Pay off debts before saving a deposit?

Toomuchdebt

Just_30 wrote: »

I understand your reasoning, but my savings and extra cash going towards clearing the debt faster then means I am back to square one with a house deposit i.e £0.00!:) Which leads on to saving a significant amount again, which takes time in which I could have been paying off a mortgage and clearing my debts.

Please bear with me as I am just thinking out loud here and I do appreciate all the comments that have been provided so far... Its a tricky decision.

Except that you won't be able to get as high a mortgage if you still have the debts as the banks will look at outgoings, and secondly, once the debt is paid off you'll be able to save a lot quicker then you are now, and just think how much you'll save in interest
I would do it that way..you never know what's going to pop up when you buy a house-there's no guarantee you won't need to repair something/buy something as soon as you move in-personally I'd rather take my time a bit longer than get stressed that I won't manage if something happens.

Asbestross

I'd also look at it from this perspective.

Should you obtain a mortgage with debts, if you default on these debts, there's the possibility that the creditors would persue charging orders etc against you. All your hard work saving up could be put at risk....

Always go for clearing a debt before amassing another I believe

matt8787

I disagree with much that has been said here.

It's all too easy for an outsider to just say 'put your life on hold until your debts are paid off, and in the meantime plough money into a landlord's pocket for years rather than the equity of your own property'.

I've been doing that for years, and if I were to calculate now the amount i've spent on rent over the last 15 years i would have enough to cover a sizeable portion of the mortgage and be well on my way to actually owning my own house / be a lot closer to mortgage free living.

Time waits for no man.

If you have done your sums and know you can manage both, I would say plough what you have into your deposit and buy as soon as you can. As a Londoner I'm paying approx £1,500 a month rent at the moment - whilst knowing that friends who have bought equally nice places are paying approx £300-500 a month in mortgages.

Now I can't imagine your loans are costing you that much in interest - but thats what it costs me as a renter over being a home-owner each month

Just_30

matt8787 wrote: »

I disagree with much that has been said here.

It's all too easy for an outsider to just say 'put your life on hold until your debts are paid off, and in the meantime plough money into a landlord's pocket for years rather than the equity of your own property'.

I've been doing that for years, and if I were to calculate now the amount i've spent on rent over the last 15 years i would have enough to cover a sizeable portion of the mortgage and be well on my way to actually owning my own house / be a lot closer to mortgage free living.

Time waits for no man.

If you have done your sums and know you can manage both, I would say plough what you have into your deposit and buy as soon as you can. As a Londoner I'm paying approx £1,500 a month rent at the moment - whilst knowing that friends who have bought equally nice places are paying approx £300-500 a month in mortgages.

Now I can't imagine your loans are costing you that much in interest - but thats what it costs me as a renter over being a home-owner each month

Thanks Matt, that post pretty much sums up my way of thinking.

You are correct that the loans are not costing me a great deal in interest. If I settled my car loan right now I would save £700 and the loan from my friend was agreed over the full term, so I know how much its costing me and he knows how much return he is getting. I would not want to push his generousity even further by paying him back early and expecting not to pay back the full amount (that is, including the agreed interest).

With regard to other posters stating that other household costs could come up, we are most likely looking to buy a new build so this concern should not be (so much) of an issue. I do appreciate you need to have a contingency fund for nasty little surprises and as long as we stay sensible with the size of the mortgage I think this can all be budgeted for without any issues.

JustinCredibleGillespie

You answered your own question Just_30. Keep servicing your debts & get a mortgage.

All the best

JCG

xx

DebtClearer

Hi, I'm in a similar situation. Try and get your debt down to 0% interest but work towards both goals. Many people will disagree but personally with no house if I was to sink all my spare money at debts and none in to savings I would be pretty unhappy.

Call me strange but I'm doing this how I feel best.

Toomuchdebt

Just one thing to add-I've just moved into a new build(council house)...and a week later the heating wasn't working, and 2 days ago we had a leak from the upstairs bathroom and now the living room ceiling has to be redecorated when the damp patch dries out...just because it's a new build doesn't mean you won't have problems.
But it's your choice

Malkin157

matt8787 wrote: »

I disagree with much that has been said here.

It's all too easy for an outsider to just say 'put your life on hold until your debts are paid off, and in the meantime plough money into a landlord's pocket for years rather than the equity of your own property'.

I've been doing that for years, and if I were to calculate now the amount i've spent on rent over the last 15 years i would have enough to cover a sizeable portion of the mortgage and be well on my way to actually owning my own house / be a lot closer to mortgage free living.

Time waits for no man.

If you have done your sums and know you can manage both, I would say plough what you have into your deposit and buy as soon as you can. As a Londoner I'm paying approx £1,500 a month rent at the moment - whilst knowing that friends who have bought equally nice places are paying approx £300-500 a month in mortgages.

Now I can't imagine your loans are costing you that much in interest - but thats what it costs me as a renter over being a home-owner each month

You have to be confident though in the the future equity of your property. A lot of property at the moment is costing 6 to 8 times average earning whilst 15 years ago that might have been 3 to 5 times average earnings.

Renting might seem like a pain but you do have freedom to move on, whilst if you get into negative equity on your asset it can quickly become a millstone. A mortgage is just another debt commitment.

That said if you are confident in your employment security and you are looking at a permanent purchase then over a long period of time you should be OK.

Hatecreditors.com

Can I just add something to the whole ‘dead money’ renting term that gets banded about far too often.

Due to the recession, I not only lost my £20,000 equity, but I will have to take a hit of around £10,000 to sell my house (i.e I would have to sell for 90% of my mortgage). Due to changes in circumstances, I absolutely hate where I live and would do anything (other than take on another £10k of debt) to move. But I can’t. I’m stuck in a house I hate.

So if you ask me, dead money is losing £30,000 not renting off a landlord and having the option to move after 6 months.

I accept the recession was a one-off but renting and buying both have pros and cons.

vics199

I personally have double the de bt that you do and still took out a mortgage 3 years ago. Fortunateyl for me I 'borrowed' the deposit off of my dad in return for paying it back on sale of the house with any profit on his share.

This is the best thing I have done as it makes me happy to think I have my foot on the ladder and in a way it acts as my savings pot as I don't save a penny because of my debt repayments.

The mortgage people won't look at the loan from your friend as it isn't official. I pay back my parents monthly and that £300 wasn't taken into account. So you should get a decent mortgage offer.