How Should I Use a Lump Sum "Gift"?

mjkyorkshire78 · 9 February 2018 at 10:52AM

I got divorced in 2015 and have been left with substantial marital debts (five figures) that I'm slowly digging myself out from under.

I'm currently renting but I'm struggling to find suitable properties for me and my daughters within my budget and in the required locations. My current tenancy runs out in September, and I'll be definitely moving, my existing property has a number of issues that the landlord and estate agent aren't really dealing with so I'm not staying there.

My parents have offered me a "gift" to help me out, their hope is that I can get on the property ladder, but I'm not sure what my best option is. The money they have would be enough for a deposit for a suitable small house, but not enough to clear my loan.

The way I see it these are my potential options...
1- take a chunk out of my loan and lower my monthly payments and save the rest for a deposit
2- take a chunk out of my loan and pay off sooner, then start from zero towards a deposit
3- use the money for a deposit and continue to pay off my loan

Does anyone have any thoughts, observations, experience or advice on this please?

fatrab · 9 February 2018 at 12:04PM

It always makes sense to pay the debt with the highest rates of interest first.

Personally I'd say pay the loan off first, but if the gift is specifically for the purpose of a deposit then you may want to consider how your parents will feel if they see you using the money for anything other than that.

Welcome to the forum

Silver_Queen · 9 February 2018 at 12:05PM

My first thought is this - are you going to be able to get a mortgage with your current level of debt? If not, option 3 is out of the picture.

I'd either go 2 or 3. Depends on the size of debt, size of deposit, how long it will take you to save up a deposit all over again...many different factors need to be taken into account.

a_silver_lining · 10 February 2018 at 8:39AM

Have you been paying down the debt over the years or ever stalled paying or taken on more debt?

Do your parents know about the debt, and if so how would you feel explaining to them the total and your monthly repayments in order to discuss whether they would be happy for their gift to be spent on the debt?

bamgbost · 10 February 2018 at 7:23PM

as has been previously alluded to.
depending on the size of the debt, you may not be able to get a mortgage anyway.

2ndly, have a word with your folks. and let them know that the debt is weighing you down, and can you use their help to clear that?

How Should I Use a Lump Sum "Gift"?

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