Borrowing more on mortgage

[BYTEr]

It is straying off topic, but with £150 remaining after debts and expected expenses, but then an admission that there are always unexpected expenses, I would argue that your debts are not affordable at all. You're extremely vulnerable to a financial shock, such as a prolonged loss or reduction of income. I sincerely hope that some of those outgoings insure you against those kinds of events.

We're extremely vulnerable, it only takes a couple of sick days, or needing new tyres, or a trip to the vets and we wouldnt have enough and we'd be forced to use a credit card.

We've managed for the past year, but unless our income goes up we will be in this situation for at least another 3 years.

We have done everything we can to cut expenses, like using 0% balance transfer cards, switching energy providers, getting rid of sky, using packed lunches, shopping at Lidl etc, but the fact is, we have overstretched ourselves trying to buy a house from an unexpected pay out and we're now in a situation where we just about manage but very vulnerable, hence why I was interested in borrowing more on our mortgage to pay some debts off and reduce our monthly outgoings.

Ideally I need more income, but doesn't most people.

 

[The_Abyss]

Unfortunately you don't have many options now you're in this situation, so you may not have choices. If you're able to remortgage to borrow more then it'll be cheaper in the short term but a non-secured personal loan will be cheaper over the longer term. I don't think you have the luxury of looking at the longer term.

If neither of those is an option then there's already been some good advice in this thread about paying off the most expensive debts first etc. Are there any family members who may be willing to help you out?

What are your options for more income - can either or both of you look for other jobs or get second jobs?

Do NOT have a child!

 

[BYTEr]

Unfortunately you don't have many options now you're in this situation, so you may not have choices. If you're able to remortgage to borrow more then it'll be cheaper in the short term but a non-secured personal loan will be cheaper over the longer term. I don't think you have the luxury of looking at the longer term.

If neither of those is an option then there's already been some good advice in this thread about paying off the most expensive debts first etc. Are there any family members who may be willing to help you out?

What are your options for more income - can either or both of you look for other jobs or get second jobs?

Do NOT have a child!

Didn't think we'd have many options, even remortgaging doesn't seem an option, but worth some more research, as I've mentioned earlier in the thread, we knew we'd be in this situation buying a house when we did, hopefully in 3-4 years we will be in a better position and it would have been worthwile.

In terms of family helping, then no, my father in law is a high earner (senior HMI inspector) who has helped us out on occassions with unexpected expenses, so we'd never be on the street or anything.

In terms of children, then too late, wife is due March 2019, but being the first grandchild, our parents have pretty much offerred to buy most things like pram, car seat, cot and those things, wife is a primary school teacher and gets a good maternity package, I think we can manage, but again, will mean no savings, paying the minimum etc.

Thanks for all the advice.

 

[planty]

In terms of children, then too late, wife is due March 2019, but being the first grandchild, our parents have pretty much offerred to buy most things like pram, car seat, cot and those things, wife is a primary school teacher and gets a good maternity package, I think we can manage, but again, will mean no savings, paying the minimum etc.

It's not just the initial outlay on pram, cot, etc, a child will significantly increase your monthly outgoings, which you are already struggling to cover the costs of.

Given that you have only recently bought the house, I wouldn't have thought remortgaging is a viable option, but that's just based on my own instincts rather than any specific knowledge! What sort of mortgage are you on at the moment? Fixed for x years?

As others have said, getting a new/second job would appear to be an obvious way out. Perhaps your wife could make some extra money by tutoring? What sort of work do you do?

 

[Psycho Sonny]

Hi all,

Thanks for the replies.

Our debts are manageable,

no they aren't.

manageable would be that once you have paid all your bills for the month and that includes debts. you have plenty of money to do what you need or want within reason.

you should have a spare 30-50% of your HH income left over after all monthly direct debits leave. the 30-50% is for basically your food shopping, fuel, purchases for the month whatever they may be (going out, clothes, etc) and from that circa 10% still left at the end of the month which goes into a savings account. these are arbitrary figures but should be close to what would be classed as manageable for the average person.

being left with no money every month to pay for any surprise bills would be deemed unmanageable debt in my book.

you need to decrease your outgoings or increase your income. moving the debt elsewhere isn't proper management of your finances. if you did do it and then you default on the mortgage it will have serious consequences.

