Debt/mortgage advice please
Discussion
Hello.
Please can some knowledgable people give me their feedback on my debt situation as I’m a bit lost at sea. Long posting, sorry in advance. Also this not my usual ID as I’m too easily identifiable with that one: admin I hope this is ok.
Background: I’m in my early fifties and for various reasons including two divorces and a midlife career change I have debt. I have 2x bank loans (with same bank), 3x credit cards all totalling £40k. The repayments were £1,200 per month, which I met for a few years but things finally fell over about 18 months ago when that payment plus my rent and other bills just killed me. I defaulted and after advice from Stepchange, wrote to my creditors and agreed an interim plan of £1/month to each of the 5 debts. Interest frozen. Rent and other core bills are always paid. I earn £40k. The sports car is sold, long gone to meet bills, currently in a two grand banger.
A couple of months ago, a family member sold a house (moved in with someone who had a house) and has offered me funds to sort the debt and/or put a deposit on a house and finally move out of rented. They offered me £80k which does need paying back but we are close and they are not too fussed on repayment terms.
A mortgage broker agreed a mortgage would be possible, as my repayment plans had been in place for over 12 months.
I found a little house, had an offer accepted for just under £170k, and applied for the mortgage (repayments of which would be less than my rent of £1k).
A few weeks ago I received a letter from a debt management company. The bank had sold one of the two debts for an unknown reason to this new company. I didn’t realise at the time but I believe this now counts as a new agreement/payment plan. As such I now can’t get the mortgage as all plans have to be place for 12+ months. So I’ve lost the house.
So, what to do? I would like to buy/get out of rented and get rid of the debts. I have a number of options but I’m not sure which is best and this is where I need some help please. Please correct me if I’ve made any incorrect assumptions.
Go bankrupt. Debt gone but so is any chance of getting a mortgage as I’ll be nearly 60 before my credit score starts to recover.
Borrow enough to clear the debt (yes I know this is an oxymoron). £40k to clear the debt and £40k for deposit/fees to buy somewhere. The question is how long after clearing debt will a mortgage company look at me? My Hight Street bank says I have to wait three years....
Negotiate a reduced settlement figure with my creditors. I did ask what figures they might accept but at most they would only knock a few hundred off. Is there a good way to go about this? I’m also aware if I pay the debts in full it will show on the credit file as satisfied but if I do a deal it will show as partially satisfied. How would this affect my credit file and the possibility of getting a mortgage going forward?
Get an IVA to control the debt. I know very little about IVAs but my understanding is they will reduce the debt and I pay an affordable figure over a number of years. How does this affect my file and my ability to get a mortgage?
Borrow £80k and buy a shared ownership house without a mortgage and worry about the debt once I’m in (maybe an IVA?). Not too keen on this as these properties seem to be mostly squeezed into housing estates on the plots they can’t sell on the open market.
Or something else I’ve not thought about.....
I’m currently in limbo. Stuck in rented, seemingly forever. My debts at £1/month will take over 600 years to clear....
If anyone could give me a bit of advice as to the best way forward I would really appreciate it.
Thanks for reading this.
Please can some knowledgable people give me their feedback on my debt situation as I’m a bit lost at sea. Long posting, sorry in advance. Also this not my usual ID as I’m too easily identifiable with that one: admin I hope this is ok.
Background: I’m in my early fifties and for various reasons including two divorces and a midlife career change I have debt. I have 2x bank loans (with same bank), 3x credit cards all totalling £40k. The repayments were £1,200 per month, which I met for a few years but things finally fell over about 18 months ago when that payment plus my rent and other bills just killed me. I defaulted and after advice from Stepchange, wrote to my creditors and agreed an interim plan of £1/month to each of the 5 debts. Interest frozen. Rent and other core bills are always paid. I earn £40k. The sports car is sold, long gone to meet bills, currently in a two grand banger.
A couple of months ago, a family member sold a house (moved in with someone who had a house) and has offered me funds to sort the debt and/or put a deposit on a house and finally move out of rented. They offered me £80k which does need paying back but we are close and they are not too fussed on repayment terms.
