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  • FIRST POST
    • KL78
    • By KL78 21st May 19, 9:08 PM
    • 1Posts
    • 1Thanks
    KL78
    Do we have a problem?
    • #1
    • 21st May 19, 9:08 PM
    Do we have a problem? 21st May 19 at 9:08 PM
    Hello everyone,

    We are a family of 4, Me, DH, DS (14) and DD (12)

    Last month we applied for a mortgage. We wanted to move to a better deal, plus borrow an additional 10K to sort out our extension. We were declined! This came as a shock as we never expected it to happen.

    I would describe our life as comfortable. We have decent jobs and like to enjoy life. We both have newish cars, a caravan that we visit very regularly and also enjoy holidays and weekends away etc. We do have quite a bit of debt, but I never saw it as an issue. Here are the debts....

    My car Loan - 275 per month. Balance 11000 ( approx)
    DH car loan - 297 per month Balance 13000 (approx)
    Caravan finance 265 per month Balance 10200
    my credit card - 4800 - 0%. I pay 100 per month
    DH credit cards 5000 - not all 0%. Pays around 130 per month
    0% furniture/household goods - 150 Balance 3000 approx

    We take home around 4300 per month between us. Our mortgage is 815 and our regular bills and direct debts come to an additional 690.

    Food and Money for kids activities come in at 500 per month

    This is a grand total of 3222 per month.

    We save 100 into an emergency savings pot and we have 4000. This is for house emergencies such as the boiler breaking etc. We also save some money for our kids (50 each) to contribute towards university costs etc.

    This means that we have about 878 per month. We tend to use this for holidays and entertainment.

    I guess I have never felt that we have had a problem as although we have a lot of bills, we are always able to pay and we never run out of money before payday etc. Our CC debt is related to home improvements so we aren't racking up CC debt each month.

    A mortgage broker has told us that we will definitely be able to secure the mortgage with a different lender, however we are putting the brakes on this for the time being.

    Do we have a problem?
Page 1
    • sourcrates
    • By sourcrates 21st May 19, 9:30 PM
    • 18,441 Posts
    • 17,338 Thanks
    sourcrates
    • #2
    • 21st May 19, 9:30 PM
    • #2
    • 21st May 19, 9:30 PM
    Hi,

    You have 47 thousand pounds of debt, which is a lot in anyone’s book, yes you have a good income, but it equates to almost a years salary for you both, the mortgage company probably thought this was too high and may make your new payments unaffordable.

    You may have better luck with a broker, or maybe try to reduce the debt a bit.
    I'm a Board Guide on the Debt-Free Wannabe, Credit File And Ratings, and
    Bankruptcy And Living With It, boards. "I volunteer to help get your forum questions answered and keep the forum running smoothly".

    Board guides are not moderators and don't read every post. If you spot an abusive or illegal post then please report it to forumteam@moneysavingexpert.com. Any views expressed are mine and not the official line of MoneySavingExpert.com.

    Helping you deal with problem debt.

    For free debt advice, contact either : Stepchange, National Debtline, CitizensAdviceBureaux.
    • lopsyfa
    • By lopsyfa 22nd May 19, 7:54 AM
    • 266 Posts
    • 166 Thanks
    lopsyfa
    • #3
    • 22nd May 19, 7:54 AM
    • #3
    • 22nd May 19, 7:54 AM
    As above, you currently have 47k in debt and an additional 10k debt will make your total debt about 57k. During mortgage/remortgage, application the lender will need to perform a stress test to check you can afford the mortgage if the interest rates goes up to something like 10%. I think that may have been the reason for your rejection.

    I think you need to focus on paying down the debt and then try the remortgage maybe after you have halved the current debt. If you throw your spare money (about 1000 according to your OP) together with your current monthly payment, you can cut the debt into two in 1 year. You may also want to post a statement of affairs (SOA) so the more experience members can maybe identify where you can make some savings.

    I will also look at paying the interest pay part of your partner's credit card using some of your emergency savings (not everything) and maybe keep the available balance on your 0% cards for emergency above whatever cash you have left. You can then build the emergency savings back up slowly.

    The other thing to consider is will you be able to meet all your payment obligations on one of your incomes (consider one of your companies going into administration, etc). By addressing the debt now, you will be in much better position to handle such situations and maybe even retire early.

    To answer your question, no you don't have a problem now but you need to do something now to avoid problems in the future.

