Huge debts and mortgage increase...

Martico · 23 January 2024 at 6:14PM

libertybelle70 said:

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

I assume that you have two monthly paycheques to hit your bank before the mortgage rate rises? Those would allow you to shave a not insubstantial 2.5k from your higher interest CCs, and reduce your minimum CC payments from April onwards. It's not an easy path, but with each overpayment you have a bit more headroom the following month

libertybelle70 · 23 January 2024 at 6:26PM

Thankyou @Martico
In case helpful, this is the new Monthly Budget Summary fro the SOA after making those savings, once the mortgage payment has gone up:

Monthly Budget Summary[/b]

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

Expenses (including HP & secured debts). 5,021.27

Available for debt repayments........... 1,304.33

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

Amount left after debt repayments....... 56.33[/b]

Andyjflet · 23 January 2024 at 6:37PM

First of all, sack your financial advisor.... advising to risk your home by converting all your unsecured debt into a charge over your house is like putting your head in the executioners block and waiting.

Unless you can move quickly then I would start cutting back dramatically on your outgoings, no meals, take aways, holidays etc.

If this is still not enough then you need to consider your options, this is a 5 year fix at least in my opinion at £10k a year.

Call stepchange and talk it through with them first.

RAS · 23 January 2024 at 7:14PM

libertybelle70 said:
Statement of Affairs and Personal Balance Sheet

Household Information[/b]
Number of adults in household........... 2
Number of children in household......... 2 what ages?
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?
Total income.................... 6325.6

Monthly Expense Details[/b]
Mortgage................................ 325
Secured/HP loan repayments.............. 425 what is this?

Rent.................................... 0
Management charge (leasehold property).. 0
Council tax............................. 186
Electricity............................. 235 this probably isn't very high for the house, but you all need to get used to dressing for the weather. Cut what you can, even £80 would help.
Gas..................................... 0
Oil..................................... 0
Water rates............................. 66.7
Telephone (land line)................... 0
Mobile phone............................ 174 - this is huge. Preumably 4 phone? They all need to be reduced to SIM only as soon as out of contrct
TV Licence.............................. 13.25
Satellite/Cable TV...................... 58 - that needs print and either you have the TV licence and a basic package here or ditch the satellite/TV
Internet Services....................... 0 where is this? In your phone contracts or part of the TV package?
Groceries etc. ......................... 709 - ouch Agree, aim for £400 pcm
Clothing................................ 0 Sorry but you have two children and well paid jobs. Failing to budget for inevitable expense is one of the reasons you are in the doodoo.
Petrol/diesel........................... 291.64 Can you review journeys, practice defensive driving, reclaim any costs?
Road tax................................ 15
Car Insurance........................... 98
Car maintenance (including MOT)......... 66
Car parking............................. 15
Other travel............................ 512 what is this?
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 - hopefully this covers contents?
Contents insurance...................... 0
Life assurance ......................... 0 If now't else get basic reducing term insurance to cover the mortgage and secured debt. Beyond that, what death in service and pension benefits do you have as part your pensions?
Other insurance......................... 0
Presents (birthday, christmas etc)...... 0
Haircuts................................ 46
Entertainment........................... 302 - sorry, you've already got other child related expenses. You need to cut this back massively. You can go out for meals or clear the frightening mounts of debt you have. Perhaps £60 ish per month
Holiday................................. 0
Emergency fund.......................... 0[b] You own a home. It needs maintenance, you will need to replace the car sometime. You need £100 pcm at least
Total monthly expenses.................. 3941.91[/b]
[b]

Assets[/b]
Cash.................................... 0
House value (Gross)..................... 750000
Shares and bonds........................ 0
Car(s).................................. 2000 So the secure debt is not a PCP car?
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] what is this?
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'm going to be brutal because you've obviously both been living way beyond your means for a long time, and your children are probably used to have why they want. That's over.

Other have already alluded to the fact that your home is a risk given your current strategy. You have no back-up if either of you lose work anytime over the next few years.

So basically do you want to knuckle down, pare your expenditure to the bone, or lose your home, that's the basic choice?

I suspect given the high costs on some items and the absence of anything against other categories that life has just gone on the cards for years, or decades. Which was once OK, but is no longer.

I also suspect that this SOA covers your estimate of monthly spends, not any detailed analysis of your actual spends over the last 6 months to a year?

