old house and mortgage rates - killing the budget

[lankylucy]

Buy an old house they said.......

So we have lived here for 3 years. Me, dh, ds ( teen) and dd aged 2. We decided to give ourselves a project, and believe me, this is a project. It's a big old victorian terrace but in need of a lot of work. We have done quite a bit, however the mortgage rate increase is starting to bit as we are no longer on a fixed.

We both work full time and have a decent income, but the mortgage stuff is starting to make us feel vulnerable.

JOINT INCOME £5848

Mortage £1518 who knows where this will end up :(
Childcare £750
Council tax £135
Water £40
Scottish power dual fuel £236
Car lease £385
Parent loan £135
Credit card payments £300
Kitchen finance £175
Food £400
3 mobile phones £72
Internet and TV package £60
Apple TV £4.99
Car fuel £280
Breakdown cover - £28
Pet insurance and health club for 2 cats - £36
Life insurance - £37
House insurance - £22
Car insurance - £38
Teen DS money for school lunch etc - £80
House repair savings - £200 – quite a bit to fix!
Days out/Christmas/birthdays etc - £100
Personal loan payment - £148
Clothes - £50

TOTAL - £5229.99
SURPLUS - £618

I know we are lucky to have a bit of surplus, but I am not sure how much of this will be needed for the mortgage. I also know that there are some non-essential areas that we can cut back on.

yesterday I was of the mindset that we needed to sell the house and buy something modern and more affordable, however that isn't what I really want to do.

Not really sure what I am asking. I think I just needed to vent a bit!

I think that we need to start building a bit of a buffer for the possible mortgage hike. What do you guys think?

You have a great income and a lot of surplus. I know mortgage is high but you have a very high income to meet it. We previously had the same amount going out in mortgage and childcare with a significantly lower income. None of that is to say your concerns aren't valid but you don't seem to be in a bad place to start.

Have you worked out what an increase of 1,2,3,4% etc will cost you so that you are mentally prepared for it? I'm a sucker for a spreadsheet so if that's up your street you could do one to play with and see what happens when you adjust things. If mortgage is going to get too high and nowhere else to cut costs would you be able to extend the term to keep payments affordable?

What happens with the surplus at the moment? Are you paying interest on those credit card payments? If you have some savings for a rainy day or loss of income could you use your surplus to knock them down (if on a high rate) and then make overpayments to your mortgage? Money saving expert has good mortgage calculators you can play with to see impact of rate changes and overpayments.

Would switching to a fixed mortgage be worth it for peace of mind? You might have to pay a bit more than now but at least you would know it isn’t going to increase for however long and plan accordingly?

Unless you’re really regretting buying a project and looking for a reason to move to en I think you’re actually in a good position. As you say you have a surplus to absorb some increases and then cutting back on non-essentials is a back up plan. Also is paying off your credit card or the loan to parents an option in the foreseeable future? If it is then you’ll have an even bigger buffer to play with.

Hopefully a good vent is all you need to see it’s not as bad as you feel it is (although it is noting to see your budget shrinking!)

Hi, could you reduce some of those outgoings? Move phones to cheaper SIM only contracts? Or when they are out of a fixed contract, keep them and don’t replace.
when child is 3, the 15/30 hours funding should reduce the childcare bill.

Presumably you will only have the £750 a month childcare bill until your youngest turns 3? My bill went from £750 to £250 when that kicked in for us. Depending on your age could you fix your mortgage but extend the term to give you certainty and make the monthly payment more manageable?

Writing it down is always a good start, but sometimes it’s a bit of an eye opener. Totting up your debt repayments excluding mortgage but including the car lease payments (and counting the kitchen finance, parental loan, personal loan, credit cards) gets you to almost 20% of your income. When do those finish, as that’ll free up quite a chunk of cash!

I'd pay down your loans ASAP if you can. Go without clothes for a few months. How much is your credit card? Put that in the back of a draw too.

I have just up a monzo account and just moving my weekly spends into the current account part so there's no overdraft. In theory we have a surplus. In reality we eat into savings every month and in determined to stop that.