A mortgage broker agreed a mortgage would be possible, as my repayment plans had been in place for over 12 months.
I found a little house, had an offer accepted for just under £170k, and applied for the mortgage (repayments of which would be less than my rent of £1k).
A few weeks ago I received a letter from a debt management company. The bank had sold one of the two debts for an unknown reason to this new company. I didn’t realise at the time but I believe this now counts as a new agreement/payment plan. As such I now can’t get the mortgage as all plans have to be place for 12+ months. So I’ve lost the house.
So, what to do? I would like to buy/get out of rented and get rid of the debts. I have a number of options but I’m not sure which is best and this is where I need some help please. Please correct me if I’ve made any incorrect assumptions.
Go bankrupt. Debt gone but so is any chance of getting a mortgage as I’ll be nearly 60 before my credit score starts to recover.
Borrow enough to clear the debt (yes I know this is an oxymoron). £40k to clear the debt and £40k for deposit/fees to buy somewhere. The question is how long after clearing debt will a mortgage company look at me? My Hight Street bank says I have to wait three years....
Negotiate a reduced settlement figure with my creditors. I did ask what figures they might accept but at most they would only knock a few hundred off. Is there a good way to go about this? I’m also aware if I pay the debts in full it will show on the credit file as satisfied but if I do a deal it will show as partially satisfied. How would this affect my credit file and the possibility of getting a mortgage going forward?
Get an IVA to control the debt. I know very little about IVAs but my understanding is they will reduce the debt and I pay an affordable figure over a number of years. How does this affect my file and my ability to get a mortgage?
Borrow £80k and buy a shared ownership house without a mortgage and worry about the debt once I’m in (maybe an IVA?). Not too keen on this as these properties seem to be mostly squeezed into housing estates on the plots they can’t sell on the open market.
Or something else I’ve not thought about.....
I’m currently in limbo. Stuck in rented, seemingly forever. My debts at £1/month will take over 600 years to clear....
If anyone could give me a bit of advice as to the best way forward I would really appreciate it.
Thanks for reading this.
CzechItOut said:
I know this might not help in the short term, but can you agree a plan with the new debt management company, wait 12 months and then re-apply for a mortgage?
Thanks for the reply.The danger is any one of the creditors could sell their debt on at any time to a new company (as the bank did with one of the loans) and then I’m back to square one and waiting for another 12 months to pass.
I’m in my fifties, I’m not getting any younger and each 12 months hurt!
My advice was going to be that you should use half the loaned money to pay off all debts, then wait the 12-month period before reapplying and using the second half of the loaned money as a deposit.
But from your post, it looks as though you have to wait a year from any new agreement, but three years if the debt is paid off. Am I reading this correctly?
But from your post, it looks as though you have to wait a year from any new agreement, but three years if the debt is paid off. Am I reading this correctly?
Pay off the dept, that should have been the first thing you did anyway. Your going to get a far more favourable mortgage deal.
I think you need a reality check. Having no dept is the place you want to be. Cut your living expenses to the bone and get this sorted out.
Go see a independent financial advisor
I think you need a reality check. Having no dept is the place you want to be. Cut your living expenses to the bone and get this sorted out.
Go see a independent financial advisor
Edited by Foliage on Friday 13th July 11:19
You really need to settle the existing debt before buying property.
If you do not, they creditors may seek to charge your property as security for the debt. They would do this via a CCJ and then a Charging Order. All the costs will be added to your debt.
They could then seek an Order to sell the property to get the money owed to them.
If you do not, they creditors may seek to charge your property as security for the debt. They would do this via a CCJ and then a Charging Order. All the costs will be added to your debt.
They could then seek an Order to sell the property to get the money owed to them.
romeogolf said:
My advice was going to be that you should use half the loaned money to pay off all debts, then wait the 12-month period before reapplying and using the second half of the loaned money as a deposit.
But from your post, it looks as though you have to wait a year from any new agreement, but three years if the debt is paid off. Am I reading this correctly?
Three years if I use my own High Street bank. But from your post, it looks as though you have to wait a year from any new agreement, but three years if the debt is paid off. Am I reading this correctly?
