Which first, lose debt or buy family home?

JaySee_2

Hello all,

I’ve been lurking around here as a guest for a fairly long time now, and thought it was about time I registered and joined in. My financial situation isn’t great, and I’m in need of a little advice from anyone that cares to suggest anything.

My situation is this; I have £15,502 worth of debt on loans & credit cards (requesting my debt-free wannabe member number is my next task..), I married my girlfriend of four years last year, and recently seen the arrival of my wonderful baby daughter.

I’ve been trying to cut down my debt for a fair while now, at its peak it was around £17,000. I was able to occasionally throw a few hundred at the debt every couple of months or so, but now my wife is on maternity leave our spare cash has taken a dive. With tax credits and child benefits we’re just about getting by.

Over the last couple of years I’ve done all I can think of to streamline our finances, getting cheaper energy supplies, lower cost broadband, negotiating mobile phone contracts, no buying lunch at work, buying supermarket brand goods.. You name it. I’m fairly satisfied that I’ve covered most of the day-to-day money saving routes.

Here’s the new complication; both my wife and I are very keen to buy a home for our new family. It’s the usual situation of being fed up with throwing rent money away when it could be invested, and the desire to have somewhere that’s truly our own and can do what we like with it (instead of living with a kitchen from the 70’s and a garden that I swear was once a landfill but now covered in turf, as well as other more serious points).

We’re very lucky that we have a good home to rent at a very good price, but the area is not the most ‘family friendly’ in town, and we’re desperate to have somewhere to truly call our own.

So now instead of throwing all available cash at my debts, I’ve started putting some money into savings, with the aim of getting £3500 behind us and looking to buy on the HomeBuy scheme for ‘Key Workers’ (my wife is continuing to work for the NHS part-time after her maternity leave).

I’ve run several mortgage lending calculators, and the general consensus seems to be that we’ll struggle to get any more than £80,000 - £110,000 which will barely afford us a studio flat, let alone a two-bedroom home we need. Due to this, the only option I can see is giving this HomeBuy scheme a shot, as we should be able to get a mortgage for 50%~ the property and rent the other 50%, making affording a two-bedroom home more realistic.

Keeping in mind that we’re very very keen to get out of debt, but to also get on the property ladder, what do we do?

Will I be best off boosting my income as much as possible and getting the debt out of the way? Or should we save now for what we need to cover fees and start-up costs of buying through the HomeBuy scheme? I feel like I’m stuck between ‘a hard place and a rock’ – we’re desperate to be free of debt but also desperate to buy a family home. I realise that a mortgage is debt too, but as it’s a ‘good debt’ we can glaze over that…

Can anybody advise any alternative options for us to get where we need to? Or perhaps know of something we can do that perhaps we haven’t considered? I’ve been stressing over this for so long now I’m having trouble seeing new solutions – need some fresh perspective! Any suggestions or ideas would be greatly appreciated.


JaySee

alwaysonthego_2

Hi welcome to mse

Have you spoke to a morgage adviser, because I know when we have been for morgages they take your debt into consideration. Once you get the morgage you will be paying an high morgage payment and rent too. Can you give more details on your debts, outgoings and incomings so we can see the full picture

angelavdavis

Hi and welcome.
Although I completely understand your frustrations about paying rent, its pointless saving when you are probably paying more in interest on debts than you are receiving on your savings. If you have switched your interest to 0% - great, then save your money, but I would pay off as much as possible.
Its not just about paying a mortgage - its about buying the furniture, washing machine, dishwasher, fridge/freezer and other stuff plus the addition of the maintenance costs of the house - ooh and the fact that most people can't resist replacing their kitchen/bathroom/floor coverings, etc that will add to your debts quite quickly.
I don't know what your salary is, but I suggest paying off the debts first as you will be able to save more for your deposit and to pay for the inevitable and usually unbudgeted extras that do come along.

Sorry its probably not what you want to hear.

hypno06

I am not renting, but I do want to move house within the next few years. However, because of the level of debt we have, we currently could not get a mortgage to buy the place we are currently in, yet alone buy somewhere better (if you see what I mean).

So I see it as rather than paying my debt, which can be quite depressing, I am actually building up my deposit/buying power because the lender has less to knock off the amount we would be eligable to borrow under the mortgage.

Pay the debt off first, focus on it, hammer it down, and buy the place that you need. If you buy too early, you will end up defaulting on your debts, and risk losing your much longed for home, and that will undo all the good work you have done so far.

How about posting your SOA as per the sticky by southernscouser and the great DFW community can see if we can help make things happen quicker?

blackangeluk

Hi there and welcome to the board

Personally I would repay the debt and buy a house later. As someone mentioned earlier in the thread, it isn't just about buying a house it is all the expenses that came with it.

I bought my first home when I had a loan, in hindsight I really, really wish that I had started the home buying journey debt free as all it did for me was increase it.

I can understand why you would want to buy a house, but think of the satisfaction when you pay your debts off and you are in a position to buy a better house than you could now.

As others have suggested why not post a SOA and see if anyone spots any other areas to cut down - it's amazing what other people notice.

Seaxwyn

HI JaySee

I'm with the others above - I would seriously advise putting off buying somewhere until you've paid off your debts.

When we bought our house six years ago we had a smallish amount of debt on overdrafts and credit cards. That has snowballed, despite living very frugally, and now we have huge debts on top of our mortgage.

Paying a mortgage isn't necessarily any more positive than paying rent. I pay over £700 a month in mortgage interest only. I loathe our mortgage lender with a passion I never felt for any landlord! And it's just as depressing living in a shabby house and not being able to afford to do anything about it than it is to live in a shabby rented house.

Quite honestly I see our mortgage as a millstone, and look back on renting as a time when life was simple and enjoyable.

JaySee_2

Wow I'm amazed at the amount of fast replies! Thank you so much everyone - I'm preparing my SOA right now, will post as soon as it's done.

JaySee

JaySee_2

Okay here’s my SOA, hope this is everything you need;


Debts
Loan £8753.80 @ 7.66%
Credit Card £1077.52 @ 14.9% (Priorty to pay off)
Another Credit Card £1291.44 @ 0%
Yet Another Credit Card £4380.13 @ 0%

Total Debt £15,502.89



Total in Savings £603.36 @ 5 %



Income
Combined (whilst wife on maternity leave) £1,600 (net)
Combined (when wife returns to work) £2,000

Total Income £1,600



Expenses
TV License £11.39
BT £11
Broadband £10
Sky £15
Mobiles £15 & £19
Contact lenses £25 (toric, expensive!)
Dual Fuel Energy £29.99
Water (Both) £39.92
Council Tax £118
Diesel £160
Groceries £200
Debt Payments £220.99
Rent £550

Total Expenses £1442.96


Remaining Balance /Month £157.04
Of which the majority will go on cash expenses, food, drink, baby bits.

Sea78

Hi!

How about childcare or have you got family arrangements?

Sea xx

skint_spice

Just a quick one but Asda do toric lenses for about £60 for six months (with solutions) and they are the same brand I used to get from D & A. They might be even cheaper elsewhere.

hypno06

First of all pay that savings chunk off the highest APR credit card. That will leave only £500 or so on that card which will make you feel much better, as well as being the correct way of doing it. No point having savings at 5% when you have debt at 14.9%.

Now head over to the snowball calculator - put your debts in there https://www.whatsthecost.com and get your initial debt free date. This is just a starting point and will act as a great motivator for you to shove some of that "leftover" £157 to the debt too.

Start a spending diary. Log absolutely everything - every penny, that you spend and you will soon find where you can cut back.

Keep posting, and let us know how you are getting on!