Looking for debt help

TessaTriangle

I was recommended to post here as I'm looking for options to help with debts.

To cut a long story short for a number of bad reasons (including a high spending ex who is now out of the picture), I find myself £38K in credit card debt. 

I'm single, 43 and was planning to reduce my hours at age 60 and wind down into retirement as I work in a physical manual job. I've got 17 years to be debt free to manage this.

I have a mortgage with £19K outstanding and 3 years 5 months to go on that.

I've managed to move some of the debt onto 0% cards, but the rest is on standard rates. I am managing to pay the minimum repayments but this mainly covers just the interest on the cards at standard rate so it doesn't feel like the debt is reducing. 

My income covers my essential living costs and the debt repayments but leaves nothing left over for fun stuff or anything else. My central heating boiler broke down last month and I had to add the cost of getting it fixed to the debt as I couldn't afford to cover the bill.

I asked for a debt consolodation loan from my mortgage lender and the bank I have my current account with but they both said no.

Stepchange recommended selling the house and buying a cheaper one, but I'd rather not consider this as I'm settled here with friends and family close by. 

They also recommended a DMP which I am considering.

I've also tried a mortgage broker who recommended remortgaging to cover all the debts. They tried normal lenders and came back and said only a specialist lender will offer a mortgage due to the level of debts. Including all the fees, the total loan would be £63K repaid over 17 years. The initial rate is a 7.74% fix for 5 years with an inital repayment of £561. This is with Together Money. They said take that loan out, clear everything and then make overpayments to reduce the interest and loan length. I can overpay £3K a year without penalties, then it's a 5% penalty. Once I've had the Together loan for a few years and the large debts have dropped off my credit file, I can also consider remortgaging to another lender who may have cheaper rates. This is tempting but I'm also wary of being tied into a mortgage for another 17 years instead of 3 years. 

SOA: 

Monthly income: £2125

Shopping (groceries, toiletries, clothing etc) £300.00

Gas, Electric £120.00

Water £23.00

Car Expenses (fuel, insurance etc) £150.00

Mobile and broadband £38.00

Buildings & Contents Insurance £25.00

Council Tax £165.00

Pension and Life Insurance £125.00
Mortgage: £563

Total: £1509

Debt repayments: 
Card 1: £184
Card 2: £69
Card 3: £84
Card 4: £117
Card 5: £158

Total: £612

What would you recomend as the best option:

1) Keep paying the minium each month, then increase payments in 3 years when mortgage is paid off

2) DMP plan

3) the remortgage and plan to overpay and clear it earlier

4) something else?

MattMattMattUK

Can you complete and post a full SOA so that people can get a better picture please? Interest rates on cards, how long is left on any 0% rates as well. Have you also guessed at some of the figures? Shopping being a round £300 is the one that stands out most, if you average over the last six months statements for example you might find it is quite different.

Do you have an emergency fund of any kind?

https://www.lemonfool.co.uk/financecalculators/soa.php

RAS

Really need to see the APRs on those debts, so a full SOA will help. Add the end date and rate to which they revert to the list as well.

What's your property like? Do you have a spare room? If so you can take a lodger and not pay tax on £7.5k.

That includes CT and utility costs, so you might now be wanting to do that for the whole year.  But people moving into an area are often looking for somewhere to hole up whilst they find a rental. Or want weekday only until the house sells or the family move as well.

fatbelly

Advice on these boards tends to be good -if it isn't then it gets removed.

External advice can vary in quality so I'm going to comment on what you say has been suggested.

Mortgage broker suggests remortgaging. Well they would, wouldn't they? From a debt perspective it is an appalling idea and puts the debt into a more dangerous place. It's not even going to save money. You would spend 63k to repay 38k if I read that corectly

Bank and mortgage lender say don't use a consolidation loan. Good. I agree with that, just need a positive strategy now

Stepchange suggest selling and downsizing. Ok if you were thinking of doing that anyway but huge costs of selling and buying and everything else. Seems odd advice from a debt adviser when there are better options.

