Debt consolidation - remortgage advice?

EssexHebridean

OK - you said in your OP that you have made poor decisions relating to consolidation before. A couple of questions then if I may - firstly, is some of the debt you are paying off now in fact as a result of previous consolidation? And secondly, when did you last attempt consolidation as an option?

Ignore your credit "scores" - they mean nothing to anyone other than you - lenders absolutely don't see them, but they DO see your file and history, which means that most lenders will have a pretty shrewd idea of how your affordability position looks. Have you used something like the MSE Credit Club to see if you might be eligible for any 0% interest credit cards for balance transfers? If not, then do - it's worth a go at applying if you get ANYTHING that shows a chance of success, even if you could get £1k of the debt onto interest free, that would help.

I gather from what you've said that your SOA is an aspirational one - sadly not a huge amount of help in actually getting a clear picture of how things stand now, although potentially useful to you for knowing what to aim for.  Taking what you have posted though...

stressedette said:

Ok so for those asking for SoA, see below.

<snip>

Statement of Affairs and Personal Balance Sheet

Household Information

Number of adults in household........... 2

Number of children in household......... 2

Number of cars owned.................... 0

Monthly Income Details

Monthly income after tax................ 2389

Partners monthly income after tax....... 0

Benefits................................ 85

Other income............................ 500

Total monthly income.................... 2974

Monthly Expense Details

Mortgage................................ 340

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

Rent.................................... 340 This is actually zero, yes?

Management charge (leasehold property).. 0

Council tax............................. 170 Is this split over 12 months, or 10? If it's over 12, by all means let it run for this year now but make absolutely sure that when the two "free" months pop up (February and march usually) that £170 per month is immediately transferred over to debt. Then from the start of the new financial year change to paying over 12 months.

Electricity............................. 85 You need to check that this is somewhere close to accurate - if it's based on costs from last winter then it may be too high - where are you at with credit on your energy account?

Gas..................................... 85

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

Water rates............................. 0

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

Mobile phone............................ 30 How many phones? If 3, then it's not too bad, anything less than that though and you are overpaying.

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

Satellite/Cable TV...................... 30 I'd personally be looking to lose that in favour of free options at the moment. Do you have the ability to stream from places like YouTube? That can give a wealth of additional viewing at only the cost of the original streaming device.

Internet Services....................... 30 Have you checked if you can do better here, unless still in contract? Even £5 saved in areas like this will help.

Groceries etc. ......................... 300 Is this a real and achievable figure? For the next month you need to keep a tally of everything you spend on grocery shopping. Also, see notes below on doing a couple of super-low months.

Clothing................................ 50 Depending on how old your children are and the age gap this may not be needed - or at least not beyond a basic "socks & pants" budget level. Younger kids don't really care what they wear in terms of where it comes from, whether it fits perfectly or if it's new - so charity shops, hand me downs from family members and even eBay clothing bundles can be really helpful here. Do you or OH have any clothes that perhaps you no longer wear which might sell on a platform like Vinted?

Petrol/diesel........................... 0

Road tax................................ 0

Car Insurance........................... 0

Car maintenance (including MOT)......... 0

Car parking............................. 0

Other travel............................ 150 Can this be cut at all? Even by getting off the train or bus a little earlier and walking?

Childcare/nursery....................... 250

Other child related expenses............ 100 Anything that can be reduced here? If this is child savings then stop them for now - the most important thing for them at this stage is that they are clothed, warm, fed and housed. Money in the bank is great but it's a really low priority right now. 

Medical (prescriptions, dentist etc).... 50 This is quite a chunk - presumably not prescription costs as you are in Scotland so maybe have a think about whether there is any room for adjustment here. 

Pet insurance/vet bills................. 50

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

Contents insurance...................... 10

Life assurance ......................... 30

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

Presents (birthday, christmas etc)...... 50 This is a big one at this time of year - how much do you actually have saved ready for Christmas as you're not showing any cash assets? 

