x-post - Salary cut in half overnight - Need help!

Bertrum

Me again

The Sensible thing to do is to Sell the current house, as you have no equity and put £150k leaving £20k for the inevitable 'improvements' as a deposit on the new property. If you had equity in the current house I would keep it but as you don't it seems a bit pointless.

Also the best rental returns are made on 1 bed flats with regards to outlay vs reward. And the risk is alot less as demand is high. Houses can take ages to rent out.

You can then overpay on the mortgage with your bonuses and all being well be mortgage free in 2-3years.

You can then look at rental properties as your family will be secure. Which should be your top priority.

You do love a good bit of risk don't you.

(this is all coming from a guy who spends all his spare cash racing cars). But I don't have a family

danlovedough

Thanks Bertrum, I have spoken to a mortgage advisor today who seemed pretty switched on and have come up with a basic plan.

Bear in mind that although this is a money saving forum, for me saving every penny is not necessarily the most important thing for me. I have a huge confidence and belief in myself to continue making good money, however I am balancing this with trying to provide security for my family and having an enjoyable standard of living. The biggest priority for me and my family is to move to a bigger house with the space we need, and I believe having comfortable living conditions will also influence my future career success and overall happiness.

My situation is unusual as a small window of opportunity to achieve this has presented itself where I am able to secure a reasonable mortgage based on my current employment, without over-leverage and at the end of it all be living in a larger property holding 40% equity, hold 25% equity in the rental property where I currently live, own my wife's car outright, and have no other unsecured debt an an income to be able to live comfortably an be paying off my mortgage more quickly as my income (hopefully) grows.

The advice I received was to switch my current mortgage to a buy to let mortgage by paying off ~£38k, and to put as much deposit as I can into the property in which I am going to live.
I would then move out of my current house in the next few weeks if we can find somewhere nice to move to, without the added stress and pressure of having to immediately sell or rent my current house.

Once we have moved I will be in a position to carry out some minor renovations and clean-up of my current house, then rent it out for 6-12 months initially. For me, this solution works very well, we are enabled to move fast which all of us want, and my mortgage will be at a low interest rate based on my current employment.

I think it will be tight and will have to get viewing houses and applying for mortgage straight away, but if we are able to find an available property with no chain it may be possible to be moved in within 4 weeks from today...

danlovedough

Bertrum wrote: »

Me again

You do love a good bit of risk don't you.

Yes I do! But only if it's carefully calculated....

Gigervamp

danlovedough wrote: »

I think it will be tight and will have to get viewing houses and applying for mortgage straight away, but if we are able to find an available property with no chain it may be possible to be moved in within 4 weeks from today...

I think that's a bit optimistic.

danlovedough

Maybe it is a bit optimistic, perhaps we can at least have completed on a sale by then... PMA!

Gigervamp

The average time for house sale purchases is 12 weeks and you haven't even started looking yet.

danlovedough

Thanks Gigervamp. Don't worry, I am not average!
We have certain things in our favour such as mortgage in place and not needing to worry about selling current property before the sale. Also some flexibility on price, but I do agree with you it is very optimistic to expect to find somewhere and complete in such a small time-frame. I do love a challenge though, so will work towards it. If we aim for 4 weeks and it takes 10 it will not be the end of the world.

interested to know, if you were in the situation of having the opportunity to rent out current property or buy somewhere but with a larger deposit which would you go for?

Gigervamp

I'd buy a property with a larger deposit. Wouldn't want the hassle of being a landlord.

Pixie5740

I know you like taking a (calculated) risk OP but i think there's more lessons to be learned from 2 years ago. I like yourself used to haemorrhage money because I was very poor at budgeting. I used to fanny around with spreadsheets that really only gave a snap shot of that month rather than my whole financial situation.

3 years ago my income went up significantly (4.5 times what I'd been making before) and after the first year I realised I still didn't have a handle on what I was really spending. Then I discovered YNAB which has really turned my finances around. I only have 2 debts now, 1 is a 0% credit card which I can pay off in full when the promotional period ends and the other is car finance (I shouldn't have done it in the first place but I did) which will be paid off in March 2015. I also have saved a deposit for a house, a buffer and a decent emergency fund. I don't live frugally but I can afford my lifestyle even when things go wrong. Like next month. I contract and the company I contract for, in their words "under-utilised" me last month so November is going to be a stinker but I know I can comfortably pay my priority bills and skim some fat off my entertainment budget if needs be and if I'm really desperate there's the emergency fund. I really recommend you give YNAB a try to help get your finances under control.

I see from your SOA that your emergency fund is given £50 a month yet holidays gets £400 a month. I think you should revise that.

I also notice that you don't seem to have any life insurance. How would your wife and children manage if, God forbid, something were to happen to you. There's no way your wife would be able to maintain all this.

When you say you already have a mortgage in place how can that be if you haven't found somewhere to live yet? Is it a mortgage in principal you have?

As for the BTL property. Unless you really want to be a LL I would sell and put down a larger deposit on my home and then work towards being mortgage free. Although I see from one of your other posts that you're wanting to use the governments help to buy scheme so you might be limited as to how much deposit you can put down.

lulabelle

I just want to say that I'm a little surprised at Warwick tigers post, particularly on a board like this which is supposed to be about support, not judgement.

Yes, this person might be earning, even with the pay cut, more than a lot of people and to someone struggling it might seem inappropriate or insensitive to post given there are people worse off. However, everyone's circumstances are different and there are always going to be people worse/better off but you don't know the circumstances behind it all. Perhaps this person has earned a lot over the years but had to sacrifice other things such as their family time or health. In saying that I also appreciate that people who are scraping by May also have had to sacrifice family time or their health to make ends meet. But at the end of the day, everyone is different and being bitter or judging people is not going to change your own situation.

Yes, he may have been silly for living for the moment and not planning for the day when something like this happened but pointing all of that out is only going to make him feel worse and what he actually needs is help and support

So, people, please think before you judge and don't judge before you post