Clear the debt first or save towards deposit

dashing4uu

Hi,

Im 37 year old working in london with avg annual salary of 26-27k. I have two kids and wife (currently not employed).

I have a huge debt £11k PL, overall debt on cards 6k. My wife has been saving for quite sometime now and has about 10k worth savings. Have been to a mortgage advisor who said will do a AIP to check thhe affordability. it is impossible for me to save towards deposit, if i pay off my debt using my wife's saving. Wondering what is the best step forward. Shall we go on saving for another couple of years or clear the debt first.

The other option we are thinking of is to get my wife into employment, as she is debt free and apply mortgage putting her as main applicant, but a bit concerned as she has been out of job for about 5 years (caring for our kids), and this will be her most recent employment.

We are planning to buy property somewhere in Birmingham or West Midlands, 2 bedroom approximately around 120k.

All your inputs are welcome and can help us to conclude the next step forward.

Thanks
Dashing4uu

sparky130a

I'd get myself back to the Midlands first and foremost.

Your salary in London must be eaten apart.

Get two incomes and reduce the debt. It'll cripple your affordability otherwise.

Cakeguts

Could you please explain how your wife who is not working has managed to save 10k while you who are working have managed to get 17k into debt?

You are using jam jars. This money is in this jam jar and this money is in this jam jar and that money is owned and that is saved. What you actually have is 7k debt and no savings. The debt cancels out the actual money that you have.

ACG

An AIP to check affordability? If that is what they really said, get a new broker. There is absolutely no reason to do a credit check (hard or soft footprint) to check affordability. It is just lazyness. Almost every lender has affordability calculators.

As a general rule of thumb you would be looking at around 4-4.5x income, based on what you have said I would say closer to 4x income.

dashing4uu

We have been living in london for almost 8 years now, never lived out of london, but i think its the righttime to move out and stop paying for someone else's mortgage.


Thanks for the info.

dashing4uu

She has put the money as savings along with her parents, before we got married. Iam the sole earner and now she wants to get back to work.

dashing4uu

@ACG, 3 options to choose from, suggest me the best please!!!

Clear the debt first
Continue with the deposit and search for properties
Apply mortage on my wife's name with her deposit, when she's back into work??

Thanks
Dashing4uu

ACG

I cant, 3 is pretty difficult due to the limited number of lenders who would do it.

1 or 2 depends on personal preference and the cost of the debt/rent etc etc. It is like doing an equation with only some of the figures.

dashing4uu

I am thinking of clearing debt first, but cannot clear both loan and credit cards at the same time. One last suggestion needed from mortgage point of view, clearing the cards first balances of 3.3k, 2.2k, 1.8k (which are all balance transfers, interest free) or loan which is 11k until Dec'19.

Cakeguts

dashing4uu wrote: »

I am thinking of clearing debt first, but cannot clear both loan and credit cards at the same time. One last suggestion needed from mortgage point of view, clearing the cards first balances of 3.3k, 2.2k, 1.8k (which are all balance transfers, interest free) or loan which is 11k until Dec'19.

Use the savings that your wife has made to pay off 10k of the 11k debt that you have. You are probably paying more interest on the debt than she is getting on the 10k so that 10k is slowly losing value against the cost of borrowing the 11k.

When your wife goes back to work put her earnings into paying off the rest of the debt.

zagubov

Buying a family home on one income might be possible, but may be unwise.
Your wife's desire to go back to work is very wise, for no end of reasons.
I'd start investigating relocating to the midlands ASAP.