    This may actually be a blessing in disguise.
    Last edited by lopsyfa; 22-05-2019 at 7:56 AM.
    • kazwookie
    • By kazwookie 22nd May 19, 8:02 AM
    • 10,975 Posts
    • 130,671 Thanks
    kazwookie
    • #4
    • 22nd May 19, 8:02 AM
    • #4
    • 22nd May 19, 8:02 AM
    47K problem I would say.

    Do you need both cars? can you have cheaper cars / send them back to reduce the amount owed?
    How often do you actually use the caravan? can you hire on site one forthe same amount that you use the one you have? / can you sell the caravan and pay off the owing amount.

    Do you actually have the amount left over each month that you think you do?

    You seem to have good salaries, what would happen if either of you were unable to work due to illness / lost your jobs for what ever reason? what / who would cover the

    Good luck
    Sun, Sea

    • NorthernMonkey1
    • By NorthernMonkey1 22nd May 19, 8:05 AM
    • 300 Posts
    • 1,145 Thanks
    NorthernMonkey1
    • #5
    • 22nd May 19, 8:05 AM
    • #5
    • 22nd May 19, 8:05 AM
    Just short of 10000 on Credit cards, especially if some of this is not 0% is a lot. Although your payments are manageable, the Mortgage co will look at how your debt is increasing or decreasing over the past few years. If its showing a steady increase it could show you're spending more than your earning, which would raise concern.
  • archived user
    • #6
    • 22nd May 19, 9:15 AM
    • #6
    • 22nd May 19, 9:15 AM
    Yep you have a problem. If you or your partner lost your jobs, you'd be in lots of trouble. Debt is only manageable when everything is going smoothly.
    • tallyhoh
    • By tallyhoh 22nd May 19, 10:41 AM
    • 2,207 Posts
    • 2,345 Thanks
    tallyhoh
    • #7
    • 22nd May 19, 10:41 AM
    • #7
    • 22nd May 19, 10:41 AM
    I can understand having debt of 0% or even paying interest on very large purchases like a mortgage. Here you have a very reasonable income so why are you paying interest on a credit card?

    In the same situation I would be considering downsizing the cars & selling the caravan to finance the extension instead of just putting even more onto finance.

    As the other posters mention debt is fine unless one of you loses a job, happened to us unfortunately
    Tallyhoh!

    Stopped Smoking October 2000. Saved 21,840 so far!
    • ReadingTim
    • By ReadingTim 22nd May 19, 3:58 PM
    • 3,451 Posts
    • 5,175 Thanks
    ReadingTim
    • #8
    • 22nd May 19, 3:58 PM
    • #8
    • 22nd May 19, 3:58 PM
    You're teetering on the edge of a very big problem because you've fallen into the classic trap of thinking just because you're meeting the minimum repayments very month then all is well.

    It isn't.

    First off, what would happen if one of you lost your job or the family was without one income for a few months - how long do you think you'd last?

    Secondly, how long will it take to repay the entire amount? Is it even possible? I notice there are some pretty big amounts on cars etc - are these loans to buy the vehicle outright, or finance deals whereby you're essentially renting the thing for 2-3 years because you can't afford the final balloon payment, or don't even get the option to buy at the end?

    Thirdly, what happens when the 0% deals come to an end? Will the amounts be paid off, or will you still owe money? What were you planning on doing then? Could you afford the repayments at the standard rates?

    You say you're not adding to your debt every month, but you don't seem to be reducing it by much either. You're not saving much either, and the savings you do have only represent 10% of the amount you owe.

    Basically, you're just about staying afloat, and it's not going to take too much to sink you. But you've seen the looming iceberg and have time to avoid it: can the extension, reign in the spending on holidays, entertainment etc and concentrate on paying down debt - you need to eliminate all of the non-car stuff as a matter of urgency. Suggest also review the caravan, and consider driving older cars, or hanging onto the current ones for quite a lot longer than previously.

    Good luck - you're going to need it as you're going to face some hard questions and tough choices, which will represent quite a change from the comfortable life you've been enjoying up to now. In short, things need to get uncomfortable until the debt is gone.
    • Happier Me
    • By Happier Me 22nd May 19, 4:43 PM
    • 530 Posts
    • 1,182 Thanks
    Happier Me
    • #9
    • 22nd May 19, 4:43 PM
    • #9
    • 22nd May 19, 4:43 PM
    You've had some tough responses but the thing to bear in mind is that many of us that are active on this site have been seriously affected by problem debt or are that risk averse we see your debt as a problem just waiting to happen.

