advice please how to deal with huge credit card interest

Floss

gwynlas said:

Selling your BTL appears to be your best option and I appreciate that you say you have alredy tried this but failed. Please can you explain further why the flat failed to sell? Most properties will sell at a price that agent suggests otherwise they would go out of business very quickly. 

Are you setting a price that will clear the mortgage and all of your debts, which is over the agents price? Or does the flat need work to make it sellable?

It does seem like you cannot afford to hold onto this asset as you're unable to pay towards your debts. If you were to sell for market rate, would that clear the mortgage? Would there be any profit after estate agents & solicitors fees?

enthusiasticsaver

As you  are 53 now and most lenders will not lend past the age of 70 any mortgage you get in the future will need to be very small as you will not have very long to repay it over.  If you are planning on waiting until the defaults drop off that means you will be almost 60 and faced with having to work at least another 10 years and you will have just the 10 years to repay it in.  That will mean a substantial monthly repayment. 

From the look of it you get £1000 per month in rental income and out of that you presumably pay tax and the mortgage repayment on the £220k BTL mortgage plus maintenance and other landlord costs? So it is not £1000 towards the debt but a lot less than that? 

You have £60k of debt but only £40k is eligible for a DMP.  That does have the advantage of freezing the interest on those debts.  What is the plan on the business overdraft and bounce back loan? Does that have to  be repaid through the £20k income? Increasing your income would be the obvious solution but I am not sure how viable or easy that is. 

You have £130k of equity in the flat but as it is not selling at that price it would obviously be less than that.  I personally would opt to sell the flat at a realistic market price.  You will have enough to clear all the debt plus the start of a deposit and no monthly debt repayments to find. Then focus on increasing income and saving a deposit for the home you are going for. On your current income though you would only get a mortgage of around £80k and you are 53 now and most lenders wont lend past 70 (or retirement) so if you wait another 6 years if you go down the DMP route you would be almost 60.  It goes without saying that the shorter the mortgage term the higher the monthly repayments. 

Martico

@enthusiasticsaver makes some very good points, you need to approach this with a solid and thought-through plan. If you want more detailed advice here, an SOA - as previously suggested - would really help forumites to see the full situation and provide advice that might be of help. 

flipflopflo

Is it possible that the reason the flat hasn’t sold is because you have a sitting tenant? If I remember correctly that will drive the price down. If you do end up selling it then it would probably be better to serve the tenant with a section 21 and sell when the tenant has left which if they need help from the council could be anything up to 6 months or so by the time you go to court etc. 

Donpal

Hi
I am new to this - very interesting points of views.
I think as you are now 53 , retirement is round the corner so I will keep the flat - you will need some where to live in in your old age and if you take out a new mortgage now you may be paying it into your late 70s.  Had you been in your 20s or 30s I would say sell it and start again. Try as best as possible to avoid DMPs and IVAs and the likes.

At your age , I will invest £300 to £500 on an IFA who would produce a detailed plan for you and include retirement. 
Also £20 000 salary is quite low, you seem quite intelligent so try to revive your business or something and dont use covid or cost of living as an excuse - you can do it! Don't look for the easy way out with a DMP. 

EssexHebridean

Hi OP  - I will echo the repeated suggestion for an SOA to be completed and posted. It may well be that there are savings to be made in your budget that you simply haven’t spotted - you’d be surprised at the amount we have “found” for people to save/divert to debt in the past! 

On the flat, I think you need to do some very detailed sums to see where you really stand. If the current rental income is £1k above the mortgage payment, that is very different to the rental income being £1k and the the mortgage payment coming out of it, for example. 

Even if you did sell the flat, you would need to be cautious about this still not solving future debt issues. Often the best way of ensuring that someone will avoid getting into debt again in the future is to “go through the process” working hard to pay off all or at least most of the debt and making sacrifices over a period of time. This not only has the effect of adjusting you to a different lifestyle in many cases, it also means that in the future, when someone is considering “just buying that new shiny toy” using a credit card, they might remember back to the 5 years or whatever of having no new shiny toys, and will instead decide to save for 6 months and THEN buy the toy! It’s another reason why consolidating generally fails - the habits are changed as the consolidation just creates a magic “fix” - except nothing is fixed, just patched up. The problem - and the habits that caused it - are still there. 

For those posting on the subject of the flat not selling easily - remember it is tenanted, thus leaving the market for it purely to investors. In a lot of areas investors aren’t buying at the moment - partly due to interest rates where financing is required, and partly due to a feeling that property prices may fall over the next little while. This means the market has slowed down, and where they ARE making offers this might be a very long way below the asking price! 

sourcrates

I think you need to be realistic here, 40 grand of debt is not going to be resolved by budget re-jigging, and at your age, you are running out of time if you want a mortgage, best to default on everything non essential, let the debt collection process go through its motions.

Currently you are wasting your £10,000 rental income on credit card interest, that money would be much more beneficial to you saved up in order to make full and final settlement offers further down the line.

Once all your debts have defaulted, wait until the lenders get tired of you, and sell the accounts on to debt purchasing companies, allow them to go through there standard collection activity, then the settlement offers will be on the table, with all the rental income and any other income you can save, you can settle your outstanding accounts for as little as possible.

Your credit file will be negatively affected for 6 years, after which it will recover, your only other options are to sell the flat, which you don`t seem able to do, and any debt management plan will likely take as long or longer than my preferred option, you also run the risk of arrangement to pay markers, which stay on file 6 years after the debt is repaid, so potentially twice as long as a default would show for.

If your goal is to be debt free, and obtain a mortgage, then over a six to seven year time frame, defaulting and settling as cheaply as possible is your best choice.