Foliage said:
Pay off the dept, that should have been the first thing you did anyway. Your going to get a far more favourable mortgage deal.
I think you need a reality check. Having no dept is the place you want to be. Cut your living expenses to the bone and get this sorted out.
Go see a independent financial advisor
Yes, I want to pay the debt but how? That’s the whole point of my post. In full and get satisfied on my file? In part, save maybe thousands but get part satisfied on my file? An IVA so I can borrow less or borrow the full £80k and get a smaller mortgage? How do these three possibilities affect my file?I think you need a reality check. Having no dept is the place you want to be. Cut your living expenses to the bone and get this sorted out.
Go see a independent financial advisor
PurpleMoonlight said:
You really need to settle the existing debt before buying property.
If you do not, they creditors may seek to charge your property as security for the debt. They would do this via a CCJ and then a Charging Order. All the costs will be added to your debt.
They could then seek an Order to sell the property to get the money owed to them.
Thanks that’s really useful to know. So, settle in full, in part, or via an IVA or something else?If you do not, they creditors may seek to charge your property as security for the debt. They would do this via a CCJ and then a Charging Order. All the costs will be added to your debt.
They could then seek an Order to sell the property to get the money owed to them.
BobsBrother said:
Yes, I want to pay the debt but how? That’s the whole point of my post. In full and get satisfied on my file? In part, save maybe thousands but get part satisfied on my file? An IVA so I can borrow less or borrow the full £80k and get a smaller mortgage? How do these three possibilities affect my file?
Have you looked at your credit record, do all 5 show as 'defaulted'?Did you actually get a mortgage offer or even an agreement in principle before?
In terms of dealing with your debt you have a few options, all of which stepchange can explain to you. A lump sum IVA may be the best option, which would involve paying a reduced sum in full and final settlement of the combined debts. You won't be getting a mortgage for some time after that though.
If your creditors find out you've come into money or an asset such as equity in a house they'll be coming after you for their money. You need to deal with the debt before doing anything else.
In terms of dealing with your debt you have a few options, all of which stepchange can explain to you. A lump sum IVA may be the best option, which would involve paying a reduced sum in full and final settlement of the combined debts. You won't be getting a mortgage for some time after that though.
If your creditors find out you've come into money or an asset such as equity in a house they'll be coming after you for their money. You need to deal with the debt before doing anything else.
PurpleMoonlight said:
BobsBrother said:
Yes, I want to pay the debt but how? That’s the whole point of my post. In full and get satisfied on my file? In part, save maybe thousands but get part satisfied on my file? An IVA so I can borrow less or borrow the full £80k and get a smaller mortgage? How do these three possibilities affect my file?
Have you looked at your credit record, do all 5 show as 'defaulted'?General Fluff said:
Did you actually get a mortgage offer or even an agreement in principle before?
In terms of dealing with your debt you have a few options, all of which stepchange can explain to you. A lump sum IVA may be the best option, which would involve paying a reduced sum in full and final settlement of the combined debts. You won't be getting a mortgage for some time after that though.
If your creditors find out you've come into money or an asset such as equity in a house they'll be coming after you for their money. You need to deal with the debt before doing anything else.
As per my first post, mortgage agreed in principle but derailed by one of the creditors selling/moving one of the debts.In terms of dealing with your debt you have a few options, all of which stepchange can explain to you. A lump sum IVA may be the best option, which would involve paying a reduced sum in full and final settlement of the combined debts. You won't be getting a mortgage for some time after that though.
If your creditors find out you've come into money or an asset such as equity in a house they'll be coming after you for their money. You need to deal with the debt before doing anything else.
Thanks for the advice about a lump sum IVA. You say no mortgage ‘for some time’. Are we talking months or years?
BobsBrother said:
I think so (my PC has the login details to my credit files but I can’t find it so can’t check: I’ll have to ask my OH where it is when she gets home....)
Obviously lenders have their own criteria, but I would think a settled debt in any form is better than an outstanding one, because the property is not as risk to them.I would try to negotiate a discounted settlement. If you have been on a £1 pm debt management plan for 12 months you should be able to get 50% off. It's far more than they will get if they sell it.
