Your Help and Advice Welcome

Kiwimel · 12 August 2019 at 2:22PM

Hi,

Thanks in advance for taking a look at this post. I seem to have got myself in to a bit of a state and am struggling to work out the best way out on my own.

I am due to remortgage 31st December and have been burying my head in the sand about the state of my accounts. I am the bread winner in our family and spent a year on maternity leave basically living off my credit card. It is my responsibility to pay for the mortgage repayments and nursery fees which I transfer in to my husbands account (we have separate accounts) each month . The credit card debt is mine and the rest is covered by my husband.

Do I repay the credit card debt when I remortgage or is there a smarter way?

Thanks in advance.

Statement of Affairs and Personal Balance Sheet
Household Information
Number of adults in household........... 2
Number of children in household......... 1
Number of cars owned....................
Monthly Income Details
Monthly income after tax................ 3307
Partners monthly income after tax....... 1600
Benefits................................ 0
Other income............................ 0
Total monthly income.................... 4907
Monthly Expense Details
Mortgage................................ 1180
Secured/HP loan repayments.............. 0
Rent.................................... 0
Management charge (leasehold property).. 0
Council tax............................. 120
Electricity............................. 60
Gas..................................... 60
Oil..................................... 0
Water rates............................. 30
Telephone (land line)................... 0
Mobile phone............................ 60
TV Licence.............................. 10
Satellite/Cable TV...................... 85
Internet Services....................... 0
Groceries etc. ......................... 200
Clothing................................ 0
Petrol/diesel........................... 120
Road tax................................ 10
Car Insurance........................... 20
Car maintenance (including MOT)......... 0
Car parking............................. 0
Other travel............................ 180
Childcare/nursery....................... 1400
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 20
Pet insurance/vet bills................. 0
Buildings insurance..................... 5
Contents insurance...................... 0
Life assurance ......................... 0
Other insurance......................... 0
Presents (birthday, christmas etc)...... 50
Haircuts................................ 0
Entertainment........................... 0
Holiday................................. 0
Emergency fund.......................... 0
Total monthly expenses.................. 3610

Assets
Cash.................................... 0
House value (Gross)..................... 400000
Shares and bonds........................ 0
Car(s).................................. 0
Other assets............................ 0
Total Assets............................ 400000

Secured & HP Debts
Description....................Debt......Monthly...APR
Mortgage...................... 168000...(1180).....2.85
Total secured & HP debts...... 168000....-.........-
Unsecured Debts
Description....................Debt......Monthly...APR
Credit Card....................10000.....111.......0
Credit Card....................6300......65........0
Credit Card....................6400......165.......18.9
Store Account..................600.......46........23.9
Credit Card....................7500......155.......21.7
Total unsecured debts..........30800.....542.......-

Monthly Budget Summary
Total monthly income.................... 4,907
Expenses (including HP & secured debts). 3,610
Available for debt repayments........... 1,297
Monthly UNsecured debt repayments....... 542
Amount left after debt repayments....... 755
Personal Balance Sheet Summary
Total assets (things you own)........... 400,000
Total HP & Secured debt................. -168,000
Total Unsecured debt.................... -30,800
Net Assets.............................. 201,200

Willing2Learn · 12 August 2019 at 2:37PM

Hi Kiwimel and welcome to the forum

Is your SOA accurate? I only ask because you have nothing listed for entertainment, emergency fund, life insurance or clothing.

Also, why have you got expenses for motoring, yet have no car?

Kiwimel · 12 August 2019 at 3:14PM

Thank you so much for your welcome

Its about as accurate as I can get it for now.
1. My life assurance is covered at work so there is no cost to me as it is a paid for employee benefit.
2. I honestly have no idea what I would list as entertainment - I am a mum to a 2 year old whose entire family live on the otherside of the world so Im not doing much in the way of cinema trips or gigs these days.
3. I have no emergency fund as at present all my remuneration is swallowed up by debt repayment, mortgage and nursery fees.
4. Clothing is sorted for the year - it would be luxury only if anything were to be purchased. Actually - some wellies for the winter for my little one. But the rest can make do.
5. My husband leases a car. I have included this £130 pm payment in the budget under "Other travel"

Thanks!

Mel

tallyhoh · 12 August 2019 at 8:11PM

with the cost of childcare & leasing a car it would be cheaper for your partner to stay home & look after the child.

enthusiasticsaver · 12 August 2019 at 9:13PM

No, I most definitely would not remortgage to clear your credit card. Why was your husband not covering more of the bills while you were on maternity leave?

If I am reading this right you have a salary of £3307 and out of this you have to pay the full mortgage of £1180 and all the nursery costs of £1400 plus service more than £30k of unsecured debt? Even paying minimums it leaves you just £185 spare to overpay the debt and presumably cover any personal expenses. Does your DH cover the grocery spends? I am not sure why you organise your finances like that but you should be working as a team to cover bills etc while you were on maternity leave not leaving you to rack up so much unsecured debt and leave you with little monthly disposable income to cover it. Why are you dealing with this alone?

enthusiasticsaver · 12 August 2019 at 9:16PM

It also looks like your husband has considerably more disposable income than you as I am assuming you probably have to pay for travel costs to work and probably your personal mobile too. Why the unfairness in bill distribution?