Out of school club until 11?

What struck me from that list is the amount of finance that you are funding on top of the mortgage. Hopefully some of those will be paid off soon freeing up some disposable income. I wouldn't be spending on any more expensive projects on the house until you can actually afford them.

For us, school wrap around care is nowhere near the cost of nursery. Even if we used it every morning and every afternoon it would still be less than £300 a month. If childcare currently costs £750 for a 2 year old that suggests it’s not full time so would likely be much less.

Are you on SVR atm?
Fix ASAP then at least you know what you are dealing with for the next 5 years.
You have £1143 loans/ debt repayment monthly which is 20% of your income!
It sounds like you feel a bit out of control at the moment.
Fixing would give you peace of mind and then I would concentrate on getting debts down .
Do you have a cash cushion?
What are your CC debts and what are the interest rates?
Lots to consider and get under control before considering home improvements.

Why not look at remortgaging your home on a fixed rate and borrowing enough to pay off all your loans? Wouldn't that cost less per month than you're paying out now? Enabling you to overpay and clear everything faster?

Yes, this shocked me as well!

I know it is only tinkering around the edges but £137/month for phones, TV & BB! Surely there are savings to be had there?
Also breakdown cover, we cover all our vehicles (home-start, recovery to destination of choice, personnel cover etc etc) for £125/year.
I would never skimp on any type of insurance (inc. pets) and appreciate how important it is but are you getting the best deals?

At the end of the day I think it is your borrowing.
You have a good surplus at the end of the month and will probably weather the storm ok but it could be better if you didn't have so much on finance (in one shape or form). Are any of these due to be paid off soon?
What is the Credit Card £300, is this just general spending using the card and is paid off monthly (good) or is this a reduced payment supporting a much larger balance?

It is the finance and the debt that's the problem.

That's a lot of extra debt you are servicing. Car loan, kitchen finance, other loads, credit cards. And a big fuel bill too. any way to cut costs? Buy a smaller more economical car perhaps?

Where are the credit card bills from?

Hopefully you will get the 30 hours help with nursery costs next year?

Approx £1100 on other loans/finance. That's a huge percentage of your income servicing debt

I also agree that fixing for a few years to get you through the nursery years and get your debts under control would be a good idea

You have a great income and a lot of surplus.
Sorry OP, I would disagree with this. I was shocked to see how much debt you have and how little you have left over at the end of the month. £600 could vanish in a shot.
We're currently living off of my salary only as my husband is retraining. I bring home £3000 a month after tax and, after all costs including food, we have £1500 left over. Fat load of use that is to you, and everyone's outgoings are different, I know. But I think you need to pay off some of those debts and build a much bigger buffer - quickly.

As others have said, you have a lot of additional debt you're paying off. How much do you owe parents/credit card etc?

Mobiles are high - are you locked in? I pay £12 a month sim only with Three and that has 100gb data plus unlimited calls/texts. You can also get around £50 cashback per contract on topcashback.

Can you lease a cheaper car?

Your income is double mine and we are also a family of four, I'm sure you can cut back in lots of ways. We have a £50 surplus vs your £600

You have a lot of debt. How has that happened?

I’d be cutting absolutely everything down to the bone and repaying. don’t get into doing more to your house, just live with it till you can actually afford to do something without more borrowing

Credit card, personal loan, kitchen finance, car leasing - even a loan from your parents?!
With nearly £6K a month, you should not need to use so much credit! 😳

I would seriously scale back your renovations until you’ve paid that stuff off, and ditch the lease car asap.

I’d also fix the mortgage - probably based on the end date of all these loans you’ve taken out!

I am surprised at the amount of debt you have in addition to your mortgage.

Parent loan £135
Credit card payments £300
Kitchen finance £175
Personal loan payment - £148

I am not sure I would be saving £200 for the house, with this much debt c£800 is a lot. I assume you have your CCs on interest only?

Yes it’s your debt that’s the problem not the mortgage. How long have you got until all the debts paid off?