Huge debts and mortgage increase...

libertybelle70

Thanks all. I'll take a look at that board @Grumpelstiltskin thankyou! I'll take a look at everything this eve. THen I guess it will be a choice between - can we make it work in this house with cuts, stripping back spending - and will there be enough left for things like saving for household emergencies as well as tackling credit commitments slowly; do we sell and make it work with the same cuts - and how much of a difference would that make once credit cards have been paid off; or we stay in this house, strip back spending, and look at a DMP. @hoenir yes once we come off fixed rate this might be a real problem. But perhaps interest rates will have dropped further. Someone also raised the issue of if either my husband and I couldn't work, this would mean we would lose the house as we have no savings and no breathing space. This is a very real, permanent worry. Thankyou - Will report back.

backinbusiness

I'd like to add that the mindset needs to change - otherwise you'll be back in the mire.  But I think from what I'm reading, it sounds like the "lightbulb moment" is just about there!  Good luck OP. BiB x 

enthusiasticsaver

libertybelle70 said:

Thanks all. I'll take a look at that board @Grumpelstiltskin thankyou! I'll take a look at everything this eve. THen I guess it will be a choice between - can we make it work in this house with cuts, stripping back spending - and will there be enough left for things like saving for household emergencies as well as tackling credit commitments slowly; do we sell and make it work with the same cuts - and how much of a difference would that make once credit cards have been paid off; or we stay in this house, strip back spending, and look at a DMP. @hoenir yes once we come off fixed rate this might be a real problem. But perhaps interest rates will have dropped further. Someone also raised the issue of if either my husband and I couldn't work, this would mean we would lose the house as we have no savings and no breathing space. This is a very real, permanent worry. Thankyou - Will report back.

A cautionary warning that I don't think interest rates will ever be as low as the current rate you are on so at some point you will need to decide whether to move to reduce the mortgage or up the repayment again once the debts are gone.  One of the reasons for high inflation now is the holding down of interest rates for too long. Hopefully by 2027 the debt will be lower and you will know whether you intend to move up north and hopefully reduce that mortgage because working until the age of 75 to service a mortgage does not sound appealing. 

Floss

libertybelle70 said:

 .... can we make it work in this house with cuts, stripping back spending - and will there be enough left for things like saving for household emergencies....

Remember that when you stop paying your cards etc the prompt the defaults, you can use what is in your budget for repayments to kick-start your emergency fund.

Also remember that you will get letters texts & phone calls, with charges for missed payments. Hold your nerve, ignore them, file the letters away and stick to your new budget. 

libertybelle70

Thankyou @Floss and @enthusiasticsaver and everyone for your responses. 

I could do with some advice on prioritising payments/emergency funds etc, if we have very little money to spare every month. What should be the priority, for a family with no savings at all? and I'd also really like to clarify that if we go down the DMP route that we will still be able to port our mortgage to a new property? (obviously, I don't want to ask NatWest direct). I'm very new to (and slightly scared by) a DMP, do the credit card companies control your spending? Would there be scope to still spend money on birthday presents, for example, or do they limit all this by asking for bank statements? And after you default by not paying cards for a few months (two or three?), is it then sensible to ask Stepchange to step in, or manage it yourself? THankyou!

enthusiasticsaver

Firstly there is nothing to be scared about with a DMP.  You are in charge of your budget and you pay them what you think you can afford.  Stepchange can sort it out for you or you can self manage if you prefer.  A DMP is also an informal arrangement so it does not need to be declared to anyone like bankruptcy or an IVA would. 

The important thing is you need the defaults first before you start paying anything.  The sooner they happen then the sooner they come off your credit file.  6 years as said before and that is 6 years from the default date and not 6 years after the debt has gone. The interest also stops then. 

Check out the DMP threads as to how easy people have found getting new mortgage deals on the DMP but if you stay with your current provider they do not credit check you so if you are with Nat West then stick with them. 

The credit cards cannot control your spending.  They may ask for income and expenditure details which is like the soa you did on here but there are allowances for things like presents, haircuts, eating out, holiday etc etc. 

