Terrified and need advice on debt

torgirl21

Sorry this is a bit of a long one but have got myself stuck and in a situation where I'm filled with panic and don't know what to do. I'm 44 and have spent my whole life being very careful not to get into debt as it really scares me. I grew up in and out of care and in various unstable situations and saw people struggling with debt which formed this outlook. 

Due to my lack of education and low earnings I thought I would never be able to buy a home but in October 2023 I fulfilled this lifelong dream and bought my own home. It was a rundown little cottage in the cheap seats of Cornwall but I fell in love with it and was able to get a mortgage and buy it for 130k. However upon moving in I realised it needed so much more work than I thought and was pretty much uninhabitable. No idea how I got the mortgage on it tbh as it was that bad. I did pay for a full survey but never actually got one as the company took my money then promptly went out of business!

Well I had to quickly do a whole raft of works, new boiler, electrics, roofing, drainage, plumbing, plastering and a raft of things to make it habitable. Because these all needed doing so quickly I panicked and took out 3 0% credit cards to get the work done which is a total of 26k. I now know this was a terrible mistake but in the moment I didn't know what else to do. These 3 credit cards have been affordable up until now but their 0% rates are finishing and I need to find around £800 per month to pay just the minimal balance. This is not affordable to me at all. I have tried to see if I can transfer the debt but it has been declined each time. I guess I'm at my debt max. I work full time but have a long term health condition which means even this is difficult for me so getting extra work is not really possible. I promise this isn't me being lazy, most people in my health position don't work and so I'm proud of myself for working at all.

I have thought that a debt repayment plan would be a good option however my fixed mortgage is up in October of this year and have already chatted to my broker who said getting a debt repayment plan would be disastrous for remortgaging. I'm already on a high interest rate of 6.5% because of when I bought my house and was looking forward to getting on a lower rate which won't happen if I get a debt repayment plan. 

Ideally I would like to consolidate my debt onto my mortgage however I don't think I would have enough equity in my house to do this.

I'm a very frugal person normally, don't go out, go on holiday, get takeaways, only buy clothes in charity shops, there's really nowhere to cut costs. I'm not worried about building debt up again as this was a very unique occurrence for me and I'm not someone who normally spends outside of their means.

I just can't think of a good way out. I can't afford to pay even the mininum payments on these credit cards but if I get a debt repayment plan this will mess up my credit rating to sort out my mortgage in October. There's no real way for me to earn more money without damaging my health and I can't cut living costs as already live incredibly frugally.

If anyone has any advice for me or has been in this situation and found a way out please let me know. I can't eat or sleep with the stress this has caused me and really can't see how I'm going to get through the next few months. All and any help truely appreciated.

Thank you for reading

VAP_Driver

Hi there,

unfortunately, I’m not going to be the poster that gives you good, constructive advice, but rest assured, they’ll be along shortly. I just wanted to say I understand how difficult it probably was for you to write your opening post, and then actually press the post comment button. I’m pretty sure that, in time, you’ll look back at that very moment and realise that was the exact point that you started to turn your situation around.

Good luck with getting things sorted. Whilst you’re patiently waiting for the useful comments and advice to start rolling in (and they will), please try to sit back, relax, and pat yourself on the back for taking this massive, positive step.

enthusiasticsaver

Do you qualify for any benefits due to your health condition?

When you say debt repayment plan do you mean a DMP? This is an informal debt solution and if you stay with your current mortgage provider they normally do not do a credit search so being on a DMP should not impact on you remortgaging. 

Unfortunately you do seem to be between a rock and a hard place in that you have over committed with the cards on top of the mortgage.  Consolidating on to the mortgage, even if allowed, is not recommended.  If you cannot make minimums I suggest letting the debts default and then doing a DMP through stepchange or self administered and then just get the best mortgage rate you can in October with your current lender. 

Voyager2002

Would it be feasible to get a new mortgage now?

Otherwise, is there any way to service the credit card debt just until the new mortgage deal has been agreed?

