Diary : Making Changes...better late than never.

abi113

Hi,I am a newbie and after some advice. We have had our debts for a couple of years and barely even touched the surface in paying them off. We are at the end of our mortgage deal (which was 4.25%) and prospects of remortgage at a half decent rate are not good. Our new rate looks to increase to about 7.5% in January. Our current mortgage is £816 a month (repayment) so this is going to be a large jump.

Our current debt is c£6k , my mum has kindly just started to put all our debt on 0% cards to help us pay it off - it also means she will pester us for the money so no escape. We also have £2400 mortgage arrears - for no reason- we can afford the mortgage but have simply been stupid.

Mum wants us to give at least £200 a month to repay the debts (she will keep transfering the debt to 0% cards).

Our income is half cash/half in the bank, varies slightly and is paid weekly , which is a lethal combination!!

We need to clear the mortgage arrears ASAP.

Income per week is
£425 in the bank
c£350 in cash
also have child benefit for 3 children (just had our third so unsure of the amount - I think approx £150?)
My mum has also opened an interest paying current account for us and plans to take all our cash as soon as we get it, working out at £1400 4 weekly. We plan to top this up to £1600 with out money paid into the bank. This £1600 is solely mortgage money. The reason being is the interest rate is high and our best chance of a good remortgage deal is better credit rating and more equity. It will also pay off our mortgage in 10 years (17 yrs early) and save us about £125000 in interest. This should leave £1650 to pay debts/bills/living expenses.

Outgoings

Car Insurances - £120
School dinners - £32
House insurance- £20
Sky - £30
Water - £40
Gas - £60
Electricity - £30
Mobile - £30 (no home phone)
Council Tax - £108
TV License - £10.99
Food - £400 (includes nappies etc)
Petrol - £60 (large commute)
debts - £200
=£1140.99

Which SHOULD leave £510 for large expenses (xmas/car tax/car repairs) and debt overpayments.

Do you think we are doing the right thing paying so much into our mortgage? Opinions gratefully recieved. I realise I am probably leaning on my mum too much but if this is what it takes to get us sorted we all agree its worth it. Currently our money literally just disappears we need some help to control our spending and I think this might just do it.

Thankyou in advance

squirrel_pigeon

abi113 wrote: »

We need to clear the mortgage arrears ASAP.

Income per week is
£425 in the bank
c£350 in cash
also have child benefit for 3 children (just had our third so unsure of the amount - I think approx £150?) This is £183 a month for 3 children at current rates


Outgoings

Car Insurances - £120 - Is this for 2 cars? Are both necessary for work? It still seems high even for 2. Have you had a look for cheaper quotes?
School dinners - £32
House insurance- £20
Sky - £30 - I hate to say this cos I'm a Sky customer (no terrestrial signal so therefore no freeview) but can you reduce this at all? Threatening to leave does wonders
Water - £40
Gas - £60
Electricity - £30
Mobile - £30 (no home phone)
Council Tax - £108
TV License - £10.99
Food - £400 (includes nappies etc)
Petrol - £60 (large commute)
debts - £200
=£1140.99

Which SHOULD leave £510 for large expenses (xmas/car tax/car repairs) and debt overpayments.

Do you think we are doing the right thing paying so much into our mortgage? Opinions gratefully recieved. I realise I am probably leaning on my mum too much but if this is what it takes to get us sorted we all agree its worth it. Currently our money literally just disappears we need some help to control our spending and I think this might just do it.

Thankyou in advance

Welcome to MSE

YES. You are doing the right thing paying so much into your mortgage. This is your number one priority and with 3 kids you don't want to be dealing with a repossession.

Have you thought about contacting CCCS, National Debtline or the CAB? They can help you do your budget and the CCCS have a special helpline for people who have more than 3 months mortgage arrears. They will help you sort this.

xxx

abi113

We haven't even talked to the motgage company yet - thats todays job, we will set up a payment plan and they are usually very accomodating providing the plan is stuck too. Its good to have mum onside (though she doesn't kow about the arrears as this is the second time we have been in this posistion ) , it wa shard telling her about the debts but she has been great.

Car insurance - we do need both cars as one child has alot of hospital appointments and it is also needed for the preschool run. Are insurances are high as we are only 21 and 25.

We are going to cancel sky altogether I think and ge another TV set up like freeview.

This is going to be a big challenge for us, I dont know what usually happens to our money but we have had a couple of months missed mortgage payments, no money in the bank and nothng to show for it apart from xmas presents for the kids (which we didn't overspend on).