 

[The_Abyss]

In terms of children, then too late, wife is due March 2019

Holy ****. You're risking turning into a case study of everything you shouldn't do! Why on earth did you do that when you knew your current financial position?

I'm really unsure how the mortgage application was allowed to go ahead with the numbers that you're quoting.

 

[HungryHippos]

I'm not sure on your best course of action but I'd highlight that the freehold in question could be valuable, and if you can't or won't buy it then some investment company probably will and they'll charge you thousands more to claw it back off them down the line, also leaving you with a less valuable leasehold property to sell.

For more info look into the home builder leasehold scandal of recent years to hear of some eye watering figures that people are being asked to pay for freeholds from 3rd parties.

Your mortgage doesn't sound expensive so I'd suggest more belt tightening if you can do it. Sell any assets you have which you don't use or want if you have anything worth selling.

I'd consider approaching your high earning father about getting a loan from him to cover your high interest debts and potentially the cash for the freehold when it comes up. Setup a manageable repayment plan at 0÷ interest ideally.

 

[BYTEr]

Holy ****. You're risking turning into a case study of everything you shouldn't do! Why on earth did you do that when you knew your current financial position?

I'm really unsure how the mortgage application was allowed to go ahead with the numbers that you're quoting.

Well, if you must know, my wife was told that it would be extremely difficult, nigh on impossible to conceive naturally due to certain issues even with drugs, but you apparently have to of being trying to conceive naturally for 2 years before any other methods and apparently it can take 4 years before you get to the IVF stage. But guess what, we conceived in the first month of trying and midwives now refer to our baby as the miracle baby.

So yeah, believe me, we weren't expecting to have a baby anytime soon.

In terms of the mortgage application, we were healthy'ish financially before we bought the house, we had £4k savings (which did disappear in purchasing the house), I had a slightly better paying job and we didn't have thousands on finance for things like flooring, kitchen appliances and furniture.

 

[BYTEr]

I'm not sure on your best course of action but I'd highlight that the freehold in question could be valuable, and if you can't or won't buy it then some investment company probably will and they'll charge you thousands more to claw it back off them down the line, also leaving you with a less valuable leasehold property to sell.

For more info look into the home builder leasehold scandal of recent years to hear of some eye watering figures that people are being asked to pay for freeholds from 3rd parties.

This won't be a problem I think, it is written in our contract that it can only be our leasehold fee (£150) times 25 (=£3750) and can only increase by the RPI after 10 years even if it's sold to other companies which I doubt will happen now, of course we have to pay for the other sides legal fee's though (£350-£550), there are lots of cases of this actually happening with this housebuilder though.

I still want to buy it if possible as soon as possible when the 2 years are up.

 

[The_Abyss]

Why? This is another irrational financial decision. You currently have a low known cost with limited increases that can be applied, but you want to borrow more money that you cannot afford to ‘save’ yourself £150 a year and no other benefits. Why not just wait a few years until you can afford it?

Or, if you must buy it, wait 2 years to borrow the money to do so.

 

[BYTEr]

Why? This is another irrational financial decision. You currently have a low known cost with limited increases that can be applied, but you want to borrow more money that you cannot afford to ‘save’ yourself £150 a year and no other benefits. Why not just wait a few years until you can afford it?

Or, if you must buy it, wait 2 years to borrow the money to do so.

Because comparing the houses built before ours at the start of the estate that are now up to 7 years old, the ones which are now freehold are on the market and have sold for a lot more than the same leasehold ones, much more than the £4k'ish it costs to obtain, it's not to save £150 a year.

The reason I want to buy it as soon as feasibly possible is because in 1-2 years, we want to have the option to sell and move, having the freehold will massively help with this as well as the value, but of course, this isn't the highest priority, but if I could borrow an extra £10k for example in a year or two then it will be something we consider.

