Pay off debt or use as a deposit

mrsjay

Hi All,

My first post so be gentle! Looking for a little bit of your advice, opinions and financial common sense.

Hubby and I got married earlier this year, and moved in together. We now have 2 properties. I put mine on the market and it sold within a week! Just going through the final stages of the sale and should complete by the end of the month.

As a result of the sale we should have 20k cash once the mortgage and secured loan (and all other associated sale costs) are cleared.

What i am wondering is what should we do with this 20k?

We'd like to move and buy somewhere of our own - this is a nice to do not a need to do as the house we have now is fine for us, we'd just like to buy somewhere a little bigger and somewhere we've bought together. There is not much equity in his/our house and he has about 34k of credit card debt.

I'm debt free.

I'm wondering is should we use the 20k to clear some of the credit card debt and then split the remaining 14k between us on 0% cards clearing them as quick as we can, and save as much as we can for a deposit on a new property over the next year or so?

Or ...

Should i be putting that 20k away for a rainy day? and if so where?

Or ...

Should i be doing a bit of both?

Any advice or opinions would be much appreciated - its keeping me awake at night!

Many thanks

Mrs Jay

bacard1

mrsjay wrote: »

I'm wondering is should we use the 20k to clear some of the credit card debt and then split the remaining 14k between us on 0% cards clearing them as quick as we can, and save as much as we can for a deposit on a new property over the next year or so?

If i were you (and you are happy to let your hubby have the cash) i would clear the debt before you even consider moving, if you do have debt it will be taken into account when a lender considers how you can borrow. So clear the debt save for a deposit and look as to why you husband has so much debt on credit cards

poppy10_2

I know it's not nice to think about when you have just gotten married, but you need to plan ahead for what would happen if you ever split up for any reason. Unfortunately marriages don't always last forever.

If you just hand him £20k of your money, from your house sale, to pay off his credit card debts, then that money is gone forever. You need to protect your own interests, you are debt free. At least if you use the money for a deposit, you can ring-fence the money you have put into the house by becoming tenants-in-common.

Has he addressed the reasons why he has accumulated so much debt? If you just pay it off for him, what if the same spending pattens continue?

mrsjay

Thanks for you comments.
There is nothing sinister in the credit card debt, its just something that has amounted over time. Hubby travels a great with work, expenses (flights, car hire etc.) go on credit card, work pay expenses back into current account and he's not been very disciplined in paying the expenses off the card and so its built up.
We are both high earners and can mroe than afford repayments, but my feelings are that we wouldn't be able to buy an new property and get a mortgage with such a large amount of credit card debt even if we did have a fairly substanital deposit. Am I right in thinking that lenders would expect the debt to be cleared first?
What is the current situation with lenders - are they lending again? or is it just to people who are financial secure (no debt etc.)?

TrickyDicky

I think the quick rule when working out how much deposit you have on a new house:

Total savings + equity in house - all debts = total deposit.

So in your case you have 20k cash + small equity in house -34k debts. Im guessing this will amount to a £0 deposit. This is looking at the 2 of you joint.

If you applied on your own without your husband, you have a 20k deposit you could use to buy a house up to 200k (assuming you can get a 90% LTV mortgage on your salary alone).