Inheritance and I can be debt free or should I get a mortgage?

pjgtips

Hi

Any advice you have would be appreciated. I have also asked for input on the buying/selling/renting out issues on the appropriate forum discussion.

Basically, I am 45 and I earn about 21K but have 18.5K in credit card debt (mostly low interest) and another 7K outstanding on a bank loan (+ 1.5K outstanding on a student loan that I don't earn enough to need to make repayments on). This debt is getting to be a problem for me. It is old debt from 4-5 years ago before I met my current partner and at a time when I had depression and was on medication that made me financially reckless. Before then I had savings and since then I can manage financially if it wasn't for the debt albatross. I have made all payments and am not behind with any of the debts.

I am now in the position that I have inherited a 50% share (c. 65 - 70K) in a house from my Mom along with my sister who inherited the other 50%. The house is worth about 130 - 140K. I need to decide whether to realise the equity or whether to purchase the property outright (probably initially as a buy to let with a view to living in the house at a later time).

I have an emotional attachment to the house and the memories of living there with my Mom and other family - I have lived in it for most of my life (but not for the last 5 years). I also have friends and family in the town. I would like to live in the house again in the future but it isn't feasible at the moment.Obviously the equity in the house can resolve my debt problems (though I would rather have my Mom and the debt problems).

I am currently living in rented accomodation with my partner who does not wish to move due to his family commitments - we live about 20 miles away in a town where I have no support network. It may be that in the future I would want to live in the house more permanently. As it is, my partner is working away for the next 6-9 months and I will live in the house for the majority of this time or until the house is sold/I buy it (we will still be renting the other house). I should just add that I do find the insecurity of living in private rented accomodation difficult although I do love some aspects of the house we currently rent.

My job has a pension and lump sum on retirement and I would get a reasonable redundancy settlement if the worse happened. However, if I realised the equity in the house I could pay off my debts and use the remainder to retrain as I really don't enjoy my current job but stay in it to survive financially and pay my debts.

My thoughts at present are to try and get a buy to let mortgage possibly on an interest only basis (if advisable adding my cc debt to the mortgage amount) and then to rent the property out. The rental market is buoyant in the town in which the house is located and I would expect to get 450 -500 pcm in rent. I would ideally be looking to have an interest only mortgage into which I could make capital repayments at some points; unless a repayment mortgage is more appropriate.

If we do sell; everyone seems to think it would sell quickly despite the current climate as its a lot of house for the money in a small town with excellent schools. The reason for the price is it's only two bedroomed and ex local authority but it is am attractive house in a quiet nice cul de sac, has reasonable size rooms, is close to the schools (but not too close) and it isn't directly overlooked and has a reasonable sized garden, garage and drive.

Do you have any suggestions/advice. (My sister wishes to realise the equity but would prefer it if I bought the house rather than an "outsider").

Confused what to do..... ideally I want to get rid of the cc debt and keep the house (but I can't have it as my main residence at the moment). Please advise/help....

rustybucket

Easier said than done, but I think you need to let the emotion of this house go. Sell the house, release the equity and settle your debts. Save the rest and put down on a deposit when you and your partner are both in agreement with future plans.

The debt has got to you as you said, I think it could be better to clear this now while you have the opportunity.

themull1

I agree with rustybucket.

niccatw

It is a tough one, but I got the feeling from your post that you've perhaps been erring towards selling anyway. Whenever you mention your debt there's a negative association and it's clear you want rid of it.

I know we all want rid, but I think what I mean is that, although you've acknowledged there's an emotional attachment, you've not tried to justify why you should keep the house and you seem to know the market you'd be selling in. And you refer to your debt as an albatros around your neck.

If that's how it feels right now, I suspect it'll only feel heavier if you have a mortgage along with that.

podperson

At the end of the day it is entirely your decisions but just a few points to consider.

Have you looked provisionally at whether you would be able to get a buy-to-let mortgage and what the monthly payments would be.

Would the average rent in the area cover this amount? If you couldn't rent the property straight away or you had empty periods between tenants would you still be able to afford this?

You say you would like to live in the property in the future but your partner doesn't want to move. Have you discussed this with him or if there some reason you think he might change his mind in the future?

I can understand the emotional attachment to the house but if it isn't you that's going to be living in it then might just need to let that go. Financially it is a big commitment to be taking on when you are already in a lot of debt.