Haircuts................................ 50 

Entertainment........................... 50

Holiday................................. 0

Emergency fund.......................... 50 Again - no cash assets - would I be right in thinking that you aren't currently saving this? 

Total monthly expenses.................. 2329

Assets

Cash.................................... 0

House value (Gross)..................... 140000

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

Car(s).................................. 0

Other assets............................ 0

Total Assets............................ 140000

Secured & HP Debts

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

Mortgage...................... 84251....(340)......2.5

Total secured & HP debts...... 84251.....-.........-   

Unsecured Debts

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

RBS Loan.......................1400......425.......20.1

Lendable Loan..................1000......270.......23.65

Santander Card.................1970......60........23.9

Next Storecard.................300.......20........29.9

Capital One Card...............170.......15........34.9

Aqua Card......................230.......35........23.9

RBS Card.......................4900......135.......18.9

Overdraft......................2000......0.........39.9

Very Storecard.................1000......160.......44.9

Barclaycard....................3450......170.......24.9

MBNA Card......................1590......60........23.9[b]

Total unsecured debts..........18010.....1350......-  

Monthly Budget Summary

Total monthly income.................... 2,974

Expenses (including HP & secured debts). 2,329

Available for debt repayments........... 645

Monthly UNsecured debt repayments....... 1,350

Amount short for making debt repayments. -705 (This is actually -£365 once the rent error is taken into account, yes?) 

Personal Balance Sheet Summary

Total assets (things you own)........... 140,000

Total HP & Secured debt................. -84,251

Total Unsecured debt.................... -18,010

Net Assets.............................. 37,739

Created using the SOA calculator at www.LemonFool.co.uk.

Reproduced on Moneysavingexpert with permission, using other browser

Grocery shopping - do a full inventory of fridge, freezer and cupboards - then use that inventory to plan out your meals for the next month. If you have things like mince, think about stretching that to make more portions on a batch cook by adding a few handfuls of red lentils and even some finely chopped mushrooms (if using the mushrooms, cook them off by themselves first as this improves both the flavour and the texture for this purpose). the grocery challenge thread and the old style board generally might be of assistance here. Also "reverse Meal Planning" - there is a thread for that too - which is basically a load of us who frequently plan based on what we have, rather than going out and buying a heap of ingredients to make specific meals. The aim is for the next couple of months to spend as little as possible on buying stuff, by using what you already have in. 

The thing that stands out for me on the SOA above all else is that I can't see where you could have been making savings of over £300 over the past few months in order to meet the payments. There just doesn't seem to be the slack.  I'm guessing that means that overdraft has been gradually creeping up, yes?  The OD is for me the first thing you need to tackle - as that is a proper "dangerous debt" - the bank can recall it at any time, so it definitely needs sorting as a priority. As for the rest - you're not using any of those credit accounts now at all - is that right? Not even Very?

What I WILL say is that there is definitely room to chip away at things once the two big loans are gone. Have a think about ways that you might be able to make extra income between you and your partner even if not additional "jobs" as such - thinks like online surveys for example. You won't make your fortunes, but between you it might be possible to make an extra £100 a month for example. Even if you were earning in vouchers rather than money that could offset christmas/presents spending and free up money that way. Those are relatively easy to do while sitting down watching TV in the evening, for example. Lots of information about boosting income on the forum! 

I'd suggest that right now your priorities need to be:
- screwing your budget down tighter than the proverbial - including checking on actual total grocery spend.
- making sure that you know what your Christmas budget is, and dealing right now with any expectations that simply can't be met. (This might include instigating a "secret santa" around adult family members with a set max spend that is affordable, or starting to look now to nab stuff for children in charity shops or on eBay)
- Trying to get your budget for the next few months as close to break-even as possible. 
- Notwithstanding the point I raised earlier about the OD, I personally thing that your more practical route on actually clearing debt would be to obviously get the final payments on the two loans done, then to diver all surplus to Very for a few months to get that cleared. Once you have done that, you will have freed up a good chunk of surplus to start really making an impact. At the same time though it's vital to make sure that the OD doesn't increase, and that is where the budget comes in.

