Huge debts and mortgage increase...

libertybelle70 · 23 January at 3:40PM

Hi - looking for some urgent advice. My husband and I have accrued an enormous amount of credit card debt - some is historic, some has occurred more recently after my husband lost work and we had a huge bill for unavoidable building work. We dropped our mortgage to interest only for six months which was the only way we could afford to make our repayments, but now we are due to start paying the full amount again. This will increase our mortgage payment to £1949, from £325 (the amount I’ve entered on the SOA) and these increased payments are due to start again at the end of March. On the SOA that I have put 0 for spending on holidays, clothes and Christmas - we usually airbnb our house to cover a summer holiday; we don’t spend a lot on Christmas and birthdays but what we do, we have been putting on a credit card.

We took advice and our financial advisor recommended taking out a new second charge for £117000 to cover the existing second charge and consolidate our debt. This new monthly payment would be £1027 a month, and would save us £620 a month. This would mean we could cover our expenses, but leaves just £200 a month for emergencies, clothes, holidays and birthdays. I am desperate for a new start and determined not to use credit in the future.

We are prepared to move house, but obviously this will be unpredictable time-wise and mortgage repayments will kick in first. Both my husband and I are in our early 50s; we have two teenage children.

I am reaching out to see if you have any advice before we go ahead and take out the new second charge. Is this the right thing to do? We want to relocate to the North in the future and I am nervous about eating into our equity, or taking out a DMP.

here is our SOA. You'll see Amount left after debt repayments....... 1,135.69; but our mortgage repayment as discussed above is soon to increase to 1949 rather than the 325 it is at the moment. Would be hugely grateful for any advice, or if there is any alternative to taking out the second charge.

Thankyou so much.

Statement of Affairs and Personal Balance Sheet

Household Information[/b]

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

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

Number of cars owned.................... 1

Monthly Income Details[/b]

Monthly income after tax................ 3102

Partners monthly income after tax....... 2064

Benefits................................ 159.6

Other income............................ 1000

Total monthly income.................... 6325.6

Monthly Expense Details[/b]

Mortgage................................ 325

Secured/HP loan repayments.............. 425

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

Management charge (leasehold property).. 0

Council tax............................. 186

Electricity............................. 235

Gas..................................... 0

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

Water rates............................. 66.7

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

Mobile phone............................ 174

TV Licence.............................. 13.25

Satellite/Cable TV...................... 58

Internet Services....................... 0

Groceries etc. ......................... 709

Clothing................................ 0

Petrol/diesel........................... 291.64

Road tax................................ 15

Car Insurance........................... 98

Car maintenance (including MOT)......... 66

Car parking............................. 15

Other travel............................ 512

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

Other child related expenses............ 255

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

Pet insurance/vet bills................. 80.2

Buildings insurance..................... 44.12

Contents insurance...................... 0

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

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

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

Haircuts................................ 46

Entertainment........................... 302

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

Emergency fund.......................... 0[b]

Total monthly expenses.................. 3941.91[/b]

[b]

Assets[/b]

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

House value (Gross)..................... 750000

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

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

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

Total Assets............................ 752000[/b]

[b]

Secured & HP Debts[/b]

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

Mortgage...................... 342000...(325)......0

Secured Debt.................. 64000....(425)......0[b]

Total secured & HP debts...... 406000....-.........- [/b]

[b]Unsecured Debts[/b]

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

hsbc credit card...............4060......99........0

tesco cc.......................1000......49........NaN

virgin cc......................10667.....282.......22

mbna cc........................11690.....346.......22

halifax cc.....................5485......98........22

lloyds cc......................2800......49........0

lloyds loan....................16624.....325.......9[b]

Total unsecured debts..........52326.....1248......- [/b]

[b]

Monthly Budget Summary[/b]

Total monthly income.................... 6,325.6

Expenses (including HP & secured debts). 3,941.91

Available for debt repayments........... 2,383.69

Monthly UNsecured debt repayments....... 1,248[b]

Amount left after debt repayments....... 1,135.69[/b]

[b]Personal Balance Sheet Summary[/b]

Total assets (things you own)........... 752,000

Total HP & Secured debt................. -406,000

Total Unsecured debt.................... -52,326[b]

Net Assets.............................. 293,674[/b]

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

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

Green_hopeful · 23 January at 3:48PM

Sorry I haven’t read all the details but can you let a room or two to a lodger. It’s a quick and relatively easy way to make money. Most banks and insurance companies don’t mind although check. You can earn up to £7500 tax free. I realise that is not enough but it might help a bit. Spare room will show you what other people are charging.

