Options to buy a house.

Money_maker

AdrianC wrote: »

I don't want to be harsh here, but "maintain a little quality of life" is what got you into debt in the first place, and is what's keeping you there now and for the foreseeable future.

Think this quote says it all. No LBM yet.

AdrianC

audigex wrote: »

£60k is a respectable enough income that you can deal with this unless you're in London or somewhere fairly expensive, in which case this post probably doesn't apply.

Bearing in mind he's paying £800/mo for a three-bed house in rent...

1) You have 20k debt you say will be cleared in 4 years? So you can pay off £5k/year. That means you can also save £5k/year

Why on earth would anybody in their right mind save £5k/year at ~3% interest (less tax), at the same time as paying 27% interest on debt?

japmis

seanym007 wrote: »

Yes the interest on a couple of my debts is pretty high, 8.5, 16.9 and 27. I pay as much as I can on the debts I owe, but I do try and maintain a little quality of life. That said, yes there are always savings to be made.. Just not ready to go the extra mile I guess you all are suggesting.

Both cars are on finance and not included in the £20k debt. Yes it's more preference than have to..

In a couple years time I should get £8k out of my current scheme, and the same again the year after. It's all linked to the performance of the business, which at the moment is stable with growth, but I realise that could all change..

I guess I was hoping there was some way of having my cake and eat it, but as I assumed there isn't..

I appreciate all the advice, but picking holes in my maths or questioning my reasoning is something I hadn't bargained for..

I have a spreadsheet with all my outgoings clearly outlined.. I'm comfortable with where the cash is going.. We should be a lot more comfortable than we are, but going backwards to a smaller house, less cars, is something I'm not ready to do yet. Maybe in a couple years when in the same position I might change my mind.

Definitely get on over to the Debt Free Wannabee forum; they are amazing :beer:

Migrate your spreadsheets into a software called You Need A Budget (YNAB); it has transformed my money management. Don't be put off by the word "budget" :rotfl:it's a really good tool for allocating your money however YOU want to (e.g. Sky packages)

GwylimT

AdrianC wrote: »

Bearing in mind he's paying £800/mo for a three-bed house in rent...



Why on earth would anybody in their right mind save £5k/year at ~3% interest (less tax), at the same time as paying 27% interest on debt?

I think the point is if they can pay £800 a month in loans paying off £5k per year they can save the same amount after the loan is paid off, that could get them a decent deposit very quickly.

Hillbilly1

It's clear the OP hasn't had their LBM - light bulb moment yet. Until then they will continue with excuses to not being able to pay it off or save.

AdrianC

GwylimT wrote: »

I think the point is if they can pay £800 a month in loans paying off £5k per year they can save the same amount after the loan is paid off, that could get them a decent deposit very quickly.

Yes, I think you're right. I was still thinking about the £500+ gap in the numbers they've told us about.

audigex

AdrianC wrote: »

Bearing in mind he's paying £800/mo for a three-bed house in rent...

Why on earth would anybody in their right mind save £5k/year at ~3% interest (less tax), at the same time as paying 27% interest on debt?

He specifically stated earlier that he had a £20k loan which would be paid off in 4 years. We can extrapolate this as being at least £5K per year in payments (likely significantly more, as the interest must be served too). But for the sake of argument let's assume £5k/year is saved

This is clearly being paid off in addition to his £800/month rent, bills and Sky Sports subscription (which we seem to be getting pretty hung up on: it's at absolute most 3% of his net monthly income if he has the entire sky TV + Fibre package and is a higher rate taxpayer. Probably more like 2.5%)

So £20k paid off at £5k year. In 4 years that's gone. In one further year (making the same payments into a savings account) he's saved £5k. Enough for a deposit on a £100k house. In 2 years he's saved £10k, enough for a deposit on a £200k house.

Based on a typical yield it would appear that his 3 bed rented house is worth somewhere around the £130-180k mark, fairly typical. So in around 6 years (4 paying debt off, 2 saving deposit) he could afford to take out a mortgage on an equivalent house.

(removed a section about his finances, as I can't be bothered matching it up to what he's already said he pays)

The point is that they're currently paying £800 to service debts. Assuming even £500 of that is paying towards his £20k debt, they will clear his debt in 4 years and can then continue using that exact same budget towards a deposit for buying a house.

They can't afford a house in the next 3-4 years, but it's certainly achievable this decade.

AdrianC

audigex wrote: »

He specifically stated earlier that he had a £20k loan which would be paid off in 4 years.

Not quite what he said.
The £20k debt is in at least three different forms, with three different rates (8.5%, 16.9%, 27%) - no split as to which is on what rate. At least one of those is on a card, probably two, looking at the rates. He's already paid off £10k. There's clearly VERY little prioritisation or management of repayment going on.

We can extrapolate this as being at least £5K per year in payments (likely significantly more, as the interest must be served too). But for the sake of argument let's assume £5k/year is saved

He's said £800/mo. Which is £9,600/yr. Which doesn't add up to the timelines he's given us. He's said "four years on my loan", and he's said "4/5years to clear the debt". If I had to guess, I'd say that some is going to a loan, at 8.5% with four years left, and the rest is vaguely keeping pace with minimum payments on the higher-rate cards

After rent + bills that still leaves them around £2,000/month. I think people are getting hung up on this £20k debt and seeing it as insurmountable because it's a big number. It's not, it's a very manageable debt on that level of income.

It could be, yes. Once that LBM happens.

audigex

He said £800/mo for all debts, and he also said that he has a car payment. It could also potentially be servicing some of his wife's debt.

Where the REST of the money is going doesn't really matter, the fact I'm going off is that he did state he had £20k of personal debt which would be paid off in 4 years. That suggests a payment of £420/month to pay off the capital, or somewhere closer to £500/month to service the interest too.

If we stick with the assumption that he's paying off his debt at approximately that rate, a house is in reach within 5-7 years, assuming no other lifestyle changes, increase in income, reduction in outgoings etc.

mattyprice4004

In all honesty, if you're desperate to buy a house you need to cut back massively.
Two new cars won't be helping - that's a large chunk gone right there.

I decided to start saving to buy a house, and now have a modest 2-bed bungalow for myself and my family (partner and child), I have 2 cars (one for my business, and a project) which are 10 years old and I own outright.

In total we spend around £1500 inc all bills, it can be done. It's all about cutting back on what you don't need - if you're not willing to do that, then 'desperate' isn't the right word. If you wanted it with all your heart, you'd already have an older car (singular), some Aldi own-brand Corn Flakes in the cupboard, and a Freeview box.

Trust me, living a little more 'basic' will be worth it when you don't have to ask permission just to re-decorate a room. Good luck.