It is always worth checking if you are eligible for any state benefits such as PIP.

torgirl21

VAP_Driver said:

Hi there,

unfortunately, I’m not going to be the poster that gives you good, constructive advice, but rest assured, they’ll be along shortly. I just wanted to say I understand how difficult it probably was for you to write your opening post, and then actually press the post comment button. I’m pretty sure that, in time, you’ll look back at that very moment and realise that was the exact point that you started to turn your situation around.

Good luck with getting things sorted. Whilst you’re patiently waiting for the useful comments and advice to start rolling in (and they will), please try to sit back, relax, and pat yourself on the back for taking this massive, positive step.

Thanks for your kind words. Yes I'm really hoping this can be the start of things getting back on track and me feeling back in control of things again. Because of my chaotic upbringing a sense of control over my life has always been important and I think this is why I'm feeling so panicked now because I have clearly lost control of my financial situation. Will try and speak some kind words to myself for once

torgirl21

enthusiasticsaver said:

Do you qualify for any benefits due to your health condition?

When you say debt repayment plan do you mean a DMP? This is an informal debt solution and if you stay with your current mortgage provider they normally do not do a credit search so being on a DMP should not impact on you remortgaging. 

Unfortunately you do seem to be between a rock and a hard place in that you have over committed with the cards on top of the mortgage.  Consolidating on to the mortgage, even if allowed, is not recommended.  If you cannot make minimums I suggest letting the debts default and then doing a DMP through stepchange or self administered and then just get the best mortgage rate you can in October with your current lender. 

I have tried to get PIP multiple times but always been refused which has been a very frustrating experience on it's own.
I didn't know that about a retention mortgage, my broker said they would run a credit check for those as well but I will seek a second opinion. If that's correct then I think a DMP would be the best thing if it doesn't affect my remortgage. Thank you very much for your advice, much appreciated  

torgirl21

Voyager2002 said:

Would it be feasible to get a new mortgage now?

Otherwise, is there any way to service the credit card debt just until the new mortgage deal has been agreed?

It is always worth checking if you are eligible for any state benefits such as PIP.

I would have to pay a fairly hefty ERC to get out of my current mortgage. But yes might be worth doing it to get a good 5 year fixed now before the DMP affects my credit rating.

Unfortunately I have applied for PIP multiple times and been refused which has been very dispiriting. Thanks so much for your advice

VAP_Driver

As @enthusiasticsaver has pointed out, usually if you remortgage with the same provider, then another credit check isn’t carried out. So, it’s entirely possible you could go the DMP route to deal with your unsecured debts, and still successfully remortgage to a lower rate in October when your current rate expires.

Without being able to scour and cherry pick the whole market, it mightn’t be the most competitive deal around. But it’s likely to be better than 6.1%. Combined with the DMP, that might give you the financial headroom to get back on your feet properly and sustainably.

torgirl21

VAP_Driver said:

As enthusiastic saver has pointed out, usually if you remortgage with the same provider, then another credit check isn’t carried out. So, it’s entirely possible you could go the DMP route to deal with your unsecured debts, and still successfully remortgage to a lower rate in October when your current rate expires.

Without being able to scour and cherry pick the whole market, it mightn’t be the most competitive deal around. But it’s likely to be better than 6.1%. Combined with the DMP, that might give you the financial headroom to get back on your feet properly and sustainably.

That would be a real relief as the thought of the remortgage is the only thing stopping me getting the DMP. Will arrange a call with Stepchange asap to see if they can help with this. Thank you for taking the time to comment.

Mushy

If you have a spare room, would you consider taking on a lodger under the rent a room scheme? I know it's not for everyone and it's always a risk living with someone who you don't know initially. 

torgirl21

Mushy said:

If you have a spare room, would you consider taking on a lodger under the rent a room scheme? I know it's not for everyone and it's always a risk living with someone who you don't know initially. 

I have thought about that. The only issues I have are 1) house is still not in a great state, tiny bathroom off the kitchen which is still basically a building site and don't think that would appeal to many people and 2) because of a great deal of trauma growing up I'm extremely wary and nervous of strangers and really can't imagine living with someone I don't know. I haven't totally discounted it tho as can be a great way to earn extra income. If I can get my bathroom a bit nicer and find someone I feel comfortable with this would be a great way to increase my income. Thanks for the help