretty negatively by most lenders.  Also, a bank can, in theory, withdraw the overdraft facility at any point and demand full and immediate repayment.  How often this happens in reality I'm not sure, but the possibility is there.

A final point to bear in mind - when you get your own place, you'll need both buildings and contents insurance (whether a combined policy or separate policies).  Life insurance is also very well worth while considering, particularly as you have dependents.  It's not a nice thing to think about, but you should at least look into it.

RAS

This looks aspirational. For a start, check the APRs on your OD, PayPal and cards. You should know them.

Get out the last 6 months bank statements and go through them with a fine toothcomb, allocating everything to a line in the SOA. I'd be astounded if you managed to build up debt whilst thinking you have £1k a month surplus income. How come. Then look at what you spent last Christmas.

And also suspect that with three teens your clothing, haircut and other child related expenses aren't so low.

You could check out why your fuel costs are so high and shave a little off the grocery budget? Might as well start living to the budget you'll need when you buy a house.

welshsarah1

Thank you for all your comments! I really do appreciate everyones input. 

Firstly, we have never had this amount of income before, prior to this I was a student. I am only starting out on my career path so only upwards I can go. I've only been working full time since March, debt as been built up over the years of raising the children and covid we took a hit too. 

I am in a much better place now and appreciate all your advice. I really want to own my home but firstly I want to be debt free. 

Car costs are quite high. The car we saved and bought out right instead of having one on finance. It's quite old, over 10 years but it's a reliable car atm and we save the £100 a month and this covers a service, MOT and anything scary. 

I am going to work on the overdraft first then. 

How much extra after debts should I save for new house, moving fees, brooker, solicitor etc?

I don't want to clear the debt and end up back in debt when we move home. 

Thanks.

RAS

Are either of you still under 40 years old? If so, get a tenner into a Lifetime Individual Savings Account (LISA), urgently. You get a 25%.bonus on savings upto £4k pa, but you have to open the account before your 40th birthday.

I'd aim to clear all this debt within the next 12 months and then save for the next year.

enthusiasticsaver

I would second opening a Lisa account for buying a home if you are eligible.


The soa shows areas which could be trimmed like groceries and presents

you haven’t put interest rates but most overdrafts are 40% and next is usually expensive. I would focus on clearing those debts and saving as buying a house is expensive.

fatbelly

Your attitude on the car xounds good to me. Best to run an older car that you own and won't depreciate, and have the cash to pay for maintenance as it's needed. 

As for the overdraft, we have a guide to getting rid of it here

https://www.moneysavingexpert.com/banking/cut-overdraft-costs/

WYSPECIAL

Could could you shave anything off utility costs by being more careful, turning stuff off and turning heating down? 
Good discipline to get the kids into and £320 per month seems a lot.