Debts or Deposit.. Please help

Jonesy87

Morning All

I have browsed through MSE for a few years but never felt the need to post until recently. I have always had debt since my first credit card 10 years ago. Two years ago I had around 28k Debt – mostly credit cards from gambling.

I haven’t gambled for 56 days now which is the longest I have gone and the urges have gone and my career is taking off and will soon be earning good money with lots of progression opportunities so now have a good opportunity to stay away from gambling and build a life.

I still live at home at 28 which is not ideal and I really want to change but would rather buy. I am currently earning 20k a year which is rising to 23k from October 31 Payday. (An extra 180 per month)
I have two options.
1. Concentrate of paying my credit card off by the end of year (0% ends in Jan) and focus on saving towards a deposit (need around 5k where I live) so I can finally move out during the middle of next year.
2. Pay off credit card. Pay off loan and put off moving out until 2018.

I prefer option one as I can move out quicker but option two has the benefits of several wage rises and freeing up 237 per month but if I go with option one, in 4 years the loan money is freed up anyway for over payments on a mortgage.

I know most DFW’s would like to be in my position living at home with spare cash to throw at debt but it’s not a great situation to be in at my age.

Statement of Affairs and Personal Balance Sheet

Monthly Income Details
Monthly income after tax................ 1378
Partners monthly income after tax....... 0
Benefits................................ 0
Other income............................ 0
Total monthly income.................... 1378

Monthly Expense Details
Mortgage................................ 0
Secured/HP loan repayments.............. 0
Rent.................................... 130
Management charge (leasehold property).. 0
Council tax............................. 0
Electricity............................. 0
Gas..................................... 0
Oil..................................... 0
Water rates............................. 0
Telephone (land line)................... 0
Mobile phone............................ 45
TV Licence.............................. 0
Satellite/Cable TV...................... 0
Internet Services....................... 15
Groceries etc. ......................... 90
Clothing................................ 20
Petrol/diesel........................... 130
Road tax................................ 13
Car Insurance........................... 39
Car maintenance (including MOT)......... 10
Car parking............................. 0
Other travel............................ 0
Childcare/nursery....................... 0
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 0
Pet insurance/vet bills................. 0
Buildings insurance..................... 0
Contents insurance...................... 0
Life assurance ......................... 0
Other insurance......................... 0
Presents (birthday, christmas etc)...... 20
Haircuts................................ 5
Entertainment........................... 90
Holiday................................. 30
Emergency fund.......................... 0
Total monthly expenses.................. 637


Assets
Cash.................................... 500
House value (Gross)..................... 0
Shares and bonds........................ 0
Car(s).................................. 800
Other assets............................ 0
Total Assets............................ 1300

No Secured nor Hire Purchase Debts

Unsecured Debts
Description....................Debt......Monthly...APR
Barclays CC....................1700......45........0
Tesco Loan.....................13996.....237.......6
Total unsecured debts..........15696.....282.......-


Monthly Budget Summary
Total monthly income.................... 1,378
Expenses (including HP & secured debts). 637
Available for debt repayments........... 741
Monthly UNsecured debt repayments....... 282
Amount left after debt repayments....... 459

Personal Balance Sheet Summary
Total assets (things you own)........... 1,300
Total HP & Secured debt................. -0
Total Unsecured debt.................... -15,696
Net Assets.............................. -14,396



Thanks in Advance

Pixie5740

I would go for option 2. You shouldn't underestimate the true cost of setting up your own home...especially as a home owner. That's why I think it would be better to be completely debt free. Although option 2 depends on your parents being happy for you to continue living with them for another few years.

Congratulations on not gambling for 56 days :beer:

BitterAndTwisted

Any mortgage-offer will be reduced by the amount of debt you have around your neck at the time you apply. Consequently option 2 is the most sensible. Possibly the only viable one.

Also, it doesn't make any sense to stash away savings while you're paying interest on debts, bar having a minimum "rainy day" fund for the unexpected, like vehicle servicing and repairs. For a car worth only £800 I suspect that £10 a month in your budget is woefully underestimated.

HappyMJ

I'd go with option 1....but that's me I couldn't stand living at my parents house and moved out as soon as I earned enough to pay the rent. I had debts when I moved into a rental property they can now be paid back much more slowly as a rate that you can afford.

You don't really have that much debt anyway. It looks manageable. Although it's nice being debt free I value my independence over being in a bit of debt.

Oh...I'd rent first before buying. If it fails you can always return home to your parents house. Selling a house is so much more difficult.

Renting does not cost that much more than buying...something to consider.

Minx1986

As mortgages are now done on affordability, your most defiantly be better of with option 2. Clear the debt, then save. Your available income will be more and the mortgage you can get more reasonable.

Otherwise you may find whilst your affordability is low, the amount you can borrow will be low, or the rate you get not the most competitive.

babes21

Definitely clear off the debt first. When trying to obtain a mortgage having that amount of debt will make a significant difference in what you will be able to borrow.

Money_maker

Definately option 2. I know its not ideal but each month you stay in the family home is another month when you could save towards a bigger deposit. Others who do not have this option would be very envious of you. Home ownership is costly and the last thing you need is a 14K loan hanging around on top of a mortgage.

rockm87

Morning!!
I agree on option 2, and what a great position to be in!

I never had the benefit of cheaper rent while paying off my debt, and I moved out of my parents home far too early (hence my now financial problems).

I'd get the debt-busting bug now, work hard to pay off your debt as quick as possible, then focus on your deposit, and then once you own your home work on becoming mortgage free.

Imagine that!!! How amazing??

It is all well within your reach...and you're making big strides already...well done and keep going :-)

Minty123

Option 2 - definitely!

If your SOA is correct, and you have that amount of spare money each month, you could pay off your debts, and save a £5k deposit within about 2 and a half years.

sugarcube84

Option 2 You are much better off with the debts paid before buying a house for 2 reason


1/ as other have said the debt will affect the mortgage offers you get 2/ houses eat money, in emergencies and maintenance


if you are using your 'spare' cash to service credit cards how are you going to pay for these? You will enjoy your new freedom and house much more if you can afford to make it your own without using credit to pay for it.