Remortgage or debt consolidation?

DonFog

Hoenir said:

Wouldn't it be cheaper to pay the £3k and refinance everything in one go. Reduction in monthly outgoings only works if mortgage interest rates don't head higher in the future. Always a risk that they will. 

Unfortunately, remortgage option is hard because there is no guarantee you will pay off the unsecured debt so they don't consider you to have affordability despite the fact you're asking to borrow in order to achieve affordability by removing the debt.

DonFog

fatbelly said:

Were you only given a 5-year mortgage because you were of (ahem) advanced age? Or are you saying that the fixed interest period comes to an end after 5 years? There's a huge difference between the two.

Yes the fixed period is ending. Only half way to retirement age 

DonFog

EssexHebridean said:

OK - firstly - the loans you are are all unsecured I assume? The credit cards certainly will be. If you are unable to pay those debts, then you will get a few letters, some uncomfortable phone calls, perhaps a threat or two of legal action which is highly likely to ever materialise. Then the debts default, the interest stops, and you can make headway into clearing them off. 
If you load that currently unaffordable debt onto your mortgage however, and then find yourself unable to pay TAT, then what happens is you get some rather MORE nasty letters, and eventually the bank repossess your home.  Now, call me bold, but given those two options, I know which I prefer the sound of? (Clue - not the second one). 

The consolidation loan sounds exceptionally horrible - and regardless, consolidation rarely works in any event. It's seen as a way of fixing a problem, but it fixes nothing in most cases - it just shifts a problem, and makes it cost more. 

You've already been given the link above to the SOA calculator we recommend, so the first step it to sit down and complete that. Make it open and honest - it needs to reflect the situation you are in right now, not what you think you should be spending. Don't guess figures either - check. You might find a years worth of bank and card statements handy. 

If you can't afford your debt payments on the unsecured stuff now, having paid all your priority bills, then stop paying it. Don't leave yourself using more borrowing to cover priority bills because you are paying debt first. 

[font=courier new][b]Statement of Affairs and Personal Balance Sheet[/b][b]

Household Information[/b]

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

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

Number of cars owned.................... 1[b]

Monthly Income Details[/b]

Monthly income after tax................ 5600

Partners monthly income after tax....... 2900

Benefits................................ 0

Other income............................ 0[b]

Total monthly income.................... 8500[/b][b]

Monthly Expense Details[/b]

Mortgage................................ 2014

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

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

Management charge (leasehold property).. 0

Council tax............................. 203

Electricity............................. 115

Gas..................................... 115

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

Water rates............................. 57

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

Mobile phone............................ 70

TV Licence.............................. 13

Satellite/Cable TV...................... 90

Internet Services....................... 55

Groceries etc. ......................... 450

Clothing................................ 100

Petrol/diesel........................... 70

Road tax................................ 14

Car Insurance........................... 70

Car maintenance (including MOT)......... 5

Car parking............................. 10

Other travel............................ 400

Childcare/nursery....................... 1350

Other child related expenses............ 200

Medical (prescriptions, dentist etc).... 20

Pet insurance/vet bills................. 0

Buildings insurance..................... 45

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

Life assurance ......................... 73

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

Presents (birthday, christmas etc)...... 167

Haircuts................................ 133

Entertainment........................... 167

Holiday................................. 500

Emergency fund.......................... 0

Cleaner................................. 140[b]

Total monthly expenses.................. 6646[/b]

[b]

Assets[/b]

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

House value (Gross)..................... 735000

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

Car(s).................................. 8000

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

Total Assets............................ 743000[/b]

[b]

Secured & HP Debts[/b]

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

Mortgage...................... 498800...(2014).....3[b]

Total secured & HP debts...... 498800....-.........-   [/b]

[b]Unsecured Debts[/b]

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

Tesco Loan.....................25961.....365.......5.75

Monzo Loan.....................18183.....350.......15.4

AMEX...........................5858......300.......35.2

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

MBNA Credit Card...............5954......158.......0

MBNA Credit Card...............7810......200.......0

Lloyds Credit Card.............14997.....375.......0

HSBC Credit Card...............7739......200.......0

Paypal Credit Card.............2421......60........0

Virgin Credit Card.............2973......30........24.1

JohnLewis Credit Card..........2368......100.......25.9[b]

Total unsecured debts..........96264.....2138......-  [/b]

[b]

Monthly Budget Summary[/b]

Total monthly income.................... 8,500

Expenses (including HP & secured debts). 6,646

Available for debt repayments........... 1,854

Monthly UNsecured debt repayments....... 2,138[b]

Amount short for making debt repayments. -284[/b]

[b]Personal Balance Sheet Summary[/b]

Total assets (things you own)........... 743,000

Total HP & Secured debt................. -498,800

Total Unsecured debt.................... -96,264[b]

Net Assets.............................. 147,936[/b]

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

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

DonFog

Thanks everyone. I have completed the SOA and pasted it in here in response to a couple of comments. I will also take the advice to post in Debt Free Wannabe. 

fatbelly

You're already on debt-free wannabe

Thanks for confirming your mortgage term isn't ending in November, but is potentially going on to the SVR.