The overwhelming view here has been not to consolidate, and I'm afraid I agree with that. Consolidation by way of remortgage or indeed relocation is still consolidation - it just comes with a level of risk if the former, and disruption of the latter. (And indeed costs - moving house is definitely NOT a cheap option!) With remortgaging, the risk is that you would still be stretched moderately thinly, and so if the wheels come off the bus at that stage you really would be risking the roof over your heads. Probably best not to do that. You said it yourself - you've made some poor decisions around consolidation before - don't make another one, eh?

Martico

Thanks for posting up the SOA, but it's left me slightly confused. If that's realistic (which you say it isn't) then you'd be adding to your debt every month, but you say you aren't. So I'm going to assume that you've been living to another budget, but it's good to see the debts laid out.

So within about 3-4 months you'll no longer have the two loans at all.
That's 3-4 more months of tough, tough living, and I know that it's a real slog, but that hurdle is very close now.
If you extend that slog by one further month, the money you've been so far throwing at the loand can wipe out Next, Capital One and Aqua in one go. One more month and Very is pretty much done for too.

And after that, perhaps March or April, you can start to live within your SOA while overpaying on the other debts, starting with the overdraft. 

I don't see 20 years of slog at all, I see six months of slog to take around £4,000 off the total, and then a reversion to a more "normal" budget that allows you some life while paying down the rest of the debt. It'll be tough, but shouldn't be a 20 year slog.

But that's with the caveat that I don't know what your realistic other spends are, as you say that you inputted unrealistic numbers into your SOA, so I may be wide of the mark.

fatbelly

stressedette said:

Just to confirm, from the Code of Practice of my professional body at work: 

"XXXX professionals must inform the XXXXX as soon as practicable if they:
i. are declared bankrupt;
ii. are the director of a company that has been wound up (other than for amalgamation or reconstruction purposes);
iii. make an accommodation with creditors (including a voluntary arrangement);
iv. fail to pay a judgement debt;
v. are convicted of an indictable offence or are sentenced to imprisonment in respect of any offence;
vi. are made the subject of an order of a court disqualifying XXX professionals from acting as a company director; or
vii. are disqualified from any other professional body.

XXXX professionals should not take as a partner or as a co-director, any person to whom any of i-vii above apply."

This makes a DMP a leap of career suicide for me - which seems unnecessarily crazy given the equity I have in my house.

The last resort option I'd consider before this to sort things out without further borrowing would be to sell my house, (approx £58k equity,) pay off the (£18k) unsecured debt, and use the remaining £40k equity to start again as a deposit for a new mortgage. (The issue with this is finding somewhere to live meantime with two pre-school kids and two cats!)

Hi

I think you're misinterpreting para iii

Para i refers to bankruptcy, which would appear on the insolvency register and your credit file.

I think Para iii refers to an IVA, which would appear on the insolvency register and your credit file.

Para iv refers to a ccj which would appear on the register of fines and judgements and your credit file..

A DMP is an informal arrangement and there is no specific mark made anywhere.

However...

With your income and housing costs as they are you may not need a DMP if you are prepared to be disciplined.

I have looked at your soa and once the loans finish in Jan, it balances, more or less

You are left with 8 cards and an overdraft.

There are lots of tactics for getting rid of an overdraft

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

On the cards you say most of them are in 'persistent debt'. I am therefore surprised at the interest rates. Please read

https://nationaldebtline.org/fact-sheet-library/persistent-debt-s/

These companies should be offering assistance to get you out of debt. You should contact them and insist that they help. A start would be to cancel interest and credit your account with the interest paid since they established you were in persistent debt.

Also see

https://debtcamel.co.uk/persistent-debt-halifax-credit-card/

which, towards the end, questions whether you should have been given the credit limits that you were

enthusiasticsaver

In theory if you have just about managed to cover things without defaulting then in January when the loans finish you should have an extra £695 in your budget to play with and start actually budgeting properly as I think like EH you are probably using your overdraft to fill in the gaps. When will the childcare reduce?

