Can remortgaging help to consolidate the debts of my partner who is a musician?

Posted on 24 April 2008

Hi,

My partner works for himself as a musician. He is currently paying off a gigantic tax bill that's making his finances very stretched. Also he owes £30,000 on cards and loans. This is the bad news. The good news is that he owns a house that is currently worth £220,000 and he has a mortgage for £140,000. I'm wondering if he would be better remortgaging to pay his debts off and then spending the next couple of years lopping that extra off his mortgage when he can. He currently makes £3,000 take home after tax so it's madness that his money is not working for him but rather against him! The longer he leaves the credit cards at just paying the minimum amount, the harder it will get for him. Its hard to see him make such a mess of his money! Can you advise us as to what we should do to help fix this situation?

Many thanks,

Sarah

Hi Sarah,

Yes my other half is a musician too, all art, and not enough spreadsheets!!

I'm sure you know the immediate answer which is that he should have been putting 20 - 40% away every month into an account, with which to pay his tax when the bill arrived.  However, as the opportunity has gone, he will need to settle it some way and if it can't be paid monthly from his income, then consolidating the debt from his property might be his only option. This certainly would be an effective way of dealing with this tax bill and outstanding cards. Please read my letters of advice on consolidating and its risks here:

http://www.charcol.co.uk/knowledge-resources/ask-katie/category/consolidation-of-debts-new/

knowledge-resources/ask-katie/category/consolidation-of-debts-new/After consolidating, it is vital that he cuts up his cards, and starts a suitable savings account for the tax bills.

I personally would opt for an offset mortgage if I was holding onto an increasing amount of cash for my annual tax bill; that way the cash is reserved for paying the bill, but it's still contributing to reducing the term of his mortgage.

Only a mortgage advisor of your own, who has done a full financial review of your situation, can quote you for the loan amount and repayment schedule to cover these debts.  Please do contact Charcol on 0800 358 5560 if you want that review and the specific quotes.

Regards

Category: Consolidation of debts

 

Answers provided in response to Ask Bea are based on the information provided and do not constitute advice under the Financial Services & Markets Act. They reflect the personal views of the authors and do not neccessarily represent the views, positions, strategies or opinions of Charcol Limited. All comments are made in good faith, and neither Charcol Limited nor Bea will accept liability for them.

We recommend you seek professional advice with regard to any of these topics where appropriate.

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