I think you could possibly reduce your water bill, mobile phone and groceries. As they seem quite high.

Grumpelstiltskin · 23 January at 4:16PM

Two things that jump out are groceries and entertainment. Can you explain why those are high?

I presume phones are for 4 phones? Any out of contract that can go Sim only?

Martico · 23 January at 4:19PM

I'm surprised (and worried) that your financial adviser is suggesting that you convert unsecured debt into secured debt. If you default on unsecured debt, your credit file is trashed for a few years. On secured debt, you risk losing your house.

Floss · 23 January at 4:31PM

Could you advise what the £1k "other income" is? And clarify the £64k secured loan & "other travel" of £512?

Martico · 23 January at 4:35PM

You've got good incomes and a lot of areas in your budget that can be cut - quite substantially in some cases.
As things stand, you can overpay some debts by £1,300 for another month or so. And then you'll be around £500 per month short. That should mean that you can take a big chunk out of the expensive Halifax CC before the new mortgage payment comes along, and with serious budgeting (I'm looking at you, groceries and mobile phones) chip away at the unsecured debts thereafter. It'll take time, but will keep your house secure.
If you're not able to budget enough to cover at least the minimums, then another solution will be needed - one that doesn't involve turning unsecured (and non priority) debt into secured debt. Good luck

CliveOfIndia · 23 January at 5:11PM

libertybelle70 said:

Statement of Affairs and Personal Balance Sheet

Household Information[/b]
Number of adults in household........... 2
Number of children in household......... 2
Number of cars owned.................... 1

Monthly Income Details[/b]
Monthly income after tax................ 3102
Partners monthly income after tax....... 2064
Benefits................................ 159.6
Other income............................ 1000 What is this, and is it a guaranteed income every month?
Total monthly income.................... 6325.6

Monthly Expense Details[/b]
Mortgage................................ 325
Secured/HP loan repayments.............. 425
Rent.................................... 0
Management charge (leasehold property).. 0
Council tax............................. 186
Electricity............................. 235
Gas..................................... 0
Oil..................................... 0
Water rates............................. 66.7
Telephone (land line)................... 0
Mobile phone............................ 174 This is very high - once you're out of contract, a SIM-only deal can be had for ~ £10 per month
TV Licence.............................. 13.25
Satellite/Cable TV...................... 58
Internet Services....................... 0 Is this correct - is it included in you Satellite/Cable package ?
Groceries etc. ......................... 709 This could be cut by a fair amount by batch cooking and shopping at Aldi/Lidl.
Clothing................................ 0
Petrol/diesel........................... 291.64 This seems a lot - is there any room for reducing non-essential car travel?
Road tax................................ 15
Car Insurance........................... 98 This seems very high (especially given the value of your car). Have you shopped around for a better deal?
Car maintenance (including MOT)......... 66
Car parking............................. 15
Other travel............................ 512 What's this, can it be reduced? It seems a lot every month.
Childcare/nursery....................... 0
Other child related expenses............ 255 What is this?
Medical (prescriptions, dentist etc).... 25
Pet insurance/vet bills................. 80.2
Buildings insurance..................... 44.12
Contents insurance...................... 0 You need this - or is included above as a combined building/contents policy?
Life assurance ......................... 0
Other insurance......................... 0
Presents (birthday, christmas etc)...... 0
Haircuts................................ 46 This could probably be reduced
Entertainment........................... 302 This seems very high, you should be able to reduce this
Holiday................................. 0
Emergency fund.......................... 0[b]
Total monthly expenses.................. 3941.91[/b]
[b]