This weekend's home work is to get both your credit reports and statements for all your accounts over the last 6 months, preferably longer and go through them together and allocate all spends to a category. You need to identify the old subscriptions, latte habits, little treats for the kids added to the supermarket trolley, takeaways and the essentials like car and house maintenance for which you've not been budgeting.

You and hubbie both need to keep spending diaries for few weeks as well. Writing it all down may help you understand where you re leaking money.

njkmr · 23 January 2024 at 7:36PM

I would be looking at selling the house to be honest because its clear at the moment it is too much of a burden.
I would find somewhere cheaper to live for the next few years and get shut of the debt first.
I know it sounds drastic but you are living beyond your means at the moment and need to remove the debt , then build back up again.
I dont want to sound harsh but its property and there are plenty of other cheaper properties that will do for a couple of years until you get back on your feet.

MFWannabe · 23 January 2024 at 8:31PM

I would agree with njkmr, sell the house, pay off the debts and find somewhere cheaper to live.

However you must learn to live within your means! otherwise you will have learnt nothing and will rack up debt again and be even worse off than you are now.

Some of your outgoings are to be blunt ridiculous. Mobile phones, groceries etc and then you’re spending on credit cards as well. You need to massively change your mindset
Do not under any circumstances take out a second charge on your property otherwise you will end up losing your home

enthusiasticsaver · 23 January 2024 at 10:42PM

libertybelle70 said:

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 If this is due to increase you need the new amount in here £1949
Secured/HP loan repayments.............. 425 DO NOT UNDER ANY CIRCUMSTANCES INCREASE THIS TO REPAY UNSECURED DEBT.
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 way too high
TV Licence.............................. 13.25
Satellite/Cable TV...................... 58 When you are out of contract can you cancel this or does it include internet?
Internet Services....................... 0
Groceries etc. ......................... 709 Again far too high
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 What is this for if your children are teenagers presumably not childcare?
Medical (prescriptions, dentist etc).... 25
Pet insurance/vet bills................. 80.2 Again are you using cost comparison sites?
Buildings insurance..................... 44.12 Are you using cost comparison sites?
Contents insurance...................... 0
Life assurance ......................... 0
Other insurance......................... 0
Presents (birthday, christmas etc)...... 0
Haircuts................................ 46
Entertainment........................... 302 Can this be reduced?
Holiday................................. 0
Emergency fund.......................... 0[b]
Total monthly expenses.................. 3941.91[/b] So with the new mortgage payment this is £5565.91
[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]

First your financial advisor should be strung up for suggesting you take out an increased secured loan on your house to pay off unsecured debt. You are at grave risk of losing your house even should that be agreed which I very much doubt it would.

My first suggestion is that you explore extending the term of the mortgage to get the monthly repayment down. At that level of mortgage though you are going to struggle so I would suggest that you overextended with the house let alone the unsecured debt you also took out to renovate.

I think you should look to cut down as much as possible on outgoings and default on the unsecured debt and do a DMP. Defaults stay on your file for 6 years but more borrowing is the last thing you should be doing anyway. As you are paying 22% interest on some of those cards presumably you cannot move them to 0% so defaulting will stop the interest accruing any further. The monthly payment will be set at an affordable amount allowing for your increased mortgage payment.

enthusiasticsaver · 23 January 2024 at 10:58PM

Ideally you would have explored doing something like a DMP 6 months ago when you were first struggling but it seems you prioritised the unsecured debt repayments over your mortgage by converting it to interest only. That has extended the term and consequently eaten into the equity. What interest rate are you paying on the mortgage?

You say you are looking to move to the North at some point in the future. Is that likely to be within the next six years? That is how long defaults take to drop off your file but you could use those 6 years to get the debt repaid, catch up on the mortgage which has not been reducing for the last 6 months and start to live within your budget.

enthusiasticsaver · 23 January 2024 at 11:05PM

libertybelle70 said:

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

I don't think you can negotiate a reduction in vehicle tax but if you are adamant you do not want to default and do a DMP then making those savings will certainly help providing you stop using credit if you cannot live within the budget but you could also explore extending the term of the mortgage. You have already done that by moving to interest only for 6 months but extending the term if you are able to may mean the very high new mortgage payment may be slightly reduced enough to give you a higher surplus than £56. Use these next few months to really hammer the interest charging cards until the new mortgage payment comes in.

badmemory · 23 January 2024 at 11:18PM

I suspect you have been talking to an FA & not an IFA. An FA who is maybe associated with the holder of some of your debts. Oh dear. Acting in his own interests & not yours.

Huge debts and mortgage increase...

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