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Original poster

Does this sound sensible or stupid?

12 replies

Iknowothershaveitworse · 23/05/2013 19:33

Name changer here!

This is is the bare bones of the problem...dh got a new job at the back end of 2012 with a decent salary.
For a couple of years before that he was on a pretty dire salary, with me working PT on a decent enough salary for a pt job.

Whilst dh was on the dire salary, we've run up about £6k of overdraft and credit card debt. We thought that when he started the new job, we'd get the overdraft under control fairly quickly, but we haven't.
Dh keeps an almost daily eye on the bank account with his "pet" spreadsheet. (I say that jokingly, it's a pretty good spreadsheet).
We've done all the utility switching etc, but the day to day stuff never seems to go away.

We don't have a huge mortgage, and I'm wondering if in order to take control for once and for all, it might be best to remortgage, to cover the credit card and overdraft, and start with a clean sheet, so we know exactly where we are with our cash.

The bare figures are ...
Dh salary £40k
My salary £17k
Value of house £225k (ish)

Outstanding mortgage £57k (13 years to go)
Cc debt £3k
O/d £3k
Car loan £4k (with 3 years to run)
Work needed on house £2k

Does this sound like a sensible idea? To add maybe £15k to the mortgage would cost about an extra £180 to mortgage payment, but this would take at least £400 off the current outgoings

OP posts:

DiscoDonkey · 23/05/2013 19:37

Personally I would work out another plan to clear your debts. I don't think paying back 6k over 13 years is a good plan long term.

LunaticFringe · 23/05/2013 19:38

This reply has been deleted

Message withdrawn at poster's request.

tribpot · 23/05/2013 19:56

My guess is you're not budgeting effectively yet. Watching the bank account isn't the same as budgeting, particularly if you're not accounting for unexpected or irregular amounts so the road tax comes up, for example, and destroys any surplus you think you have.

It may be that the remortgage option is the right one (although be aware many people who consolidate debt end up running up more) but I think I would try to get a real handle on your running costs so you can decide what to do from a position of knowledge.

I am a big fan of You Need a Budget and it would be well worth looking at some of their video tutorials to see if the method appeals to you - this is all freely available without the need to buy the YNAB software, btw.

Maybe also have a look at Debt Free Wannabe at Money Saving Expert or Dealing With Debt at The Motley Fool.

nextphase · 23/05/2013 20:07

I think we need more info:
How much is your mortgage payment each month?
How much is your debt payment each month?
How much are you spending on food etc?

Where is the extra money that DH is bringing in disappearing to? ie if you looked at a bank statement from before he got the job, how much were you spending? And what has increased to swallow up the extra income?

starfishmummy · 23/05/2013 20:43

So you have 57k between you and you are struggling. I think you need to look at your spending

Blistory · 23/05/2013 20:53

So you have £12k of debt which you propose to clear by extending the amount on your mortgage which will cost you £28,080 assuming no change in interest rates. And you want to turn it into secured debt.

Your current debt at £400 a month will take you 3 years to repay at a total cost of £14,400 plus interest on the card and OD.

No, it's not sensible and I can guarantee that even with the best of intentions, during the 13 year of the mortgage term you will take on more debt or another credit card.

Please don't consolidate - I have to tidy up the crap when people mess it up and it's soul destroying seeing the decisions that people make with the best of intentions. Turning unsecured debt into secured debt isn't worth the risk to your house.

Concentrate on the highest interest debt and clear that first. Then the next one. Do it like that and it'll clear quicker.

Blistory · 23/05/2013 20:53

Your current debt at £400 a month will take you 3 years to repay at a total cost of £14,400 plus interest on the card and OD.

No, it's not sensible and I can guarantee that even with the best of intentions, during the 13 year of the mortgage term you will take on more debt or another credit card.

Concentrate on the highest interest debt and clear that first. Then the next one. Do it like that and it'll clear quicker.

Tookagestogethere · 23/05/2013 22:41

Name changed too.

I really think you need to write down exactly what your spending. We have an income of 45k, our mortgage costs £690 per month but we over pay by £150 per month. I'm guessing £840 per month would cover your mortgage and a fair chunk of your repayments. We have 2 dc, run a car, enjoy a couple of UK breaks a year and the odd meal out. It does require discipline though. I meal plan and have to be organised with how we spend our money as it's all accounted for.

If you put the debt on your mortgage I doubt it'll do much to your repayments and you may feel it's better to start a fresh. It'll certainly be less painful to do it that way but long term it will cost you more and you really need to resolve why your debt hasn't naturally decreased. If it's because your spending has gone up to match your new income then the same is likely to happen again and you could find yourself in this position again soon.

ThisIsMummyPig · 23/05/2013 22:48

Can you swap your credit card to one that gives you 12 months interest free, and spend those 12 months paying down your overdraft.

You were managing on £10k less a year, presumably, even accounting for your extra debt that you were accruing at that time.

I think you need to bring down your spending.

Blistory sounds as if she knows what she is talking about.

Tookagestogethere · 23/05/2013 22:49

I've just noticed that although your debt is 12k you want to add 15k to your mortgage. Definitely don't do this. You should be aiming to reduce your debt. I suspect with some effort you could shave a further £220 off your outgoings so that financially you'd be in the same situation you're proposing but with remortgaging.

munchkinmaster · 23/05/2013 22:57

A 57k mortgage must be tiny? About £300 a month. My guess is as soon as you get a higher wage your outgoings and spending creep up. You feel you can afford it (and deserve it for working hard). You made a decision before to run up debt and pay it off when he was promoted. I think you need to stick to this plan.

PuggyMum · 23/05/2013 22:58

I agree that putting this kind of debt onto your mortgage is not the best way.

With discipline you can repay this in no time. And also agree watching what you spend is not budgeting.

My advice to my clients is to have a salary account, a bills account and a savings account.

Get your dh to make a spreadsheet I all your fixed bills, add a contingent amount for variable direct debits and on payday have this amount paid into the bills.

Have a standing order to your credit card for more than the minimum payments up to what you can afford. If you can get an interest free period try to pay it across that timeframe. Or switch again before the period ends. Do not use the credit card!!

Pay a set amount into savings to cover whatever you want it to. Car repairs, holidays etc.

Live on what's left.

That way on payday all your bills are paid. Debt is reducing.

Fwiw we pay £2000 per month into our bills. We've left it at that even though our mortgage has reduced. All surplus at the end of each month is transferred to overpay our mortgage but we know if interest rates go back up we are covered.

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