Save to get LISA bonus or use money to pay off 0% debts

greensalad

Nuggy96 said:

Another method is to get a balance transfer card, move that 1.3k to there and so no interest paid (stoozing). then put your money into a LISA

Sorry which £1.3k do you mean? Almost all our debt is 0% with the exception of one which we intend to pay off just next month.

Nuggy96

greensalad said:

Nuggy96 said:

Another method is to get a balance transfer card, move that 1.3k to there and so no interest paid (stoozing). then put your money into a LISA

Sorry which £1.3k do you mean? Almost all our debt is 0% with the exception of one which we intend to pay off just next month.

My bad, the 2.6k at 6% you could transfer to a 0% balance transfer card and have an extra 2.6k in a savings account getting interest

greensalad

Nuggy96 said:

greensalad said:

Nuggy96 said:

Another method is to get a balance transfer card, move that 1.3k to there and so no interest paid (stoozing). then put your money into a LISA

Sorry which £1.3k do you mean? Almost all our debt is 0% with the exception of one which we intend to pay off just next month.

My bad, the 2.6k at 6% you could transfer to a 0% balance transfer card and have an extra 2.6k in a savings account getting interest

It's a loan, so I guess I would have to get a money transfer instead. I had considered it before but I plan to pay it off in full next month so not much point at this stage. For the cost of the money transfer fee I think it'd be better just to pay it in full.

DiggerUK

Your 1,2,3,4,5 plan is sensible to me. What I would suggest you do is get all the 0% debt being paid at minimum per month, but have all the money to pay that debt put by.
Once that is done you can pile in to the LISA at a rate of knots with the money for the debts safely put by. You could put it all in PB's for now, then who knows.

I wouldn't get too hung up on emergency funds, with the 0% CC's on standby you only need a healthy cash in hand balance.

I think you are over optimistic about when you will be in a position to buy, not by much, but best aim for at least a £20k balance before browsing the estate agents window. 

I don't see property prices rising going forward, exact opposite in my view. Best of fortune..._

Fighter1986

What's going to be most important on your application, a high income multiple on the banks maximum lend or a good LTV?

What I'm asking is, how expensive are the properties you're looking at in comparison to your income?

Are you looking at a property that's around 4x your joint gross annual salaries, or nearer 4.75x your joint gross annual salaries?

If you leave your debt in situ, you'll have a larger deposit, but be offered less against your income.
If you pay off your debt, you'll have a smaller deposit, but be offered more against your income.

Right now, I'd expect lenders to be erring towards wanting borrowers with a larger deposit. 

let's say for example you saved a 20% deposit, would a mortgage equating to 4x your joint annual salaries be sufficient to cover 80% of the house you're looking to buy? If so, save rather than paying off debt. 

(Lenders usually lend 4.5-4.75x joint annual basic salary to applicants who don't have debt elsewhere, the multiple reduces depending on how much you owe elsewhere)

I'd suggest however the position you want to be in at a minimum is having a 15% deposit and £NIL debt when you apply, as well has looking at properties where the 85% you're asking to borrow is under 4.5x your joint basic salaries. The best way to achieve this is to save £4,000 per tax year into the LISA and squirrel the rest of the money towards your debt until it's all cleared, and carry on saving until you have at the very least that 15% + all associated moving costs / fallback fund.

At present, assuming your LISA balance is £0, you'll want to save £444.45 Per Month into your LISA starting 1st July reducing to £333.34 per month from April, and use the remaining money towards your debts, highest interest rate debt gets the lions share of the money you've left after your LISA payment, minimum payment on everything else. 

This strategy is the most financially optimum when taking into account all factors, interest, LISA bonus, etc. 

Once your debt is clear, ensure you don't save more than £4,000 per year into your LISA and put the rest in a penalty-free savings account. 

greensalad

DiggerUK said:

Your 1,2,3,4,5 plan is sensible to me. What I would suggest you do is get all the 0% debt being paid at minimum per month, but have all the money to pay that debt put by.
Once that is done you can pile in to the LISA at a rate of knots with the money for the debts safely put by. You could put it all in PB's for now, then who knows.

I wouldn't get too hung up on emergency funds, with the 0% CC's on standby you only need a healthy cash in hand balance.

I think you are over optimistic about when you will be in a position to buy, not by much, but best aim for at least a £20k balance before browsing the estate agents window. 