I understand you  have obviously been struggling with this debt for a long time and getting nowhere and unfortunately this is what debt consolidation does.  Kicks the can down the road until it cannot be kicked anymore.  This is where you are at now but you have the added complication of not being able to enter into even an informal debt solution like a DMP which is the ideal solution for you. 

I do not think anyone will advise you to get a secured loan to repay non essential debt as it puts your home at risk.

You can count on moving expenses of at least £5k if buying houses to the same value so that would eat into the equity and whilst I do not know the state of the private rental market in Scotland it is dire in some areas of the UK. Lots to think about but I accept your options are limited by your employment contract and the sheer level of the debt in comparison to your income. In theory £18k debt against a £38k salary does not sound huge but it is the high monthly repayment amounts on the loans which have crippled you financially. 

What does your partner say about the possibility of either remortgaging or selling?  Does he have savings or debts? 

Martico

You could also go for a cheeky current account switch from Nationwide (other banks are also offering switches, but NW pay out pretty quickly) to get what may be a vital £200 within 28 days. Take a look at the thread on the banking boards. It may be simplest to set up a "dummy" Starling or Monzo account, put two DDs onto that, then switch from that account. That way you keep your longstanding current account

RAS

I'd also ask what exactly your partner's SOA is like? Do they have slack?

Realistically, some of this debt may be a hang over from your less responsible spending days.

But some of this is recent accrual of debt because your income cannot cover the current debts. Your partner may not have taken out the soon to end loans but they have probably benefited from the things they were spent on?

You're desperate. How desperate is your partner to sort this out? Or are they out with friends, buying new toys?

backinbusiness

Your Code of Conduct states that you must inform them if you enter into a voluntary agreement, but what are the stated sanctions, if any?

Could it be you only have to inform them?  But can continue in your role?

Do you have a Union Rep or HR specialist in your field you could check this out with?

RAS

fatbelly said:

Hi

I think you're misinterpreting para iii

Para i refers to bankruptcy, which would appear on the insolvency register and your credit file.

I think Para iii refers to an IVA, which would appear on the insolvency register and your credit file.

Para iv refers to a ccj which would appear on the register of fines and judgements and your credit file..

A DMP is an informal arrangement and there is no specific mark made anywhere.

However...

fatbelly works in debt advice, so their assessment is sound.

First, find out who the professional standards/welfare advisor is in your professional body is, and ask them to clarify whether para iii refers to IVA's and Debt Management Plans. Doesn't mean you have to do a DMP but it might take some of the pressure off if you know it's an option.

Second, ask the creditors who have identified persistent debt to freeze interest and consider back-dating this to the date of their notification letter.

Re-assess when you have the answers and the loans end in January.

Meantime ask your partner to increase their contribution by £100.per month, as they sure as heck won't be paying so little if you have to sell and rent.

enthusiasticsaver

I would also question whether paragraph 111 refers to an IVA rather than a DMP which doesn't show on your credit record although obviously debt defaults would. I think a DMP is also slightly different in Scotland. 

stressedette

peb said:

If you go down the sale / purchase route then you simply pay off the debts on the day of completion, indeed the lender for the new mortgage will possibly require it.  I don't understand why you think you need to rent it be homeless in-between?

I was assuming that given affordability calculations would be based on current debts, I'd be unlikely to be offered another mortgage - even at the same value as my current one. So to apply for a new mortgage, I'd need to sell my house, use part of the equity to pay off the debt, and then apply for a new mortgage using the remaining money as a new 'deposit' with no debt to my name? With a few months in between. I'd probably also get a fairly decent rate of mortgage this way, as like I say I've always made payments on time etc - I just have a ridiculously high credit utilisation! 

I hadn't really considered that there might be a way to do this and pay off debts on the day of completion. Not sure of the logistics of that!