 

[HungryHippos]

I agree with Abyss, I'd have more pressing concerns than saving less than £12.50 a month whilst costing me £3750 upfront. I'd definitely want to get it sorted before the 10 year RPI thing starts to kick in though. I was worried that it would get sold out from under you (at great expense) but it sounds like you can't get screwed over too badly even if you don't pay it for another 8 years. However I'd argue if you have a way of buying out the freehold (even a short term borrow for the cash) when you actually want to sell that would be the best time to get it.

I don't think you have enough equity to borrow more on the house if you only have 5% down, I'd not bother entertaining it, especially as any equity you've gained from price increases will help you save money later by giving you a better LTV. If you gain enough you may even be able to re-mortgage to pay down the HTB loan (which goes up with the house price).

I'd start with your most expensive debt first, which sounds like the credit card at 18.9% and go from there. If you can get any fiscal help from family on paying that off then that is where I'd go.

It's worth noting that whilst the HTB loan can probably work, it too will start to cost you money eventually. I can only see it making sense if you are thinking there is a good chance you will earn more in the future to cover paying it back before the interest racks up on it. By the sounds of it, if anything you are going to be earning less once a child arrives on the scene! You may need to sell to avoid being swamped with future payments against your own debts plus the HTB loan.

Can you do anything to better your own prospects in your industry? I.e. undertake training, any promotions you can apply for where you work, even looking for a better paid job?

 

[BYTEr]

Can you do anything to better your own prospects in your industry? I.e. undertake training, any promotions you can apply for where you work, even looking for a better paid job?

Unfortunately, it hasn't gone quite to plan since graduating in 2015 and I've had to move jobs a few times because it was apparent that it wasn't going to go anywhere. I'm now at a new place, which seems really good for future prospects, but I've had to take a pay cut and essentially now at the bottom of the ladder again. In 3 months I should be getting a £2k pay rise, but I think it will be a good few years working here before I'm earning decent money.

Luckily my wife has been a teacher since graduating and is now on something like £29k with a recent £200 a month pay rise, so we are now a little better off but with a baby coming.

 

[h4rm0ny]

Holy ****. You're risking turning into a case study of everything you shouldn't do! Why on earth did you do that when you knew your current financial position?

Wise or not, with uncertainty about mortgages and assistance schemes and the risk of house prices going ever higher, it's at least understandable that if a chance to buy a home comes long you'd want to grab it. It took me a very long time to get together enough to buy my house. And if I'd waited, it could have well have only got harder.

I'm just saying it's very understandable.

 

[The_Abyss]

Wise or not, with uncertainty about mortgages and assistance schemes and the risk of house prices going ever higher, it's at least understandable that if a chance to buy a home comes long you'd want to grab it. It took me a very long time to get together enough to buy my house. And if I'd waited, it could have well have only got harder.

I'm just saying it's very understandable.

And I’m just saying that I don’t consider getting into significant debt combined with unaffordable spending behaviours is really ‘a chance’ to buy a property. But we are where we are.

 

[Semple]

The reason I want to buy it as soon as feasibly possible is because in 1-2 years, we want to have the option to sell and move

I really get the impression that you don't have realistic expectations. I don't want to come across rude here at all, but you're already struggling with a lot of unsecured debt, plus adding in the costs of a new child, and the fact that you wish to purchase your freehold. I can't see how you can possibly consider moving after such a short time, and saving up for all those additional expenses. Unless you're both considerably downsizing, but that seems unlikely with an extra member of the family.

I think you both really need to sit down and see where you can cut back on things. The fact that you mentioned earlier on that money left at the end of the month goes on clothes/shoes and birthday/Christmas presents. I'm sorry but those are all luxuries that you shouldn't be spending on.

Obvious things to save money on:
-broadband/TV, swap to the cheapest package you can find
-mobile contracts, cheapest sim only contract ~£10/mth
-food, absolutely no takeaways, batch cook meals and ensure you're not buying branded foods

Do you work far from where you live? Any possibility of walking/cycling, even if only a few days a week, as that'll help reduce running costs on your car.

