Debt vs Flat vs House?!

auroch17

Sorely in need of advice on this from people that are much smarter with this sort of thing than me! Here we go....

I'm carrying around £16k worth of debt and it's being paid off via a DMP with Stepchange with around 2 years left to go. I very fortunately own my property outright with no mortgage but it's in need of selling; age, size and maintenance costs are out of reach for me. If I sold I could look to obtain somewhere in the region of £280k-£300k, the first thing I would do is settle the debt regardless of what may follow and make a short sharp end to that chapter. 

From that point on, do I:

Look to purchase a 2-bedroom flat for up to and around £230k outright and go for a mortgage in 2 to 3 years time on a family home? I'd be open to either selling the flat or holding on to it as an extra source of income when it's time for a house. The leasehold, service/maintenance charges and ground rent concern me however.

OR 

Lay down a hefty deposit of £200k and go for a family home now? My credit is poor due to the debt and the DMP but I could (from the Mortgage in Principle that I have obtained) still qualify for a mortgage courtesy of my salary and the large deposit that I'd be prepared to put down albeit with a higher-than-normal interest rate of ~6.3%. After sufficient time has passed I would look to renegotiate a better mortgage deal either way.

The current economical and housing market situation along with my curve ball of debt is making this a hard choice on how to restart my life. And trying to see in to the future is a tough one for someone that knows very little about these types of things!

The end-goal would be to have a family home to be left for the children as and when the time comes. The good ol' white picket fence dream!

Thanks people!

NameUnavailable

None of my business of course but I would first ask how you came to be in debt to the extent that you need a structured repayment plan and why is it going to take 2 years to repay 16K assuming you don't currently have a mortgage?

Do you think it's a good idea to stretch yourself financially again?

auroch17

NameUnavailable - I went through a difficult patch in my personal life and one of the fallouts before I even realised what had happened fully had been mismanagement of my finances. Those days are behind me though with professional help and the debt charity already mentioned. 

Correct, there is no mortgage. If I want to continue to save where possible then I would need to stick to the payments agreed within the plan.

My affordability once the debt is clear would be sufficient.

Thanks! 

gwynlas

A flat generally means very close neighbours as well as service charge and ground rent. A house might give you the opportunity to rent a room and have income.

Schwarzwald

Cant you remortgage with £50k on the current house, repay the debt, renovate and modernize the place, safe a lot of selling expenses and stay where you are?

auroch17

Gwynlas - It's certainly not without it's pros and cons is it! 

Annisele

auroch17 said:

The end-goal would be to have a family home to be left for the children as and when the time comes.

I'm not sure about whether these are actual children (grown up and left home), or hypothetical children (not yet born).

If they've left home, I don't think I'd take them into account in my planning all that much. If they're not yet born but they're on the horizon -eg somebody is 5 months pregnant - I'd be very reluctant to buy a two bed flat that I thought was too small to be a family home. If I hadn't even met their other parent yet, I'd be prioritising being debt free, and aiming to reassess finances once I did meet that person.

theoretica

Schwarzwald said:

Cant you remortgage with £50k on the current house, repay the debt, renovate and modernize the place, safe a lot of selling expenses and stay where you are?

That is a very good point.  How would your hypothetical ideal home vary from a renovated version of your current place?  You mention the size of the current place as a downside - do you actually and realistically want a family home?

auroch17

Schwarzwald - I had some quotes carried out with that very purpose in mind and they're in the region of £90k+ and that's not including the contingency and it could end up being a case of flogging a dead horse 

auroch17

Annisele said:

auroch17 said:

The end-goal would be to have a family home to be left for the children as and when the time comes.

I'm not sure about whether these are actual children (grown up and left home), or hypothetical children (not yet born).

If they've left home, I don't think I'd take them into account in my planning all that much. If they're not yet born but they're on the horizon -eg somebody is 5 months pregnant - I'd be very reluctant to buy a two bed flat that I thought was too small to be a family home. If I hadn't even met their other parent yet, I'd be prioritising being debt free, and aiming to reassess finances once I did meet that person.

So there's an actual child already and he's only little 😂 and plans for another once I can clarify how best to move forward!

auroch17

theoretica said:

Schwarzwald said:

Cant you remortgage with £50k on the current house, repay the debt, renovate and modernize the place, safe a lot of selling expenses and stay where you are?

That is a very good point.  How would your hypothetical ideal home vary from a renovated version of your current place?  You mention the size of the current place as a downside - do you actually and realistically want a family home?

Apologies I should've been clearer; it's partly due to the size that makes the work harder as well as the sheer number of all the jobs yet to go. Otherwise the size itself is ideal! Plans for a family, or rather, plans for the family to grow are very much something we want when the time is right and financial stability has been gained.