I don't see property prices rising going forward, exact opposite in my view. Best of fortune..._

Thanks for your idea of putting the balance aside, though I do have to ask what you think the benefit of that would be. Just purely having it to hand in case of an emergency (or a global pandemic? haha)

We are aiming for 25k in the bank before we start looking. We're expecting a small income boost once my partner finishes training related to his job, hence my forecasting to the end of 2021. Of course, something could put a spanner in the works, but that's why I forecast a lot so at least I would know how much it'd push us back

We don't have much plan to add to our EF just yet, as you can we have low credit utilisation (I think our two CC's give us something like 25k in allowances) but obviously it's less than ideal. We planned to throw our £1,500 EF either into the house fund at the end or use it for something like appliances, though it would be nice to keep it as-is. 

greensalad

Fighter1986 said:

What's going to be most important on your application, a high income multiple on the banks maximum lend or a good LTV?

What I'm asking is, how expensive are the properties you're looking at in comparison to your income?

Are you looking at a property that's around 4x your joint gross annual salaries, or nearer 4.75x your joint gross annual salaries?

If you leave your debt in situ, you'll have a larger deposit, but be offered less against your income.
If you pay off your debt, you'll have a smaller deposit, but be offered more against your income.

Right now, I'd expect lenders to be erring towards wanting borrowers with a larger deposit. 

let's say for example you saved a 20% deposit, would a mortgage equating to 4x your joint annual salaries be sufficient to cover 80% of the house you're looking to buy? If so, save rather than paying off debt. 

(Lenders usually lend 4.5-4.75x joint annual basic salary to applicants who don't have debt elsewhere, the multiple reduces depending on how much you owe elsewhere)

I'd suggest however the position you want to be in at a minimum is having a 15% deposit and £NIL debt when you apply, as well has looking at properties where the 85% you're asking to borrow is under 4.5x your joint basic salaries. The best way to achieve this is to save £4,000 per tax year into the LISA and squirrel the rest of the money towards your debt until it's all cleared, and carry on saving until you have at the very least that 15% + all associated moving costs / fallback fund.

At present, assuming your LISA balance is £0, you'll want to save £444.45 Per Month into your LISA starting 1st July reducing to £333.34 per month from April, and use the remaining money towards your debts, highest interest rate debt gets the lions share of the money you've left after your LISA payment, minimum payment on everything else. 

This strategy is the most financially optimum when taking into account all factors, interest, LISA bonus, etc. 

Once your debt is clear, ensure you don't save more than £4,000 per year into your LISA and put the rest in a penalty-free savings account. 

We are planning to go forward with 15% and no debt, that's the aim. My mother has graciously offered to give us half the deposit we need so in reality we only need to save 7.5%. I've run through the affordability calculators on MAS to check affordability and how much we'd be offered based on our salaries and we're nicely in the green for what we're looking for, pushing up to the orange if we went for the higher band, but there seems to be plenty on the market for the lower amount, especially as we're interested in a do-er upper. 

Your way is in an interesting way of doing it. In my head I was thinking something like this but I feel like the net result is probably the same:

1) £56 to my boyfriend's MBNA (minimum) ((also this isn't part of the £1,374 we have to utilise because I already counted minimums as part of our main budget)
2) £370pm to my CC to clear balance by end of 0% period
3) £1,004 to LISAs which we'd split to two of them, so £502 each which should fill them in 8 months, which is conveniently Feb when my 0% would be paid off.  As you say, stop when they're full, at which point that excess £1k would get pushed to my partner's CC until it's paid off. Then back to filling the LISA and overflowing into whatever is best available.

[Deleted User]

Pay off the 0% cards in monthly instalments before the rates go up. I don’t know what the rates are, chances are they could be 20%. I’ll prioritise these over the Neyber loan. After you allocate your monthly savings to these 0% cards, Split the balance between LISA and Neyber loan. 

DiggerUK

Having cash to hand is better than not having cash to hand, you never know. £25k is a very good target. Your EF is a goodly cash in hand balance to have.

Your CC facility, is that total 0% balances available or total credit. Get as high a 0% allowance as you can. You may have to reduce your credit limits at mortgage time, cross that ridge as and when.

From were I'm sitting you look fine, don't forget to enjoy a bottle in the sun now and then..._