 

[HungryHippos]

I have my own house (on my own) with a similar mortgage (not split between 2 people) and I don't earn a whole lot more than your missus does as a teacher, you should be able to do better at chipping away at your debt than you are, if you're earning even £20k you should be in a far better position than it sounds like you are in. I'd love £50k a year and would be supremely comfortable on that.

I can quite comfortably put about £1k a month towards "whatever" after living expenses are factored in, I am paying back some money still to the bank of mum and dad from my house purchase but it's manageable and is where most of my surplus cash is going at the moment, I intend to clear that balance and be totally debt free within the space of a year or less.

Places you can easily save money (in addition to what Semple just said so I am including those first in the list);

-broadband/TV, swap to the cheapest package you can find
-mobile contracts, cheapest sim only contract ~£10/mth
-food, absolutely no takeaways, batch cook meals and ensure you're not buying branded foods
-walk or cycle to work occasionally if doable
-tv license. Do you need this or can you get by on Netflix/Amazon prime TV etc? It's a cool £150 a year and I don't pay it as I don't watch live tv.
-have you really done the best deals you can for Home/Contents insurance, car insurance? Are you paying insurance up-front in one go or spreading the cost? the former is more expensive in the long run.
-do you have cars on finance or expensive PCP/loan schemes? if so could you downgrade at least one of your vehicles to something that is cheaper to run long term?
-are you paying for lots of monthly things you don't really need, or can do better on? monthly subscriptions can definitely add up.

Beyond any outstanding credit card or debt payments, you should definitely review your outgoings and see where you can cut back. Contrary to what Semple said I would consider a takeaway a month at less than say £20 for 2 people to be an acceptable quality of life trade off, if you aren't holidaying or spending money on expensive presents or clothes, at least you can treat yourself once in a while.

For reference my outgoings monthly are (for just me, so yours might be a bit more):

Mortgage £580
Council Tax £132
Water + Sewerage £16
Mobile Phone £23 (includes handset + data)
Gas + Electric: £60
Life + Critical Illness cover £23.50 (this actually isn't necessary for me but I want some kind of safety net).
Fibre Internet £24 (includes Line Rental - I have the line rental saver to save a few £ a month)
"Entertainment" £20 (this includes getting access to Netflix, Amazon Prime, Spotify, and Usenet)
Food around £150-£180
Fuel £50
Total £1109

My yearly costs are:

Car Insurance: £250
Car Tax: £150
Car Service: Probably around £100 a year to sort out odd problems
Home/Contents Insurance: £120

My car is paid off but is getting on a bit, so not giving me a monthly cost but still costs a bit on the aggregates of the tax, insurance, service and fuel.

How do your monthly costs compare OP?

 

[BYTEr]

Our monthly expenses are roughly as follows:

Loans: £550
Mortgage: £528
Car Loans: £280
Food: £250
Pensions: £170
Min Payment of Credit Cards: £150
Council Tax: £147
Furniture Finance: £140
Fuel: £140
Car Insurance: £86
Gas/Elec: £76
Flooring Finance: £70
Mobile Contracts: £62
Overdraft Fee's: £50
Internet: £39
Water: £35
Home Insurance: £15
TV Licence: £13

The sum of which is £2801, our joint income after tax is roughly £3226 therefore leaving us with £425. This isn't of course an exhaustive list either, we have pets to feed, then there's things like household items like cleaning products etc and this is taking into account my wife getting a £2k pay rise in September.

Insurances and gas/elec is the cheapest we could find, internet providers are limited as we have fibre to property, as much of the credit card debt is on 0% interest deals, our mobile contracts end in 6 months so we can get cheap sims then.

Before we bought our house, we didn't have any flooring or furniture finances, council tax was cheaper, we didn't have overdraft fee's, internet was cheaper, we were closer to work etc so we roughly had £800-£900 left with £4k savings back then and managed fine.