The purchaser of the one debt will likely have paid 5% - 10% of the outstanding debt. So 50% is a huge profit for them.
Try to avoid the IVA if you can.
PurpleMoonlight said:
BobsBrother said:
I think so (my PC has the login details to my credit files but I can’t find it so can’t check: I’ll have to ask my OH where it is when she gets home....)
Obviously lenders have their own criteria, but I would think a settled debt in any form is better than an outstanding one, because the property is not as risk to them.I would try to negotiate a discounted settlement. If you have been on a £1 pm debt management plan for 12 months you should be able to get 50% off. It's far more than they will get if they sell it.
The purchaser of the one debt will likely have paid 5% - 10% of the outstanding debt. So 50% is a huge profit for them.
Try to avoid the IVA if you can.
Just been reading all about IVAs. I can see how damaging it would be to my credit file.
I assume if I made an offer to a creditor of say 50% and they accept it, then that debt would be closed but I believe it will show as part satisfied and not just satisfied: how much of a problem would this be with a mortgage application please?
BobsBrother said:
Thanks.
Just been reading all about IVAs. I can see how damaging it would be to my credit file.
I assume if I made an offer to a creditor of say 50% and they accept it, then that the debt closed but I believe it will show as part satisfied and not just satisfied: how much of a problem would this be with a mortgage application please?
Nobody can really answer that, different lenders have different criteria.Just been reading all about IVAs. I can see how damaging it would be to my credit file.
I assume if I made an offer to a creditor of say 50% and they accept it, then that the debt closed but I believe it will show as part satisfied and not just satisfied: how much of a problem would this be with a mortgage application please?
The intended lender obviously knew about the defaults. If I were them I would be happier that they were partially settled and closed than left open. Probably best to ask the mortgage brokers opinion.
Offer less than 50% first, and hopefully negotiate to that if needs be.
I think you need a reality check here. You are £40 in debt and currently unable to pay them off because your rent is £1k per month.
You have a family member who is going to lend you £80k and you want to buy a house at £170k. You earn £40k a year (so roughy £2200 per month into your bank). That’s the basic facts?
How are you planning to pay your relative back? Interest free over 10 years will still be £700 a month. Let’s say you use the remaining £40k as a deposit on the house leaving you with a mortgage of 130k. A 15 year mortgage will cost you about £800 per month. So you will be paying £1500 a month out of your earnings. Add £200 council tax, £100 a month on insurance, £50 a month on phone/internet and it soon becomes clear you cannot afford to do what you want.
Are you married? Does your wife earn? Will she be contributing to the mortgage?
You have a family member who is going to lend you £80k and you want to buy a house at £170k. You earn £40k a year (so roughy £2200 per month into your bank). That’s the basic facts?
How are you planning to pay your relative back? Interest free over 10 years will still be £700 a month. Let’s say you use the remaining £40k as a deposit on the house leaving you with a mortgage of 130k. A 15 year mortgage will cost you about £800 per month. So you will be paying £1500 a month out of your earnings. Add £200 council tax, £100 a month on insurance, £50 a month on phone/internet and it soon becomes clear you cannot afford to do what you want.
Are you married? Does your wife earn? Will she be contributing to the mortgage?
PurpleMoonlight said:
BobsBrother said:
Thanks.
Just been reading all about IVAs. I can see how damaging it would be to my credit file.
I assume if I made an offer to a creditor of say 50% and they accept it, then that the debt closed but I believe it will show as part satisfied and not just satisfied: how much of a problem would this be with a mortgage application please?
Nobody can really answer that, different lenders have different criteria.Just been reading all about IVAs. I can see how damaging it would be to my credit file.
I assume if I made an offer to a creditor of say 50% and they accept it, then that the debt closed but I believe it will show as part satisfied and not just satisfied: how much of a problem would this be with a mortgage application please?
The intended lender obviously knew about the defaults. If I were them I would be happier that they were partially settled and closed than left open. Probably best to ask the mortgage brokers opinion.
Offer less than 50% first, and hopefully negotiate to that if needs be.
Gassing Station | Finance | Top of Page | What's New | My Stuff