    I've known lots of people coasting through life similar to you and along comes a job loss or illness and their world falls apart very quickly. It can and does happen.

    So, this is a question of lifestyle and risk. You can afford the repayments so you can choose to do nothing to address your debt levels but you also must accept the risk that a future life event could have a massive impact of your lifestyle and your wellbeing. Change nothing and you'll likely be working into your 70s to pay for today's luxuries and to maintain your comfortable life. Is that what you want?

    Life is all about balance as far as I'm concerned: spend a bit on essentials, spend a bit on luxuries, save a bit for now, save a bit for the future. Have you got the balance right?

    Welcome by the way
    • enthusiasticsaver
    • By enthusiasticsaver 22nd May 19, 9:49 PM
    • 9,214 Posts
    • 21,419 Thanks
    enthusiasticsaver
    I would say that 47000 debt is a lot of unsecured debt on top of the extra 10k debt you want to borrow plus your mortgage. Even if you have a high income you will be extremely vulnerable if one of you loses their job. Why on earth are you paying credit card interest on some of your DHs debts when you have savings of 4000?

    Meeting minimum repayments only is not ideal and does not give the impression that you are more than one payday away from it all collapsing. You say you like to enjoy life which I would say most of us would but taking on such huge commitments mean that servicing your debt including your mortgage is taking almost half of your income. In comparison you are saving 200 a month which is miniscule in terms of percentages. Also your children are teens and almost teens and university is only a few years away if they go. 50 a month is a drop in the ocean towards the costs of that. Will any of those loans be gone by the time they get to university as your parental contribution will be judged as being quite high on your income?
    Early retired in December 2017

    I'm a Board Guide on the Debt-Free Wannabe, Mortgages and Endowments, Banking and Budgeting boards. I volunteer to help get your forum questions answered and keep the forum running smoothly. Any views are mine and not the official line of moneysavingexpert.com. Pease remember, board guides don't read every post. If you spot an illegal or inappropriate post then please report it to forumteam@moneysavingexpert.com
    • bspm1
    • By bspm1 22nd May 19, 10:22 PM
    • 265 Posts
    • 439 Thanks
    bspm1
    I make it closer to 52k worth of debt.
    • enthusiasticsaver
    • By enthusiasticsaver 22nd May 19, 11:20 PM
    • 9,214 Posts
    • 21,419 Thanks
    enthusiasticsaver
    I make it closer to 52k worth of debt.
    Originally posted by bspm1
    I think you need to add it up again. Definitely 47k
    Car Loans 24k
    Caravan 10.2k
    Credit cards 9.8k
    Interest free 3k
    Early retired in December 2017

    I'm a Board Guide on the Debt-Free Wannabe, Mortgages and Endowments, Banking and Budgeting boards. I volunteer to help get your forum questions answered and keep the forum running smoothly. Any views are mine and not the official line of moneysavingexpert.com. Pease remember, board guides don't read every post. If you spot an illegal or inappropriate post then please report it to forumteam@moneysavingexpert.com
    • boomsmitty
    • By boomsmitty 23rd May 19, 8:12 AM
    • 21 Posts
    • 14 Thanks
    boomsmitty
    A problem indeed, but if you get your act together you can sort it.

    Forget the extension, it's not an emergency. Sell both cars and buy two cheapies for 2k a piece that'll last you a couple of years. Sell the caravan. You don't need it. That's about 30k of debt gone, more or less. Even if you are the wrong way round on the cars you can clear the difference quickly with that extra money at the end of the month.

    Then just start attacking the remaining debts with intensity. If you go hard you could be debt free in a year I reckon, why not?

    Then imagine having no debt, apart from your mortgage, and all that lovely extra money from that income going into an investment pot every month. Splendid.
    • fresh cotton
    • By fresh cotton 26th May 19, 6:54 AM
    • 31 Posts
    • 67 Thanks
    fresh cotton
    Yes you have a major problem.

    I say major because, even though you have so much debt, you were actually trying to extend your mortgage by 10,000 for further completely unnecessary purchases. If you carry on the way you have been, you will become bankrupt
    • Sea Shell
    • By Sea Shell 26th May 19, 7:12 AM
    • 2,590 Posts
    • 4,675 Thanks
    Sea Shell
    I agree with the others. You need to be prioritising hitting your debt repayments hard. You say you have 800 per month left in disposable income for Holidays and Entertainment. But really you don't. Use this 800 to pay down the debt, and forgo the luxuries for a while.