 

[Psycho Sonny]

Our monthly expenses are roughly as follows:

Loans: £550
Mortgage: £528
Car Loans: £280
Food: £250
Pensions: £170
Min Payment of Credit Cards: £150
Council Tax: £147
Furniture Finance: £140
Fuel: £140
Car Insurance: £86
Gas/Elec: £76
Flooring Finance: £70
Mobile Contracts: £62
Overdraft Fee's: £50
Internet: £39
Water: £35
Home Insurance: £15
TV Licence: £13

The sum of which is £2801, our joint income after tax is roughly £3226 therefore leaving us with £425. This isn't of course an exhaustive list either, we have pets to feed, then there's things like household items like cleaning products etc and this is taking into account my wife getting a £2k pay rise in September.

Insurances and gas/elec is the cheapest we could find, internet providers are limited as we have fibre to property, as much of the credit card debt is on 0% interest deals, our mobile contracts end in 6 months so we can get cheap sims then.

Before we bought our house, we didn't have any flooring or furniture finances, council tax was cheaper, we didn't have overdraft fee's, internet was cheaper, we were closer to work etc so we roughly had £800-£900 left with £4k savings back then and managed fine.

it's amazing how people say they are skint then have multiple pets. a woman at work is always giving us the single mother line, etc she has 9 dogs.

also wtf on number of loans, finance and credit. car insurance £86 per month? wtf do you drive?

things to get rid of or lessen:

TV Licence - £13
Internet: £39 - is this 350MB broadband I assume? go down to 50MB
Overdraft Fee's: £50 - this is literally money for nothing. you need to be in credit in your account. i don't understand this at all. £50 thrown away every month for nothing.
Mobile Contracts: £62 - put it this way my mortgage payments are double yours. i pay £8 per month on my PAYG SIM your priorities are wrong. get rid of the samsung/iphone. buy a chinese phone in future for £200 and £8 sim.
Flooring Finance: £70 - i don't get this at all. i carpeted half of my house for £400 (including labour). you are paying £70 per month for flooring. why did you go for the most expensive option here?
Car Insurance: £86 - i drive a 3 litre petrol sports car - my insurance is like £300 a year. you are paying 3 times this much. what are you doing? if it's for 2 cars then it's still too high IMO.
Min Payment of Credit Cards: £150 - this is the minimum payment? wow my maximum payment is less than this a month. i spend like £100 a month on a credit card.
Food: £250 - £60 a week is alright tbh. i wouldn't really be looking to cut that down. so long as it's spent correctly on decent food.
Car Loans: £280 - what car and how long is the loan? put it this way. i got the wife a fantastic car (Lexus). every extra you can imagine. has extended warranty, mot and service plan included and it costs less than this. so it's definitely somewhere you could have cut down on. we did put down a £2.5K deposit (well we traded the old car in and that's what we got for it). we also own both our cars outright. we can sell them at anytime if needed to.
Loans: £550 - this is just laughable tbh. your loans are same as your mortgage. i just don't understand this at all. stop buying stuff on finance.

I can't help but think you have done this to yourself after looking at this list. you have overspent on pretty much everything apart from food and the thing you should have overspent on a home.

 

[Syla5]

Consolidating debt can help manage it but from the sounds of it you don't have the capacity to consolidate all your debt in to your mortgage which will not really help you, it will just shift some of the debt from one place to another, and in the short term appear to be a saving that in the long term wont be.

What also needs to be understood here is the difference between a remortgage and additional borrowing. You can only remortgage at the end of your current mortgage offer term (is it 2 years, 5 years etc) or if you are changing lender, but this can also come with costs of early mortgage repayment charges etc, unless you have a mortgage that doesn't have those charges (extremely unlikely).

Ideally you want to be able to borrow enough money to pay off the loans, and then any other debt that is not interest free. Then after that you need to focus consider consolidating the 0% debt to house all the payments in to one payment.

Then you need to over commit to paying back the additional borrowing.

The difficulty here is its hard to offer you a best solution without knowing the total debt, but based on those loan payment amounts, and credit card min payments, I cannot see how you can get yourself in to a better position by remortgaging.