Assets[/b]
Cash.................................... 0
House value (Gross)..................... 750000
Shares and bonds........................ 0
Car(s).................................. 2000
Other assets............................ 0[b]
Total Assets............................ 752000[/b]
[b]

Secured & HP Debts[/b]
Description....................Debt......Monthly...APR
Mortgage...................... 342000...(325)......0
Secured Debt.................. 64000....(425)......0[b]
Total secured & HP debts...... 406000....-.........- [/b]

[b]Unsecured Debts[/b]
Description....................Debt......Monthly...APR
hsbc credit card...............4060......99........0
tesco cc.......................1000......49........NaN
virgin cc......................10667.....282.......22
mbna cc........................11690.....346.......22
halifax cc.....................5485......98........22
lloyds cc......................2800......49........0
lloyds loan....................16624.....325.......9[b]
Total unsecured debts..........52326.....1248......- [/b]

[b]
Monthly Budget Summary[/b]
Total monthly income.................... 6,325.6
Expenses (including HP & secured debts). 3,941.91
Available for debt repayments........... 2,383.69
Monthly UNsecured debt repayments....... 1,248[b]
Amount left after debt repayments....... 1,135.69[/b]

[b]Personal Balance Sheet Summary[/b]
Total assets (things you own)........... 752,000
Total HP & Secured debt................. -406,000
Total Unsecured debt.................... -52,326[b]
Net Assets.............................. 293,674[/b]

[i]Created using the SOA calculator at www.LemonFool.co.uk.
Reproduced on Moneysavingexpert with permission, using other browser.[/i][/font]

I've added some comments in bold above. As always, no judgement intended, just impartial observations to provide food for thought.

libertybelle70 · 23 January at 5:56PM

Hi everyone - thankyou so much for your input. So to answer a few questions:
*Travel is our travel to London where we both work twice a week; petrol is high as our son is in a football academy and needs to be driven to matches.
*Yes, for four phones but two are out of contract so there is a saving to be made there.
*The additional 1000 is regular freelance work that my husband takes on and it is the same every month
*the £64000 secured loan was as a result of debt and building work
*internet is included in the tv package
*contents insurance is included in the buildings insurance

Sadly we can't take a lodger as our son is autistic and the disruption would be too much

It's interesting that it doesn't seem like a good idea to take out the second charge - my worry is that without it we won't be able to meet our expenses, so as @Martico says we will need another solution. I'm just not sure if there is one?
Thanks everyone will report back

Martico · 23 January at 6:02PM

I'd also hold back until a couple of our more expert and experienced members have their say (Sourcrates and fatbelly are known to be the best versed and most respected, though there are others)

EssexHebridean · 23 January at 6:03PM

Cutting straight to the chase because this is the important thing - I will come back on the SOA subsequently.

You currently have a lot of unsecured debt. if you stop paying that unsecured debt right now, you will get some angry letters, some telephone calls. Maybe a few texts. Threats will be made (but they will largely be all hot air). If you consolidate the debts onto your mortgage then those debts stop being "unsecured" and become "secured" - secured on the roof over your head. Now imagine what happens if you find yourself unable to pay THAT amount at some stage in the future. Letters and phone calls - yes, for sure, but ultimately the worst case scenario is that you can lose your home.

Don't convert unsecured debt to secured - it's an incredibly dangerous strategy.
In fact, ideally, don't consolidate at all - as it rarely works.

libertybelle70 · 23 January at 6:07PM

The SOA tells me that if I reduce food to £400 pm, entertainment to £150, phones to £120 and negotiate a reduction in vehicle tax (these are the places I feel we can make savings) then we have just £56 left after meeting our unsecured and secured debt repayments, when the mortgage goes back up. if anyone has any advice on next steps I'd be really grateful to hear it, thanks

Huge debts and mortgage increase...

Comments

Categories

Get our FREE Weekly email full of deals & guides - and it’s spam-free