    Try going on an austerity drive for say, 6 months, and throw as much as you can at the debt....short term pain, long term gain!!! Try and turn it into a competition for the kids too, to try and distract them from not spending money on them. Although at their ages, they'll no doubt be all "it's not fair" if they're told NO for a while.
    " That pound I saved yesterday, is a pound I don't have to earn tomorrow " JOB DONE!!
    This should now read "It's time to start digging up those Squirrelled Nuts"!!!
    • The Miser
    • By The Miser 26th May 19, 11:36 AM
    • 84 Posts
    • 38 Thanks
    The Miser
    I agree that you have a potential problem which you should avoid. Your morgage is 815 per month but remember that this could very easily double if rates rise (or any special deal expires). (Historically MY morgage rate hit 19%pa)

    Your caravan: you owe 10,000 odd but it looks like you also take other holidays. You should be able to get holidays at 4,000 total for the family so your caravan is 2 1/2 holidays (but don't forget fuel towing the caravan plus campsite fees plus perhaps costs of crossing the channel). One OR the other but not both.
    Two cars - I think the idea of a 2000 car each is optimistic - at that price reliability suffers; do you REALLY need two cars? Try to reduce the cost at least.
    Credit cards - nearly 10,000 and some of it is interest bearing; pay off ALL the interest bearing part as an immediate minimum and desperately try to reduce the total into three figures.
    General: pay off ALL interest bearing debt as soon as possible. Ensure that you never ever take on debt where there is a fee for early repayment.


    The future: I LIKE that you are putting 100 per month into an emergency pot; think if it would cut your interest bill if you use that to repay interest bearing debt.
    100 per month towards university costs. GOOD but will it be enough. At today's prices tuition will be 36,000 (3x6000 each) PLUS living costs which could easily be as much again.


    DO make a list of jobs each of you could do if you lose your jobs; I did this before the company closed down - I had about 80 different possibilities using a max of 100 investment and bringing in 500 per week.
    Watch the TV programmes about eating more cheaply; it works.
    Good luck




    Edit no 3. (!) Read, mark and learn every line of https://www.moneysavingexpert.com/family/money-help/.

    OK so it was written for those whose outgoings exceed income BUT you should be able to save thousands to use to repay debts. Just the odd thousand off your grocery bill would help but there is far more on that page. Then look at the allied threads like the challenge on Frugal Living.


    Edit no. 2 Once you get your debts down and as soon as possible ensure that you are putting the maximum possible into a pension pot or equivalent. You will need a big pot to bring in any realistic private pension - if you can amass 300K then with considerable care that should bring in 1K / month after today's taxes on top of any state pension. Do be aware that the rules change rapidly and the changes are almost never in your favour.


    Edit no 1. Quite separate from our pension pot which has doubled despite drawing on it monthly, we put a redundancy lump sum into investments and have more than doubled the original amount and average 10% pa. income after tax Study this VERY CAREFULLY and run a dummy account before trying - you could easily lose money
    Last edited by The Miser; 26-05-2019 at 4:32 PM. Reason: New thought
    • katsu
    • By katsu 26th May 19, 11:37 AM
    • 4,546 Posts
    • 14,127 Thanks
    katsu
    Hi and Welcome KL.

    You might have more risks than a problem, but you definitely aren't in the best financial shape.

    You are right that your life has been comfortable. Your income comfortably covers your outgoings.

    What are your financial plans? When do you plan to psy off your mortgage? What age will you be? What happens at the end of the car leases etc?

    It's easy to convince ourselves that we have good debt when it is spent on the house (a fair point that it is way less working than debt that comes from random and day to say spending). What is/ was your plan to clear your debt on the credit cards?

    You say you use the caravan a lot. That's fair. I think it will take you about 4 years to pay for it, depending what the interest rate is. Is that what you think too?

    The SoA (statement of affairs) is a really good template for working out where your money is going and you can share it here if you want advice on ways you can save money further.

    This mortgage company has done you a great favour; they've helped you wake up and reassess your situation. Now you can decide what you want to do next.

    Please do let us know what you think. Very best wishes with whatever you decide to do next.
    Debt at highest: 8k Debt Free 31/12/2009 (nine years and counting ) Original MFD: May 2036. MF Dec 2018
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