Thanks for the reply - the support is much appreciated!

immoral_angeluk

If your income varies then you either need to A) create a watertight budget based on 'worse case scenarios' and stick to it or Get a regular guaranteed income. Also you need to change your thinking. £2400 worth of mortgage arrears because 'you were stupid' is madness.... you're risking losing your home because your current line of thinking is based on 'it'll never happen to me' which is a very dangerous way of thinking. your mum bailing you out isn't goign to help you in the long run as you won't have learnt anything except to run to mum whenever things get tough.

Sorry I've just realised that what I've put sounds incredibly harsh.. it's not meant to.. just realistic. you need to seriously look at your situation and your attitudes to your debt and work out the best thing to do.

fletch3163

Good morning

I think you've put a lot of thought into your situation and it might just work. Your mum helping to stop the current debt get any bigger will be a huge help too.

Missing your mortgage payments is something you should avoid at all costs. In the current climate with sub prime mortgages going to the wall and the credit crunch on its way (the extent is still not known) lenders will be getting stricter. Same applies to better deals, etc, you'll find them thin on the ground going forward. With three babies the roof over your head needs to be of paramount importance.

I have a SIL who I helped in much the same way as your mother is doing (only I took a bank loan for her to pay all her high interest borrowings) and it worked............................. until she paid it off and then she started over again. You need to change your relationship with money, we all do.
Good luck

MissKJ

Good luck, you are very lucky to have such a good Mum on your side. But I think starting out like this without total honesty is wrong. Your Mum is risking a lot for you, she must trust you to put your debts in her name to get you a better deal, but you haven't told her the whole truth about your mortgage arears. It is time to come clean. If you don't she will start wondering where things are going wrong when you still have no money, but she thinks you are clear?

The other thing I would say is, as things improve, start to take more responsibility little by little, but ask your Mum to check over your accounts and budgets to keep you focused. Don't stop when you have cleared your debts, keep gpoing with another scheme, such as saving for other things, car replacement, christmas etc. It is wonerful to buy things when you have saved and have the money, oh a distant memory for me but I will do it again, in 2008!

Good luck!;)

mintymoneysaver

To be totally honest I would try to get rid of all your debts first before ploughing all your extra money into a mortgage. I know you are putting them on 0% but the 0% will run out well before your mortgage does.
I didn't read your thread in its entirity but if you have debts now and arrears then I would have thought that you are struggling now without making it any worse?

How abut looking for a mortgage where you start off with the basic amount and payment, but you can pay lump sums off any time you wish? We have one of these with the Woolwich/ Barclays arranged through London and Country, although unfortunately I haven't managed to pay any lump sums off yet... best laid plans etc!

abi113

immoral_angeluk wrote: »

If your income varies then you either need to A) create a watertight budget based on 'worse case scenarios' and stick to it or Get a regular guaranteed income. Also you need to change your thinking. £2400 worth of mortgage arrears because 'you were stupid' is madness.... you're risking losing your home because your current line of thinking is based on 'it'll never happen to me' which is a very dangerous way of thinking. your mum bailing you out isn't goign to help you in the long run as you won't have learnt anything except to run to mum whenever things get tough.

Sorry I've just realised that what I've put sounds incredibly harsh.. it's not meant to.. just realistic. you need to seriously look at your situation and your attitudes to your debt and work out the best thing to do.

Getting another job isn't really an option, his professions wage varies greatly and its no mean feat finding the job he is specially qualified in . So unfortunately we will have to put up with the income change because overally the income is much better.
We don't at all think "it will never happen to me" when i say we were stupid, we took a risk which we thought would make a nice little buisness on the side...it may well do but we can't turn things around as quickly as we thought, maybe in a few months we will be glad we did it, but we made a mistake in chancing our mortgage money on a risk. I hold my hands up, its been done and I can't change it now . Please don't think we are driving round in posh cars, wearing fancy clothes (infact i have one pair of jeans and one t-shirt!) and DP is working outside all day in boots with holes in!! etc . Our money has disappeared on a buisness venture that may or may not work and we have also spent money doing the house up.

