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

Little_bit_taller

What are the APRs on these debts? Are these the monthly minimums you are paying? Is the overdraft for 1 of you or both of you? If 1 of you could the other switch to get 1 of the bank switch incentives?

[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]

EssexHebridean

welshsarah1 said:

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 These seem potentially on the high side - one to work on as the cooler weather arrives is ensuring that things not in use are turned off, that folk are wearing a jumper and joggers or cosy PJ trousers/leggings rather than putting the heating on, shower times - get a shower timer if you've not already got one and you know that the younger members of the household will stay in there for hours if they are left to their own devices!

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

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

Water rates............................. 51 This is metered I assume? If so then again, small measures to save a bit here and there will be worth implementing - so no taps left running while people clean teeth, the shower being turned on just before someone gets in, not left running for 3 or 4 minutes while someone does other things... 

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

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

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

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

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

Groceries etc. ......................... 650 This is definitely high - you could take £100 off this almost effort-free, and probably an additional £100 with a little more thought. Starter here is probably to start ditching branded items.

Clothing................................ 50 is this for all of you? Does it really cover everything - so any school uniform, shoes, sports kit, work clothes for you & your OH? 

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

Road tax................................ 25 Never pay this monthly - you pay a premium to do so! 

Car Insurance........................... 25 Allowing for your surplus, next time this comes due opt to pay it outright then budget monthly for the following year.

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

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

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

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

Other child related expenses............ 25 Does this actually cover the things you need it to? School trips, odd "special" days where a fee has to be paid to not wear uniform, end of term gifts for any teachers is applicable?

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 This is pretty high - if you are budgeting for a large extended family network here then time to start paring it back to token gifts for nieces/nephews etc. Chat to the parents of any other kids that are bought for - you may well find they would be immensely relieved if that sort of arrangement was proposed! If this is just you buying for your kids then stop and think what sort of a message that is sending to them that a perfectly standard birthday gift is always amounting to several hundred pounds. 

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

Entertainment........................... 33 You're kidding yourself here I suspect - allowing that your SOA shows a £1000+ surplus which you have referred to as usually being used on days out etc, I can't see that £33 a month is really going to cut it in anyone's eyes, can you? You are in debt - but it's not crippling you, and so a realistic entertainment budget here, but then sticking to it is far better than setting it artificially low and then ending up spending money that should be prioritised towards clearing debt. 

Holiday................................. 100 By contrast to the presents budget, this seems oddly low for a family of 5? It may be that your ideal holiday is a camping trip in the UK, and this covers everything perfectly well, but if not, ask yourself whether actually this is just the accommodation you are covering here and not the travel, spending money etc. 

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

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

[b]

Assets[/b]

Cash.................................... 1001 Allowing that this should have your car maintenance, presents etc money in it, as well as your Emergency Fund savings, it doesn't seem very high? Is the money you think you budget monthly for big spends really getting saved? 

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 This isn't going to be 0% I suspect - and others have already made a good point about why you should get rid. 

Next ..........................1250......50........0 Assuming this is in the region of a year's worth of spending, does this explain why your clothing  budget is seemingly too low for your household size? Right now your budget is more George at Asda than Next - so get this cleared, close the account, and start budgeting properly for clothing.[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 Is this the amount you actually have left each month before the days out. experiences etc are taken into account? [/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]

Comments on the SOA as it stands within the body of the quote.

There is literally no point in setting a really low entertainment budget and then just dipping in to your surplus to bolster it up. How about planning a family day out once a month, which you budge for properly and then only spend the amount that there is in that budget? You can also use things like vouchers to contribute to the cost of days out - although things like the Clubcard rewards scheme aren't as good value as they used to be, you can still get 2-for-1 value on a lot of things so that's worth considering. 

I'd ignore the costs of moving while you batter down that debt - get the OD gone first, then the other debts in order of interest rates. As they are paid off, close the Next account, and either close or just stop using the PayPal credit too - if you are going to use it then it should be for items that have been budgeted for, are needed and the money has already been saved for, simply to get the benefit of any buy now pay later type deals. 

If you tighten your belts a bit for a few months then realistically you  may even be able to get shot of the overdraft in a month or just over, see off Next the following month, then PayPal credit, as you pay off one item shift the amount you were paying monthly towards that debt onto the last one you intend to clear off - that way you will start to make an impact while still using your surplus to clear the bulk of it. 

I assume your gifted deposit is either being held by your parents, or is in a savings account paying decent interest? Once the debt is gone, continue to add to that while also setting money aside to cover moving costs - I'd budget around £1500 for legals (including land registry fees, search fees etc), £1000 for removals (you may come in under this) you may not need to pay a broker - and someone else would need to give you an idea of fees there anyway. £1000 will cover most mortgage application fees - pay this upfront otherwise it costs a lot more over the term of the mortgage!

When you do start moving towards buying a home, decide from the start whether you really want to do work, or whether it's worth it to you to pay a little more to have a pretty much "ready to go" house. a bit of painting is one thing, but the upheaval of more major work is considerable. Also don't be fooled into assuming that a mortgage term is 25 years - work out what you can afford to pay a month, while still ensuring that you allow a buffer for savings. Then work through the figures again on a "worst case scenario" basis of interest rates going quite a bit higher - that way you know you're not going to be struggling if the worst happened.  Choose a mortgage product that will let you overpay at least a bit - 10% per year without being hit with charges seems fairly standard these days although there are a few lenders who will allow unlimited OPs even on a fix. The once you're in, immediately start making at least a small overpayment - it might be as simply as rounding up to the next £10 level, or the next £100 level, of just adding an extra £50 a month to your monthly payment - but the sooner you start it, the bigger the impact. 

Good luck! Why not consider starting a diary now to chart your progress of going from in debt to debt free, to mortgage, and then finally through to the wonderful mortgage free status?