While you wait for the defaults save into an emergency fund so all the money you were directing towards the credit cards/loans etc put into savings but not with a bank you owe money to.  You won't have access to credit once you are on a DMP so an emergency fund is a must and as time goes on and some of the debts will be sold on you may get full and finals where you get a discount on paying the debts off so it probably will not cost you £50k to get rid of all the debt. 

You will get  letters and phone calls although you can write and specify how you want to be contacted. 

enthusiasticsaver

Before you go down the DMP route though I would redo the soa with the new mortgage payment after extending the term and  the savings you are confident you can make within your budget just to see where you are and whether you can sort the debt through just cutting back and being more budget aware or whether the DMP is your best option.  As I recall the interest rates on your cards were not awful and you have good incomes so you might be able to sort it without going down that route. 

enthusiasticsaver

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  This is now £1531

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 can be reduced as soon as they are out of contract. You thought £120

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

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

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

Groceries etc. ......................... 709  You said you think you can reduce this to £400

Clothing................................ 0 You might need something in here. 

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

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

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

Car maintenance (including MOT)......... 66 Make sure you save this in a separate car pot. 

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

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

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

Other child related expenses............ 255 Can this be reduced? 

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 £50?  you need to put something in there as you mentioned presents. 

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

Entertainment........................... 302  This is unsustainable.  You thought £150

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

Emergency fund.......................... 0[b] £50 You really need something in here too.  

Total monthly expenses.................. 3941.91[/b]  Using your suggestions, the new mortgage payment  (and my suggestions of £50 for presents and emergency fund) This would be £4732.91

[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.  So this would be £4732.91

Available for debt repayments........... 2,383.69  This would be £1592.69

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

Amount left after debt repayments....... 1,135.69[/b] This would be £344.69

[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]

So after the new mortgage payment on the amended term you would be able to afford to repay the debts without a DMP with a £344.69 surplus.  So with those figures in mind and the cutbacks you think you can make and better budgeting you would not need a DMP. Find out when the 0% deals expire and maybe plan initially £1300 a month towards the debt until your budget works and start saving for emergencies as well.  Review in 6 months. 

iza_belle1

Re the mobile phones: Definitely swap to SIM only deals as soon as you're able. I use Giff Gaff and pay £6 a month for unlimited calls/texts and 2GB data. Lots of £10 a month deals available with a lot of providers if you needed more data than this. 

Martico

enthusiasticsaver said:

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  This is now £1531

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 can be reduced as soon as they are out of contract. You thought £120

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

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

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

Groceries etc. ......................... 709  You said you think you can reduce this to £400

Clothing................................ 0 You might need something in here. 

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

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

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

Car maintenance (including MOT)......... 66 Make sure you save this in a separate car pot. 

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

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

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

Other child related expenses............ 255 Can this be reduced? 

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 £50?  you need to put something in there as you mentioned presents. 

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

Entertainment........................... 302  This is unsustainable.  You thought £150

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

Emergency fund.......................... 0[b] £50 You really need something in here too.  

Total monthly expenses.................. 3941.91[/b]  Using your suggestions, the new mortgage payment  (and my suggestions of £50 for presents and emergency fund) This would be £4732.91

[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.  So this would be £4732.91

Available for debt repayments........... 2,383.69  This would be £1592.69

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

Amount left after debt repayments....... 1,135.69[/b] This would be £344.69

[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]

So after the new mortgage payment on the amended term you would be able to afford to repay the debts without a DMP with a £344.69 surplus.  So with those figures in mind and the cutbacks you think you can make and better budgeting you would not need a DMP. Find out when the 0% deals expire and maybe plan initially £1300 a month towards the debt until your budget works and start saving for emergencies as well.  Review in 6 months. 

I also think you can handle this, with some serious budgeting. You have at least one more month's pay before the new mortgage rate kicks in, and could split that excess between savings and an overpayment on your Halifax debt. That's what I'd aim for. If you can nuke that within a few months, it would be a morale boost, and there's a chance they might offer you a 0% balance transfer deal down the line. Rinse and repeat