I have thought about your post and considered not getting mum to help us but can't really see how it won't stop us getting into debt again. Mum isn't paying our debt, she is consolidating it to stop us accumulating any interest - we will still have to pay her every month (she can't and won't pay for us, but she will apply pressure just like a DCA!) and will be paying her more than we pay our current creditors ie puttign more pressure on ourselves than we currently do.
The reason she is opening an interest paying current account for us is that after we have cleared the arrears we want to save a couple of mortgage overpayments before paying it off so should we have any problems such as unemployent in the future we would have time to sort ourselves out. hence a high interest account will be very useful, it also means we have no access to the account.
We haven't had any credit in the last two years, nor wanted any, we saved hard when we needed a new car (nothing special under £2000) and haven't gone on expensive (actually any) holidays. The only expection is that we applied for a 0% card ourselves but got refused and since got our credit rating and discovered we would never get a decent loan ourselves, which is why mum is helping.

We fully intend to take over managing our own money as soon as we have a little forced experience under our belt.

I understand I should tell my mum about the arrears, I am not holding it back from her to save us gettign in trouble , she is very ill at the moment and the extra stress will cause her problems . i have told her we will start paying her the mortgage money the second week in March and she is being very strict that it MUST start then , this will allow us to pay off the arrears as we plan to pay the overpayments. I may change my mind and tell her once we have started to pay a good junk off. As I said unfortunetaly we have been in this posisition before though the arrears were higher and we did manage to be commited enough to sort it out so I am not a total lost cause! She only found out about the debt as I left a credit statement lying around.

Minty - Mum is happy to get a new 0% deal when this one ends if we need to and we currently plan to give her £336 a month which will take us 18 months to clear the debt . Mum is very happy with this and it allows us to make the mortgage overpayment, tho as I have said above the first couple of months we are saving the overpayment so this may well be something we continue to do rather than paying it off every week/month - its perhaps soemthign we should evaluate once we have saved the first couple of months and can weigh up the pros and cons of paying of immediatetly (lower interest) and saving to either pay debt or mortgage .

Thanks for all yours posts, I do appreciate them. I do hold my hands up to the mistakes we have made but I must say that alot have been on trying to make things better for us not so we have fancy things.

abi113

Update - I hope no one minds me changing this into a diary.

We have started to get f and f settlements for our debts in order for mum to consolidate them onto her credit card for us. We had great success with MBNA today - our cc balance was £3k and I intially ordered then £1.5 and they have accept.....just like that, they are sending out a letter detailing the "full and final"settlement offer! I was ready for a bit of bartering esp as MBNA have a bad reputation (and have indeed been quite bad in the past). We also have got a £1100 debt down to £700 today which is great. We have another cc to call tomorrow and attempt a settlement offer.
So we will have on the 0% credit card
£1268 - Old council tax arrears that was with baliffs
£741 Interim Justica (originally £1100)
£1500 MBNA (originally £3K)
£500 debt owed to mum

= £4009

Still have egg which currently stands at £2500 (have been offered £1750 ff settlement in the past). A CCJ at £840 to pay onto card.

Not sure what I should intially offer egg perhaps 40-50% £1100 ish??

Calling to make a mortgage payment tomorrow (will update when I have done that) and discuss plans for paying arrears.

Feeling excited that our debt free journey is beginning, the only way is up. We WILL change our relationship with money and TBH life will be easier, living under the stress of debt/arrears is no fun. Ultimately we will have a lot more to show for our money than we have now!

Goals for 2008

1, Catch up with mortgage arrears and stay up to date
2, Attempt to remortgage
3, Make a big dent in our debt repayments to mum
4, Be sensible with money for the first time ever!

mintymoneysaver

So your credit cards are taking full and final settlements from another credit card? I would have thought they would have wanted cash for full and finals.. good luck to you anyway.

painted_lady

Can you make sandwiches for the school dinners and save the money? Would work out much cheaper. You could even make them from leftovers.
I get money from 4 different sources, some paid monthly and some 4 weekly paid in bank and some monthly by cash. I find it less confusing by getting the money paid on the same day of every month into a current account, that account has all the DD's coming out for living expenses, such as mortgage, essential bills and debt repayments. The other current account I have has the money for 4 weekly payments, this is money I use for less essential expenses such as petrol, sky, clothes and so on. The money I get cash is my pocket money, or "petty cash" for the month. I have managed my finances much better by doing this. Maybe you could work out something similar based on your situation?
My income is generally the same all year round, but I spend far more in summer as I have expensive weather based hobbies, so I therefore have to plan for this and save more in the winter to allow me more in the summer. Can you do something similar by putting away extra when your partner is getting more money, which will cover you when he gets less? Maybe you can give the money to your mum if you dont trust yourself not to spend it?