They did suggest a dmp, which seems likely to be where you should start if you have £500 available on £38k debt. 76 months, maybe a bit less. No need to consider an IVA, which would take 72 months anyway

Rob5342

Selling seems like a a strange suggestion given how little you have left on your mortgage. A DMP would be worth serious consideration, you'd just pay what you could afford and then when your mortgage ends you will have some extra money you could use for settlement offers. It would affect your credit rating, but if you don't want to move and have been refused loans already then that won't really matter.

twiggy86

I don't have any advice to add in addition to the above (but completely agree that you shouldn't remortgage), but just wanted to say I am also in debt because of a "high spending ex"! How long have they been out of the picture? I am in such a better financial position since I got rid of mine!!!!

ManyWays

Do you have a car on finance? 

TessaTriangle

Thank you for the help.

I'll look at the SOA again over the weekend and work out all the interest rates and balances etc.

No I don't have an emergency fund or any savings. I'm throwing every spare penny at the debt to try and clear it.

Not keen on taking in a lodger. I wouldn't like sharing the bathroom and the stairs go up from the lounge, so I'd have no privacy as the lodger would be walking through if they wanted to use the front door or the kitchen.

The mortgage broker suggested the new £63K mortgage which would cover the exisiting debt, the existing mortgage, their fees and the lender fees. It's a psychological thing. Assuming I make the rest of the payments on the existing mortgage, I will be mortgage free in just over 3 years. Extending the mortgage free date to 17 years worries me.

The first thing Stepchange suggested when I filled in all their stuff online was settlement offers. I contacted them to ask how settlement offers work when I have nothing to settle. She said I would have to sell assets to raise money for settlements. The only asset I have to cover the debts is my house. She said nobody would force me to sell the house but it was something to think about. I'd prefer not to sell though as I'm settled here and I'm already in one of the smaller houses on the estate. It would mean moving away to get something cheaper and pay the debts off.

The car isn't on finance. It's just a cheap one. 

2021rdsunshine

TessaTriangle said:

Thank you for the help.

I'll look at the SOA again over the weekend and work out all the interest rates and balances etc.

No I don't have an emergency fund or any savings. I'm throwing every spare penny at the debt to try and clear it.

Not keen on taking in a lodger. I wouldn't like sharing the bathroom and the stairs go up from the lounge, so I'd have no privacy as the lodger would be walking through if they wanted to use the front door or the kitchen.

The mortgage broker suggested the new £63K mortgage which would cover the exisiting debt, the existing mortgage, their fees and the lender fees. It's a psychological thing. Assuming I make the rest of the payments on the existing mortgage, I will be mortgage free in just over 3 years. Extending the mortgage free date to 17 years worries me.

The first thing Stepchange suggested when I filled in all their stuff online was settlement offers. I contacted them to ask how settlement offers work when I have nothing to settle. She said I would have to sell assets to raise money for settlements. The only asset I have to cover the debts is my house. She said nobody would force me to sell the house but it was something to think about. I'd prefer not to sell though as I'm settled here and I'm already in one of the smaller houses on the estate. It would mean moving away to get something cheaper and pay the debts off.

The car isn't on finance. It's just a cheap one. 

Personally I wouldn’t remortgage for sure. You only have 3 years left on your mortgage, that’s really good! I wouldn’t get a consolidation loan either even if it was available. So that leaves you with 2 options: carry on paying minimum on your debt until your mortgage ends or doing a DMP. If you are not bothered about your credit rate and you have the motivation to do a self managed DMP I think it is a good option. In 3 years time you will have the mortgage money spare and at that time your creditors will be writing to you with settlement offers for sure. If you go down that route make sure you understand the ins and outs of a self managed DMP. This forum has a lot of information  and quite a few people who are very knowledgeable about it. 

Rob5342

A DMP would sort everything out with no need to ever consider selling the house. 

Settlement offers are only likely to be accepted once the debts have defaulted. The normal approach would be to stop payments, wait for the debts to default, and then get started on a dmp paying what you can afford towards the debts plus a monthly amount into a settlement fund. Once the settlement fund has built up enough you can try making settlement offers, if one accepts then you redirect the money you were paying them into the settlement fund ready for the next offer. You could probably clear the 38k for £19k.

ManyWays

Back to your original suggestions:

What would you recomend as the best option:
1) Keep paying the minium each month, then increase payments in 3 years when mortgage is paid off
2) DMP plan
3) ...

My suggestion is a combination of 1) and 2) - a DMP, increasing the payments in three years when the mortgage is paid off. 

You have no particular need for a good credit rating as your mortgage is ending and you don't have a PCP deal ending soon. So getting interest stopped as soon as possible is a good idea.