Huge debts and mortgage increase...

EssexHebridean

Is there an option to bring the planned relocation forwards and kill two birds with one stone, if downsizing is a realistic option for you? That will also minimise the disruption to the children's lives as well. There are a lot of costs involved in a move - many already mentioned - and spending those twice inside a handful of years may not be the best course of action long term.  You also need to look at what the savings are on a smaller house - is there a big saving to be made on the purchase price over what yours would sell for, allowing that with 4 of you, you do need a certain amount of space? Depends in part what the downsize would be - 6 bed > 3 bed is  going to be very different to 4 bed > 3 bed, for example. What would the savings be on running costs over what you have allowing that you could end up buying somewhere not as well insulated, for example?

You can certainly bring groceries to £400 - I would think with relatively little problem. with a bit more work, forward planning and changing the way you shop, cook and to an extent eat you could get it below that I suspect. 

Definitely don't need to be looking at £120 as a "sensible" level for phones either - you need to stop thinking in terms of phones being replaced at the end of contracts - everyone needs to be aware that there phones need to do at least twice the length of the contract (assuming 18 or 24 month contract terms), so time to start taking proper care of them! As phones drop off contracts, switch to SIM only - the most you should be paying is £10 a month, and less if not much data is needed. 

Allowing that right now you do have a fair bit of surplus, something you could look at doing is putting money aside now to cover annual expenses. Both car tax and insurance cost more paid monthly - we pay insurance (both our cars are zero tax) annually, then budget monthly for 1/12th of the amount of that year's policy +10%. the money is then there when needed, and we save ourselves having to pay the costs of buying it on credit. 

Martico touches on the credit file question. If you get "arrangement to pay" markers - for example because you've offered a creditor token payments - then those stay on your file for 6 years after the debt is repaid. As stated though, defaults (when you just stop paying entirely) will disappear 6 years after the date of the default. This is the reason why when a DMP is the best option for people we always suggest that they should stop paying to allow defaults -  although this also has the advantage of stopping the interest accruing. 

libertybelle70

hi yes we can port, our term runs out 2027 and we are lucky that we have a good rate of 1.14%. Have spoken to bank and they will extend the term until 75, making monthly repayments 1531 rather than 2000. thankyou all for that suggestion! 

libertybelle70

Hello @EssexHebridean thankyou for this... we are tied to secondary school exams for now. Our daughter is in year 10 at the moment and taking her GCSEs next year, so we need to avoid moving before then. There is a window to move in 2026 after her exams, before she starts A levels and just before our son starts in year 10. Otherwise we would look to relocate in 2028 when he has completed his GCSEs and our daughter has finished her A levels. 

I'm going to look at savings on a smaller house as you suggest and see what difference this could make; we will be porting our mortgage as we are tied in til 2027. But the aim of the move would be to pay back credit card debt and the current secured loan of 64,000. We would be going from a four bed to a three, in a different area (but still in the same town). 

I agree re groceries and mobile phones, and that is a really good point about monthly payments. Can I ask - do the DMP/default markers only disappear if the debt is paid off within 6 years? 

Thanks again.

Grumpelstiltskin

Defaults drop off after 6 years automatically, it doesn't make any difference if debts have been paid or not.

You do need to go through everything on your SOA with a fine toothcomb and try and drastically reduce your spending now. Involve the children now they are old enough to understand money doesn't grow on trees and they may have to cut back.

libertybelle70

Thankyou @Grumpelstiltskin So just to clarify, if we defaulted from March, then our credit rating would be clear from DMP markers from April 2030, meaning that we could apply for a mortgage at that point? Our mortgage rate (5 year fixed) comes in an end in 2027 so I can see that might be a problem? 

Grumpelstiltskin

 When your fixed rate ends you need to stay with the same mortgage provider as there will be no credit check just to change products. Just don't try to go anywhere else until the defaults have dropped off.

enthusiasticsaver

libertybelle70 said:

hi yes we can port, our term runs out 2027 and we are lucky that we have a good rate of 1.14%. Have spoken to bank and they will extend the term until 75, making monthly repayments 1531 rather than 2000. thankyou all for that suggestion! 

That is good that they have agreed to extend the term.  You can always alter it back again when the debt is under control or when you move. It gives you a bit of breathing space.  In the meantime just focus on reducing outgoings and sort out the debt going forward. 

If you do a DMP then you default first and those defaults fall off after 6 years so not 6 years after it has been repaid. 

If you stick with your current mortgage provider they normally do not check your credit file although if moving to a new property I am not sure. 

enthusiasticsaver

libertybelle70 said:

Thankyou @Grumpelstiltskin So just to clarify, if we defaulted from March, then our credit rating would be clear from DMP markers from April 2030, meaning that we could apply for a mortgage at that point? Our mortgage rate (5 year fixed) comes in an end in 2027 so I can see that might be a problem? 

You could stick with your current mortgage provider in 2027 to get a new deal as they would not credit check. 

Grumpelstiltskin

LB Have you looked on here for ideas for reducing groceries spend?

January 2024 Grocery Challenge — MoneySavingExpert Forum

Hoenir

libertybelle70 said:

Our mortgage rate (5 year fixed) comes in an end in 2027 

Extending the term is only going to provide short term relief given the low rate you are currently on. Plan on a future interest rate being two / three times higher.