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Council Flat: Cash or Mortgage?

Miles_Davis
Posts: 7 Forumite
Ive been a council tenant for almost 15 years in one of the London boroughs
In 2015, I applied for buy my 1 bedroom flat and after assessment& valuation the council came to the following conclusion.
Market Value at the relevant time: £120,000
Less discount £72,000
Purchase Price £48,000
at that time my discount entitlement took account of a period of 10 years
I'm also aware that (at that time) no discount can exceed £102,700
I couldn't go ahead with the purchase but at least I know how much my flat was worth at that time. I still live in the property and yes I have a ton of debts esp arrears on the council tax but my rents are ok
Now, I might get paid some money for a case that I won and amount might go as high as £70,000 as compensation.
I am self-employed and I have tons of debts that might be as high as £10,000
Questions:
1. Should I purchase the flat out right via cash?
2. I can't qualify for a mortgage but if I can what time of mortgage should I go for?
3. Since I'm not very good with financial management what options should I have if I were to invest part of the money?
4. Are there any new laws that I should take advantage of in my case?
Any advise would be greatly appreciated
In 2015, I applied for buy my 1 bedroom flat and after assessment& valuation the council came to the following conclusion.
Market Value at the relevant time: £120,000
Less discount £72,000
Purchase Price £48,000
at that time my discount entitlement took account of a period of 10 years
I'm also aware that (at that time) no discount can exceed £102,700
I couldn't go ahead with the purchase but at least I know how much my flat was worth at that time. I still live in the property and yes I have a ton of debts esp arrears on the council tax but my rents are ok
Now, I might get paid some money for a case that I won and amount might go as high as £70,000 as compensation.
I am self-employed and I have tons of debts that might be as high as £10,000
Questions:
1. Should I purchase the flat out right via cash?
2. I can't qualify for a mortgage but if I can what time of mortgage should I go for?
3. Since I'm not very good with financial management what options should I have if I were to invest part of the money?
4. Are there any new laws that I should take advantage of in my case?
Any advise would be greatly appreciated
0
Comments
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If you buy the flat you will be responsible for all the maintenance costs including your share of communal repairs to the building. In the case of large blocks this can be horrendous - new lifts, satellite TV, or dare I say it, cladding.
If you buy the flat, even on a mortgage, it becomes your asset and can be seized if you become bankrupt. It can also be seized if you can't keep up repayments on your mortgage.
If you become unemployed Housing Benefit won't pay the capital element on your mortgage. If you're a social housing tenant on a secure tenancy you are in a very secure position even if your financnial circumstances change for the worse.
If you buy your flat your block could still be subject to compulsory purchase if the area is targeted for [STRIKE]gentrification[/STRIKE] regeneration, and the money you get under compulsory purchase is unlikely to be anywhere near enough for you to buy another flat in the area.
If you consider starting a family and a 1-bed flat isn't enough you'll find it hard to get back into social housing and may not be able to afford to buy a 2-bed or even get a 2-bed on private rental. In social housing you may be able to get a mutual exchange or be more likely to get a 2-bed allocated. Likewise if you can't manage the stairs and need a ground floor property.A kind word lasts a minute, a skelped erse is sair for a day.0 -
You'd feel so much more noble if you continued renting, then after you moved or departed this life someone deserving could live there.0
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What sort of block is it? Apart from the ongoing expense of repairs, you need to think about salability. Flats on tower blocks are very difficult to sell.
And apart from all that, if you are bad at managing money then it seems crazy to take on extra liabilities. Why not concentrate on learning how to budget and keep out of debt?0 -
theartfullodger wrote: »You'd feel so much more noble if you continued renting, then after you moved or departed this life someone deserving could live there.
Deserving?0 -
Think you definitely need to consider managing your money better first.
No point in buying a flat and then not being able to pay your fees and associated maintenance costs and losing it.
Also the value may have gone up since 2015 (120k sounds low for a London flat but I guess that depends entirely on location) you would also need to consider legals fees and insurance costs.
You may be best sorting your debts and investing your money wisely or into making your business a success / more successful.
Then once your debt free and have a good money management plan in place you could reconsider.
I'd be scared buying property if I couldn't manage to save day to day.0 -
Owain_Moneysaver wrote: »If you buy the flat you will be responsible for all the maintenance costs including your share of communal repairs to the building. In the case of large blocks this can be horrendous - new lifts, satellite TV, or dare I say it, cladding.
If you buy the flat, even on a mortgage, it becomes your asset and can be seized if you become bankrupt. It can also be seized if you can't keep up repayments on your mortgage.
If you become unemployed Housing Benefit won't pay the capital element on your mortgage. If you're a social housing tenant on a secure tenancy you are in a very secure position even if your financnial circumstances change for the worse.
If you buy your flat your block could still be subject to compulsory purchase if the area is targeted for [STRIKE]gentrification[/STRIKE] regeneration, and the money you get under compulsory purchase is unlikely to be anywhere near enough for you to buy another flat in the area.
If you consider starting a family and a 1-bed flat isn't enough you'll find it hard to get back into social housing and may not be able to afford to buy a 2-bed or even get a 2-bed on private rental. In social housing you may be able to get a mutual exchange or be more likely to get a 2-bed allocated. Likewise if you can't manage the stairs and need a ground floor property.
I'm a secure council tenant
In this case, should I pay cash (buy outright) and get done with it or should I clear outstanding debts and go for a say, 70%mortage and possibly re invest the rest?
A personal perspective I thought why not buy it as a stepping stone then move up slowly0 -
theartfullodger wrote: »You'd feel so much more noble if you continued renting, then after you moved or departed this life someone deserving could live there.0
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What sort of block is it? Apart from the ongoing expense of repairs, you need to think about salability. Flats on tower blocks are very difficult to sell.
And apart from all that, if you are bad at managing money then it seems crazy to take on extra liabilities. Why not concentrate on learning how to budget and keep out of debt?
Its a 2 storey mini block/flat close to high street, national rail and underground and shopping malls and about 5 schools nearby so obviusly its a good area interms of selability.
Because I dont want debts thats why i thought why not just clear outstanding debts and buy it cash outright?0 -
HampshireH wrote: »Think you definitely need to consider managing your money better first.
No point in buying a flat and then not being able to pay your fees and associated maintenance costs and losing it.
Also the value may have gone up since 2015 (120k sounds low for a London flat but I guess that depends entirely on location) you would also need to consider legals fees and insurance costs.
You may be best sorting your debts and investing your money wisely or into making your business a success / more successful.
Then once your debt free and have a good money management plan in place you could reconsider.
I'd be scared buying property if I couldn't manage to save day to day.
Surely, the plan was to clear outstanding debts first before buying it.
I am a council tenant, was given 60% discount which amounted to £48000 instead of £120,000 which was the value of the flat
I can manage paying services associated with management of the flat0 -
Miles_Davis wrote: »Surely, the plan was to clear outstanding debts first before buying it.
I am a council tenant, was given 60% discount which amounted to £48000 instead of £120,000 which was the value of the flat
I can manage paying services associated with management of the flat
Hope so for your sake
https://forums.moneysavingexpert.com/discussion/5856039/service-charge-being-billed-for-5000-major-works
https://forums.moneysavingexpert.com/discussion/5789909/new-roof
But morally I hope you don't get to buy it"It is prudent when shopping for something important, not to limit yourself to Pound land/Estate Agents"
G_M/ Bowlhead99 RIP0
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