You can lock into a new deal in May so I would be tempted to keep things ticking over till then, to see what deals your existing lender is giving, and what you might get through a broker. 

You should leave the non-priority debts as they are and not attempt to consolidate. Your thread title may be better as DMP or IVA? as those will likely be your choices if you can't balance your budget.

I think your budget could balance with a bit of tweaking. I notice £967 per month on presents, holidays, haircuts and entertainment

Floss

I think you should put more precise income figures - not many people get a nice round figure like those. Are all your expenditure figures accurate, rounded up/down or aspirational?

How old are the children and when will you get free childcare hours?

£133 on haircuts? 

£500 on holidays but you have no cash saved? Is this already booked as you can't afford it.

No contents insurance - this is a must.

What's the £400 other travel cost?

DonFog

Floss said:

I think you should put more precise income figures - not many people get a nice round figure like those. Are all your expenditure figures accurate, rounded up/down or aspirational?

How old are the children and when will you get free childcare hours?

£133 on haircuts? 

£500 on holidays but you have no cash saved? Is this already booked as you can't afford it.

No contents insurance - this is a must.

What's the £400 other travel cost?

Figures are accurate, rounded up if needed.

Children are 3 and 1, not much change in childcare soon.

£133 on everything that would come under a beauty category over a whole year. Includes any cosmetics and more places to visit than haircuts.

£500 on holidays is aspirational - would obviously only spend what we could on any trips.

Other travel is commuting to work 3 days a week each.

DonFog

fatbelly said:

You're already on debt-free wannabe

Thanks for confirming your mortgage term isn't ending in November, but is potentially going on to the SVR.

You can lock into a new deal in May so I would be tempted to keep things ticking over till then, to see what deals your existing lender is giving, and what you might get through a broker. 

You should leave the non-priority debts as they are and not attempt to consolidate. Your thread title may be better as DMP or IVA? as those will likely be your choices if you can't balance your budget.

I think your budget could balance with a bit of tweaking. I notice £967 per month on presents, holidays, haircuts and entertainment

Oh ok, thank you for letting me know. Didn't know it worked like that with posting in other places.

We can lock in a new deal but we have negative cashflow each month until November, so more debt required unless we can sort it.

I have spoken to HSBC and First Direct who would only provide up to £50k in debt consolidation as part of additional borrowing when remortgaging. This plus the current unsecured debts takes us to a high LTV which also means our affordability tests fail.

DMP or IVA sounds quite serious considering that we have enough earnings to cover all of this debt if secured against our house at a reasonable LTV and 30 year mortgage.

Obviously £967 a month is a lot, but there are some unavoidable situations such as family weddings abroad that make up the bulk of that.

Hoenir

DonFog said:

Obviously £967 a month is a lot, but there are some unavoidable situations such as family weddings abroad that make up the bulk of that.

No one here can tell you how to live your lives. From a personal viewpoint I would make the observation that the power is in your own hands. Simply put your foot down. Your priorities need to be to protect the welfare and security of your children and everything that both you've worked hard for. All that needs to be said is "Sorry we've had work done on the house and need to pay for it".   "Interest rates have risen sharply something we didn't plan for".  

You are more fortunate than most. As do have a monetary surplus every month to tackle your financial problems head on. Might not be pleasant for a while. However it'll make you learn to budget properly. 

stymied

“I have spoken to HSBC and First Direct who would only provide up to £50k in debt consolidation as part of additional borrowing when remortgaging. This plus the current unsecured debts takes us to a high LTV which also means our affordability tests fail.”

If I understand correctly this means the negative cash flow situation extends beyond November since the debt can’t all be consolidated even if you wanted to.

You already have a high mortgage on your house with rising interest rates and who knows what else as potential future risks (redundancy, illness etc.). Fatbelly is a very wise advisor on these forums - locking in your next fixed rate and DMP (do you really need to borrow more in the next 6 years anyway?) should be seriously considered.

1 & 3 year olds barely need any expenditure in the way of presents although I understand with your incomes you may be being expected to splash out for your wider family if you haven’t apprised them of your current cash flow issues.