Current Situation

old_hat

Hi all,

New to this forum but weighing up what to do next housing wise.

Currently living in property which we bought for 144k back in 2008. We owe 105k on a mortgage plus need to pay back 10% to an open market home buy scheme (used for deposit). Estimate that it may be worth between 150 and 160k. We live in the south east. This is a flat and we want to move to a 3 bed property as soon as we can

We both earn 101k between us. This is 5600 take home pay. Our mortgage is 649 a month.

The problem comes in that we did build up a lot of debt 30k on 7 credit cards. Last year we took out a 25k loan from natwest which is 871 a month and has another two years to pay these off. There is 17k left on this debt. We have saved 4k and are currently putting away 1k a month. Have just finished paying off student and car loans. 1 other credit card is 6800.

So do we sell just after christmas and use the small equity we have (20-30k) to buy elsewhere, or save next year as much as we can for a larger deposit once debt paid off. Or, save for a couple of years and rent out current flat when we have enough deposit. (Can you rent your flat out with the extra charge - open market home buy - on it)

Any advice would be welcome

Best wishes

The Hat

Landofwood

old_hat wrote: »

Hi all,

New to this forum but weighing up what to do next housing wise.

Currently living in property which we bought for 144k back in 2008. We owe 105k on a mortgage plus need to pay back 10% to an open market home buy scheme (used for deposit). Estimate that it may be worth between 150 and 160k. We live in the south east. This is a flat and we want to move to a 3 bed property as soon as we can

We both earn 101k between us. This is 5600 take home pay. Our mortgage is 649 a month.

The problem comes in that we did build up a lot of debt 30k on 7 credit cards. Last year we took out a 25k loan from natwest which is 871 a month and has another two years to pay these off. There is 17k left on this debt. We have saved 4k and are currently putting away 1k a month. Have just finished paying off student and car loans. 1 other credit card is 6800.

So do we sell just after christmas and use the small equity we have (20-30k) to buy elsewhere, or save next year as much as we can for a larger deposit once debt paid off. Or, save for a couple of years and rent out current flat when we have enough deposit. (Can you rent your flat out with the extra charge - open market home buy - on it)

Any advice would be welcome

Best wishes

The Hat

No point saving while you have debt. Use every penny to pay off the credit cards, and then overpay the loan if you can. Then start saving.

amnblog

£5,600 a month take home and a £639 mortgage payment.


You should be paying off your unsecured debt rapidly unless you have a dozen kids.


Do that before you increase your mortgage.




If you do not get used to not having unsecured debt, you will just build it up again when you have a bigger mortgage. It may then become unmanageable.

enjoyyourshoes

Work out why you have such large debt (the debt is a symptom of a deeper underlying problem)


Once you have identified the 'real problem', tackle it as a couple and consider: 'What do I want to achieve out of life'. Then set about achieving this within your financial envelope.


Then sort out debts first and look into overpaying mortgage (check T&C's)


If you goal is to be mortgage free , you could achieve this is you overpaid mortgage by £2000 pm within 4 years (based on 2% interest rate)


Your take home pay could fund such an overpayment both to eliminate all of your debts as quickly as possible and pay off mortgage.


Need to start benefiting from compound interest rather than being hindered by them.

old_hat

Thank you.

I know what the problem with the debt was. We built up 30k of credit card debt. We now have consolidated into one natwest loan plus one credit card. Started off with 31k this time last year now loan down to 17k and 6k on credit card.

871 paid monthly on loan and 1000k put into savings to pay loan off in lump sum. Currently 4k saved.

I reckon by Dec/Jan we should be debt free.

So the question is after then.

Options:

1) Save money into a savings account to build up a deposit
2) Pay off mortgage directly (max 11k a year without penalty) and rest into savings

Thanks

The Hat

lucie_1985

Option 2.


I think what enjoyyourshoes meant by working out why you have the debt was more along the lines of whether it was built up due to lifestyle and living beyond your means or if there had been a crisis type situation. The latter is easier to prevent reoccurring by taking out some sort of insurance for example if either of you find yourselves out of work. The former is behavioural and a much easier road to find yourself on again.