Repay or save

brabbn

I'm in a position where it looks like my current relationship will be ending. We currently share a home and I'm debating what to do with what will be my share of the equity once the house has sold.


We have children together and will be able to secure short term accommodation (even if it means going back home for a short term). I will be using this time to save as much as I can in order to buy a new place for me and my children but don't know what to do first. I only have a loan in my name (other than the mortgage) and don't know if I should use my share of the equity to repay the loan quicker, or put the equity in a savings product (1 or 2 years) and make over payments on the loan over this period (could repay loan in 16 months) and then use the savings as a deposit. Rate on the loan is just below 4% so wondered if anyone had any ideas/comments.

[Deleted User]

Assuming you're not getting 4% on your savings, you will be better off financially clearing the debt.

When applying for a mortgage, the debt will impact affordability and it could look as if you have borrowed your deposit.

However - you may also need to have a savings buffer, given your circumstances.

spadoosh

Looks like its ending? I think when you start spending the joint equity the relationship is already ended?!

1. Financially it will be better to repay the loan early unless there is exit charges. Any interest you recieve in terms of savings will probably be less than what youre being recharged for the loan.

2. Any outstanding loans will be offset against your afforabillity. So realistically it should make little difference to how much you can afford to borrow.

3. Splitting up with kids will be at least a little bit messy. Both parties normally come out of it worse off than they in theory should. Youll probably have a few people around you looking for a cut (solicitors, banks etc).

Id personally plan on repaying the loan as soon as possible and trying to take full advantage of the cheap/free accommodation for as long as possible as to save a healthy deposit.

MEM62

A left-field thought. Why are you not staying in the house? You will need housing for you and the children and, in most cases, staying where you are will be preferable to going into the rented sector.

brabbn

Well I've been told to get out and had numerous arguments about it being over. It's not what I want but I've started to make a back up plan in case it does happen as I want to be able to get things sorted asap.

Depending on what the house sells for I could pay the loan off within 6-10 months, or if I kept it as savings and just made huge overpayments in around 16-18 months. It would depend on the savings accounts available as would need to stay in the free accommodation for around 2 years to build up suitable deposit and get finances in best place to buy own house.

brabbn

Don't want the kids to have to listen to my partner shouting and storming around the house, especially when they have gone to bed. I'd have to stay in the house until it sold as neither could afford it on their own and I couldn't afford to pay for them to live there whilst I also pay for things at other residence/save/pay off debts etc.

MEM62

brabbn wrote: »

Don't want the kids to have to listen to my partner shouting and storming around the house, especially when they have gone to bed. I'd have to stay in the house until it sold as neither could afford it on their own and I couldn't afford to pay for them to live there whilst I also pay for things at other residence/save/pay off debts etc.

It's always a shame with things in a relationship get to that point.

With respect to the affordability of staying in the house, have you taken into account the contribution that will be made by your ex? Whether it is in that house or another he should also consider where his children are going to live and how their needs are going to be provided for financially.

bouncydog1

Before you take any decisions you need to go and see a solicitor specialising in family law. They will be able to advise you properly regarding the legal position.

As you are a joint owner (I'm assuming 50/50) you have as much right to stay in the property as your OH who will also have to contribute to maintenance for the children.

You might also want to go over to the relationships board for more advice.