Which route is best?

Senseicads

Hi everyone,


The girlfriend and I are looking at moving in together next year before getting married, this is after my rental contract expires in March. I am a very lucky boy in that not only is she beautiful, smart and lovely, but she also owns a house and has a fair chunk of equity in it. I have some debts, including student loan debts and credit cards, which total about £18000. The plan is to move in together earlyish next year, sell her current house and find somewhere for the two of us to start our new lives together. We would obviously put something in place so her current percentage of equity in the house is protected and is in place for her and we would then get a joint mortgage. She has a thing on her divorce from her last partner that says that if she lives with someone for more than 6 months then she has to pay him a fixed amount of £40k for his share of the equity. This is more than covered by the equity in the house.


We have ran through a number of options together in terms of what would be best to do here to maximise not only the amounts being paid but to ensure that we are starting off on the best possible footing and paying off my debt and paying off her ex-hubbie. Ideally we would like increase the borrowing on the mortgage to pay off hubbie and my debt. There is plenty of equity to do this and to still have a substantial deposit for the next house.


The advice I am after is really all about the order we should do things. I want to put us in the best position next year. The end goal here is at some point next year to be in our own new home, with no additional debt payments, and the ex-husband paid off. Ideally we want to end up in our own home as soon as possible after my rental agreement ends.

Is it better to remortgage on her current property, pay off all the things we need to pay off, then look for a new house? I am thinking that this may be good as then when we look to borrow on the new house we would look to be in a very good financial status, we would look like we would have minimal outgoings and a decent amount coming in. I think the banks would look favourably on this and we could then maximise our potential mortgage? Although this would mean the hassle and fees associated with remortgaging and costing us some money.


Or is it better to wait until we have moved in, then just move and pay the one lot of costs? This would mean no money to pay out on the "interim" mortgage, but i would be worried that the bank would not be as generous as we would still have substantial outgoings appearing on the statement and i don't know if they would like the "we are using some of this to pay off the debt so none of those outgoings will be an issue in the future" plan? I just don't know enough about it. This might also put us on a bit of a stressful timeline to sell the house once we have moved in so that we can pay off the ex within 6 months.


What do people advise given our end goal? I would also be open to other ideas if anyone has any.


Thanks in advance for any help.

Canary_Yellow

What's the timing on the payment to the ex being due? You say it's triggered after 6 months of her living with someone else, but presumably the payment isn't due instantaneously?


If it were me, I would decide what type of place we wanted to live in long-term, and if it's possible to buy that now, then great, do that and pay off all debts on completetion and start in the new place as you mean to go on.


If not, remortgage in the current place, get all ducks in a row and get saving ready to move into the place you really want to live in.

Senseicads

Canary_Yellow wrote: »

If it were me, I would decide what type of place we wanted to live in long-term, and if it's possible to buy that now, then great, do that and pay off all debts on completetion and start in the new place as you mean to go on.

Would this reduce the amount we can borrow though as my expenses include a hefty amount of debt payments and it would look like I could afford to pay less in terms of a mortgage payment, or are the banks clever and allow this kind of thing?

elverson

Don't call her "the girlfriend".

Senseicads

elverson wrote: »

Don't call her "the girlfriend".

Her indoors?

getmore4less

Senseicads wrote: »

Would this reduce the amount we can borrow though as my expenses include a hefty amount of debt payments and it would look like I could afford to pay less in terms of a mortgage payment, or are the banks clever and allow this kind of thing?

The affordability changes a bit but the reality is you are going to be borrowing and extra £40k-£58k whatever you do.

some real numbers would help those in the know gauge your affordability.

debts(split into SL and the rest)
incomes
houses value(current and proposed new)
current mortgage deal eg. rates are there any ERC is it portable

Another option you have not looked at is you move in to the current place, pay off your debts quicker(no rent) review all borrowing options to raise the £40k to pay off the ex. move sometime later to the forever place.


(I think they may have been hinting fianc! might be a better term)

getmore4less

IF the move is being driven by a this will never be our place and baggage then remember that by protecting the equity unless you pay more of the mortgage to even things up then any new place will never be an equal our place.

Senseicads

getmore4less wrote: »

The affordability changes a bit but the reality is you are going to be borrowing and extra £40k-£58k whatever you do.

some real numbers would help those in the know gauge your affordability.

debts(split into SL and the rest)
incomes
houses value(current and proposed new)
current mortgage deal eg. rates are there any ERC is it portable

Another option you have not looked at is you move in to the current place, pay off your debts quicker(no rent) review all borrowing options to raise the £40k to pay off the ex. move sometime later to the forever place.


(I think they may have been hinting fianc! might be a better term)

Thanks


debts(split into SL and the rest) - £15500 on Credit Cards, these were amalgamated recently from a few various things(overdraft etc) onto a 0% card. I've not made a payment for this yet however I am anticipating around £190 per month. £2500 on Student loan. Payment due to finish in 18 months. £147 per month this costs. Also we have a car payment of £270 per month. but we don't want to pay this off with the equity.

incomes - both on £34500pa.

houses value(current and proposed new) Current Value is £350,000. we don't know yet what we are able to borrow? this is kind of the crux of our question. We don't really want to spend more than about £1500 a month on the mortgage payments to be honest.

current mortgage deal eg. rates are there any ERC is it portable. Fixed rate mortgage of 2.48%. Current mortgage is around £160k I think.



Does this help?


Thanks

getmore4less

When do the ERC finish?

What do you need to make a move worth bothering with?

After debts, £40k and fees you probably have £90k equity for a deposit

£1500pm over 20y @ 3% is £270k that's a 4*multiple probably affordable and gives you a total of £360k to play with no much more than you have now.

Go to 25 years and you are looking at £320k so £410k properties will that be enough to get something significantly better?

Senseicads

Apologies I've probably got something wrong with the amounts here, but my girlfriend isn't around to ask. I know that when she worked it out against her current mortgage and taking £60k out for our various charges we would have equity of 140K. So I've probably overstated her current mortgage. I don't know what her ERC is unfortunately, I will be able to ask tonight. I do know her current mortgage is portable and is over 30 yrs not 20.


if any of that helps?


Edit: Her ERC is currently £5k. which seems a lot!

getmore4less

but when does it finish?

how big is the mortgage.

it is a bit early to be considering options when you don' know the current situation which is where you are starting from.