Kiwimel · 13 August 2019 at 8:53AM

Thanks so much for responding. Before I had my little one it made sense for me to cover the mortgage and him to take care of all the rest - it felt like the fairest way to split things as I have generally always earned twice what my husband has. However the childcare fees are now crippling me.

I agree it now seems unfair and it’s also causing friction in my marriage because of this in all honesty.

What I need is some ideas on a solution in order to rectify this. It’s much more pressing with my fixed rate mortgage renewal looming. I don’t know where to start?

Do I use some of the equity to pay the non 0% debt and then increase my term? We currently have 15 years left. However we are swiftly outgrowing our 2 bedroom London flat.

Do I increase the term and use the surplus I would have spent on paying it back?

Do I pay the lot and add it to my mortgage? Keeping repayments and term the same?

Meanwhile, please be assured that I will have a conversation with my husband to address these inequalities in finance. It’s going to be a big change for him but I will make sure he is contributing more for future.

Thank you again for your help. Your review and advice is incredibly helpful.

Niv · 13 August 2019 at 10:42AM

Right. I think that your husband should have stepped up when you went on maternity to at least lesson the impact of the mortgage when you were on mat leave.

Like you say, the finance split was fair enough when you were earning twice as much but as soon at you went on mat leave (well ok, after about 6 weeks) you would likely have been taking home less than him (depending on your companies policy). At that point you both should have changed the balance of payments. All he has done by not stepping up at that point is allow the pair of you to get into debt accruing unnecessary interest.

What does he say about all this? Does he think it is fair that you got into debt due to being on mat leave (a situation he contributed to!). I know you have not gone into massive detail about him/his circumstances but his behaviour in this does somewhat puzzle me.

I think you need to sit down with him and work out if the SOA is indeed accurate and if it is, then see what he is doing with any surplus income - then use it to overpay that debt.

Not having a go at you/him just feel he needs a bit of a reality check!

Mnd · 13 August 2019 at 7:07PM

Kiwimel wrote: »

What I need is some ideas on a solution in order to rectify this. It’s much more pressing with my fixed rate mortgage renewal looming. I don’t know where to start

Ok, I am a bit old fashioned, and I have been in the situation in my life where I was the main earner, then for a while about the same, and for the last 2 years I am basically a "kept man" in as much that I'm retired with a works pension but no income to speak of or state pension yet, we don't have separate money ever. Yes cash is allocated to different accounts but any situation with money is our problem. We would start with your combined income, and work from there

enthusiasticsaver · 13 August 2019 at 7:53PM

Kiwimel wrote: »

Thanks so much for responding. Before I had my little one it made sense for me to cover the mortgage and him to take care of all the rest - it felt like the fairest way to split things as I have generally always earned twice what my husband has. However the childcare fees are now crippling me. This is what you need to address and your husband should be contributing. Are you using the tax free childcare scheme where the government tops it up with 20% to help with costs for children under 3? I think anyone can claim for this not just low earners. There is a maximum of £2000 which is obviously not huge compared to your costs which are unusually high. Can you move to cheaper childcare? Not ideal I know if your child is settled but it may be an option. Ideally your DH should be helping with this.

I agree it now seems unfair and it’s also causing friction in my marriage because of this in all honesty.

What I need is some ideas on a solution in order to rectify this. It’s much more pressing with my fixed rate mortgage renewal looming. I don’t know where to start?

Do I use some of the equity to pay the non 0% debt and then increase my term? We currently have 15 years left. However we are swiftly outgrowing our 2 bedroom London flat. I very much doubt you will be able to borrow to repay the debt and it may affect your remortgage. I would also never ever advise moving unsecured debt to secured.

Do I increase the term and use the surplus I would have spent on paying it back?

Do I pay the lot and add it to my mortgage? Keeping repayments and term the same?

Meanwhile, please be assured that I will have a conversation with my husband to address these inequalities in finance. It’s going to be a big change for him but I will make sure he is contributing more for future.

Thank you again for your help. Your review and advice is incredibly helpful.

As I said the inequality between your husband and yourself is the crux of the issue here. Moving the unsecured debt to your mortgage is a bad idea and will cost you more in the long run. It may sort your short term problems out if you can get a lender to agree to a secured loan to cover them but if you do not address the inequality between your husbands contribution to joint household costs then this problem will not go away and you will have the same issue if your income drops for any other reason like another maternity leave. Eventually though the childcare costs will decrease so you just need to find a sustainable way to reduce the debt regularly whilst living within budget until your child is 3 when presumably they will get some free hours?

Kiwimel · 13 August 2019 at 11:05PM

Ok. So I came clean to my husband and now there are 2 of us totally stressing out about this. I actually feel physically sick and asked for an idea of what he has remaining at the end of each month and he confirmed my thoughts - very little. We live a nice life and he agrees we will have to make drastic cut backs.

So. Where to start?

Do we just keep ticking over trying to pay off as much as possible on the debts while we remortgage? Poster above is right - childcare costs will reduce significantly once little one receives free hours which will be this time next year.

Do I attempt to shift the higher interest rate debts to 0% cards before remortgage at Christmas?

Or back to the old question I asked earlier - do I consolidate my debt to my mortgage and we try to recover by overpaying when the childcare costs reduce?

I genuinely thought I would feel better having told my husband but I feel worse. He hasn’t been able to see any light at the end of this tunnel.

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