Newbie needs advice please!!!

K_and_N

Hello everyone,

I've been a regular visitor to MSE forum and I think it's now time for me to join and get advice from all.

I'm not sure this is the correct area to post my thread. I couldn’t find a specific heading to fit in.

My boyfriend and I (both employed and in out thirties) were in our worst situations 2006 and we managed to get to where we are by following advices we’d seen on MSE. Now we are thinking to improve our financial affairs, possibly having a property and we'd like to have best available options for us. We thought about consulting a financial advisor but we don't wish to pay for that as the advice could be continuing as we are and then we could end up with the fees. So any advice from anyone here is gratefully welcomed.

Here are our figures…..

Myself:

Mortgage: £88,000 (Monthly payment £503.97 at variable rate 5.34%; property value £110,000
Personal Loan: £18,100 (Monthly £307.09 until 2014)
Credit cards: £7,500 (Monthly repayment about £250; this covers minimum payments only and I’m planning to use £2,500 in saving account to pay off one card with the highest interest rate, but again this £2,500 is not purely saving as I’ve been putting money aside in saving account for various expenses e.g. house maintenance, holidays etc.)

For last few months (after I had a pay rise), I’ve been managed to save £600 per month after all cost. I no longer live in my flat as I’ve let it out to save money.

My boyfriend:

No mortgage
Personal loan: About £12,000 (Monthly repayment £456.63 until May 2010)
Credti cards: £6,000 (Monthly repayment £ 230 that is over minimum payments)

Pension: Value £11,000

At the moment, he couldn’t save anything after all expense but he should be able to when his current loan is finished after next 8 months.

We share a small studio flat costing us £600 inclusive everything. Ideally we’d like to live separately as our jobs are far away from each other but if the best advice requires us living together we’d consider it.

He is contributing to pension scheme just because his employer is contributing double of his. To be honest we do not have much faith in living on pension when we retired. This is one of the reasons why I’ve never considered it before (and I couldn’t afford it either..:p) as we have no deposit saved for property (apart from my monthly saving possibly) we’re thinking if we can cash out his pension. But we’d like to know if there any other disadvantages other than having to pay tax on it.

Our current plan for future is to retire in Far East (this is where we’ve come from). At current properties value, we could buy 2 small properties in Far East by selling my UK flat when the mortgage is paid off. So may be living in one and having rent income on other.

Here are a few ideas we have;

1. Continue living in the studio flat and I bought a freehold property with tenants (my current flat is becoming just under 100 years lease) after selling the current one.
2. Leave my flat as it is with tenant and we jointly buy another property and live in it.
3. He buys a flat on his own (deposit by cashing his pension) and I continue living in the studio flat.
4. Or we do nothing and make overpayments to my current mortgage to pay it off early.

Can anyone suggest what would be the best option for us?

We’d be happy to provide more information if that’s necessary.

K and N

pie81

Personally, given your debt levels, I would carry on as you are at the moment and pay off the debt as much as possible (credit card debt then the personal loans). Or even sell your flat and use that to pay off the debt. I would only think about buying more property once you have no debt.

Also, I would be careful about cashing in the pension - your b/f is getting £2 from his employer for every £1 he puts in, that is a generous scheme and a lot of free money - makes sense to continue with it unless he really can't afford to.

But then, I'm pretty cautious with money...

McKneff

if we can cash out his pension.

You cannot cash in a pension. All you can do is leave it until he is at least 55 years of age. A pension is just that, its put aside for a pension for when you get older. Its not a savings account.

K_and_N

Thank you for your advice, pie81. I tried selling the flat in Feb and it was a nightmare. No offer but very close to no rent income either. End up arguing estate agent re: HIP fees.

Also after seeing info from McKneff's, cashing in pension is not possible.

pie81

sorry, thought that by cashing in pension you meant stopping making contributions to pension. mckneff is right, you can't cash in the pension fund already built up.

you COULD however stop making further contributions and use the £ to pay off debt instead. but as I say, he gets a lot of free £ from his employer in return for making contributions... so he would be losing that free £ if he stops contributing.

sounds like you should stick with getting the rental income from your flat, if selling didn't work out. if you are making £600 excess every month then you should be able to pay off your credit cards reasonably quickly. I would do that before any new property venture.