New finances for New Year...

H

Hootie

Guest
Hello all, I’m a regular reader but a first time poster. Myself and my partner bought our first house just under a year ago, and we are in severe need of re-financing. First a few details:

Ages – both 28
Joint income - €72,000 (due to increase by €5k towards the end of the year)
Mortgage - €377,000
Credit card - €10k
Credit union loan - €37k
Overdrafts - €4,700

House worth €450k, no savings.

Basically we bought this house as a shell and renovated it and extended it from scratch. The bank would only give us enough to buy the house so we financed the renovations from personal debt, with the hope of re-financing up the road. The rest of our personal debt is due to a car loan, part-time degree and a year out.

Our mortgage is €1550 p/m net of interest relief, and our repayments on personal loans comes to €1300 p/m. Our monthly take home pay is €4700 p/m. This represents around 60% of our net income.

We are hoping to release some equity and clear most it if not all of the personal debt. I’m not sure if the bank will give us any more money, or what our best options are. Would banks look favourably on us reducing our monthly commitments like we intend?

Any comments or suggestion would be welcome.
 
You wouldn't appear to have much room for manoeuvre.

Say that the bank agrees with your valuation of €450k, then (assuming that they will give you a maximum mortgage of 92%) you could release €37k and pay off all the credit card debt of €10k, the overdraft of €4,700 and reduce the CU loan to under €15k.

But I'm not sure if that's a runner-based on the valuation and your income-some of the brokers who contribute may have some views.

You could try getting a new credit card with 0% balance transfer rate so at least the interest is frozen (of course you should not be making purchases on this new card)-but again, I'm not sure if you would be approved.

Assuming that the bank says no, you have to look at how you spend the other 40% of your net pay.

Are there areas of expenditure (phone, TV, broadband, car, mobile phone, entertainment, insurance) that are essentially discretionary and can be cut out or curtailed?

Have you looked at ways of reducing your grocery bill?

Where do you eat during the day?

Could you approach the CU and see if you can renegotiate the personal loan repayments in some way to allow you to tackle the credit card and overdraft debts?

Are you currently adding to the credit card or overdrawn balances?

Have you a plan for allocating payments in order of priority (credit card first, then overdraft)?
 
Could you increase you CU loan so that you can at least pay off the overdraft and the credit card? These loans are typically around 15% interest, I dont use the CU but I hear that their interest rates are around 6%. You could try to arrange the new load over five years and it may give you breathing space.

I would caution that living on a credit card is very dangerous financially. If you find you are then you need to cut costs, as the other poster said, or think about moving down.

arry
 
Definitely a case for transferring credit cards, if both of you could each transfer to a new credit card (think u’re allowed transfer balances up to 5k each generally) then that give’s you 6 months paying zero % interest, which would give you 6 months to eat into your debts.

Maybe even give up the booze for lent!!!
 
Could you go interest-only on the mortgage and pay the difference off you other loans?
 
Sorry for the delayed response folks, been a hectic week.

Thanks for the replies. Interest-only is certainly an option we will look into. As for transferring balances, the problem is we have one credit card in my name, so i don't think we could split the balances. We're at the max with our CU loan so increasing it to pay off the higher interest debt is out as well. Hope to make an appointment with the bank at the end of feb (12 months after we took out the mortgage). Depending on their response, we will have to examine tightening our belts further (ouch!)
 
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