The Future ... Your Advice Please

boblardo

My wife and I have spent 2010 working frantically to clear as many of our debts as possible

We have paid off just shy of £5K clearing 9 of our 11 debts in the process.

However we got talking the other night about the future and the subject of home ownership came up.

It will take us 8 years to pay off our remaining 2 debts but during this time we have going to save £250 per month. The plan is to have around £30K saved by the time we get to end of the 8 year period

Now my head tells me that we should wait until we have cleared our debts before taking a mortgage but my heart says we should get one as soon as possible. we currently live in a local authority property which has been part of a regeneration project, however it seems this project has had the funding removed so has been rejected. On that basis we have been told we are adequately housed although the property is in need of modernisation.

Our options are

1) Continue renting through the local authority, pay off the debts and save as much as possible and then in 8 years look round for a mortgage deal

2) Continue renting through the local authority, save as much as possible until we have the amount needed to buy and then look round for a mortgage deal whilst continuing to pay off debts

3) Continue renting through the local authority, pay off the debts and save as much as possible then in 4 years offer our creditors full and final settlements to clear the debt.

4) Move into private rented accommodation, pay off the debts but not save as much

I know it is unlikely anyone can give me the correct answer but I would really like to hear your thoughts on the various different options. Our combined salaries are £47000. Our current rent is £450, private rent would cost us £850. there are other pros and cons for each point but anything you can add would be appreciated

JulieGeorgiana

1 or 2 are your best options. I would sit tight. But with a combined salary of £47000 I am sure there are ways for you so throw more money at your debts. Post a SOA and let people suggest where you can tighten your belt. You never know you could pay off your debts years early.

I paid mine off 2 years early.

Good luck.

Tixy

Hi

As you say there is no right answer for this, but do way up the pros and cons and costs of them all. If instead of saving £250 a month you just paid it all towards your debts how much would the 8years reduce by? How much less would you pay overall (by reducing the interest due)? If you are not sure it might be worth putting the figures into the snowball calculator - http://www.whatsthecost.com/snowball.aspx

In theory if you spend 8years paying off all your debts as soon as you can then saving all you can, you should end up with a larger deposit than if you save and pay them off together (assuming the debts are not interest free of course).

Do you feel you can live in your current accommodation for the next 8years? Or if not what about the next 4years and then reconsider renting privately?

Only you can answer which option is right for you, good luck with making that decision.

mel12

Exchanging council houses could be an option to move sooner, while still saving for a mortgage longer term http://www.homeswapper.co.uk/

david_hellier

Now is not a good time to buy unless you have a substantial deposit (at least 30%). Interest rates will soar next year forcing more defaults. Owned property can be lost if you go bankrupt. Stay in your council property and save, save.

Danni-R

I'd pay off as much as possible and once the debt is clear the money that would have gone on servicing the debt can be saved. If you can over pay on your debt then better. Bring the 8 years down a tad maybe?