How best to proceed

6ft2oflovely

Hello
My husband and I are currently looking for some advice for moving us forward and getting on the property ladder here in Scotland.

Our situation:

We have no adverse credit on our credit records (all three), have no missed payments etc 

We have £10,500 in credit card balances (all 3 on 0%)

We have £10,600 personal loan balance (taken out for a car purchase)

We have £2000 in savings and top that up by £500 a month. 

Income:

We earn approx £72,500 per annum between us

My date of birth is 1978, husbands is 1975 so a mortgage over a much shorter term is needed. 

We are currently throwing excess money at the credit cards to pay them off, but we are wondering if this is the best course of action. We wonder if putting more money in to savings is the better course and reducing the credit card payments to just over minimum per month would be better?

What would people advise?
thanks

Emma

poseidon1

There does not appear to be any significant changes in your circumstances since your last post in February below :

https://forums.moneysavingexpert.com/discussion/6653394/skipton-track-record-decline

Have noted that since that last post you appear to have amassed £2000 in savings from your joint incomes.

In addition to the suggestions made in the last posts, it seems to me you might be better advised to aim for a 95% mortgage rather than 100%, by accelerating the pace at which you are building your savings pot. On a £115k proposed property purchase that suggests at least £6k to £7k to include associated costs of purchase.

Your joint £500 per month top up to your savings would be insufficient to hit the suggested target this year. Are their any economies you both could make to say double your current monthly savings to £1000 per month?

6ft2oflovely

https://forums.moneysavingexpert.com/discussion/comment/82017387#Comment_82017387

Thanks for the reply 😊

when I posted in early February we were pretty clueless. On the back of the Skipton AIP rejection it was a wake up call and we came up with a plan. Spreadsheeted the life out of our income and outgoings, and paid off any residual small debts and red flag pay in 3’s etc (these are no longer on any credit reports)

We actually had £13,352 in credit card debts which is now at the £10,500 mark(quite proud to have paid off £3k in 3 months), plus have saved £2007 in savings we have been fortunate our wages etc have gone up so now we have a little more per annum

In our plan, by overpaying the credit cards(bulk of excess money) we can be credit card debt free in July 2027. We have it in mind to overpay the personal loan we have for our car by £100 a month whilst doing this, then after credit cards are clear, plough the excess in to paying the car loan off early(it would be clear in March 28)

Here in lies the problem: are we better to adjust where we overpay and plough more in to savings now? This would mean we could have more choice of mortgage as a bigger deposit would be available…

Thanks

poseidon1

https://forums.moneysavingexpert.com/discussion/comment/82017453#Comment_82017453

If you are targeting 2027 for a possible house purchase, I would certainly concerntrate on building the cash savings pot.

Being able to expand your choice of lenders with a decent size deposit must make sense, bearing in mind your last disappointing outcome with applying for Skipton's 100% product.

I would also mention that building your savings so that you have the equivalent of at least 6 months worth of net earnings behind you, is also strongly reccomended in any event to ensure a degree of financial resilience against adverse circumstances such as job losses or long term sickness.

As regards your savings are you utilising a regular savings account paying a higher rate of interest compared to instant access? If not, head across to the MSE savings and investment forum where regular updates on what is available are posted.

Jemma01

When do you plan to buy a house?

And when will these 0% credit cards start incurring interest?

How much is the interest on the personal loan?

How much is the interest on the savings account?

6ft2oflovely

https://forums.moneysavingexpert.com/discussion/comment/82017485#Comment_82017485

ideally buy a house early 2028

first 0% ends in April 27(that will be paid by the end of this year as it is the lowest balance)

2nd 0% ends in April 28

3rd 0% ends in Nov 28

personal loan is 10.754% per annum and monthly payment of 212.53 and finishes in Dec 2031.

Savings is a basic savings account with Barclays, can’t lay my hands on the interest figure.

poseidon1

Barclays easy access saver is a lousy 1%, whilst the likes of First Direct and Co- op offer a fixed 7% annually on £200- £300 per month regular savings. You are generating unnecessary profit for Barclays at your own expense.

The trick is in addition to bringing down expensive debt as quickly as possible, you should both aim to make your savings work hard in the background.

If you are not likely to buy until 2028, getting the best interest rate possible on your savings , has got to be part of the equation to help achieve your objectives.

6ft2oflovely

https://forums.moneysavingexpert.com/discussion/comment/82017569#Comment_82017569

do you have a link to the accounts you are talking about?

poseidon1

MSE is a great resource for all things finance related. They cover the accounts I mentioned below -

https://www.moneysavingexpert.com/savings/best-regular-savings-accounts/

However, do note each accounts Ts & Cs if you need to withdraw during the fixed period. Best to limit your monthly contributions to amounts you are sure you won't need to access during the fixed term.

ACG

I think a lot depends on what you want…

If you are looking to stretch how much you can get, chances are less credit cards would be better. If you are well within affordability then it makes no odds really, its up to you - personal preference.

As for the decline, if your credit cards were maxed out, that could be a problem. Reducing them by 25% might take a little bit to update on your credit report but should help make a difference. Your debt is not horrendous considering your incomes. But it is/was a touch on the high side.

6ft2oflovely

https://forums.moneysavingexpert.com/discussion/comment/82017997#Comment_82017997

the area we live in Scotland we are realistically not needing to spend more than £200k, maybe £220 at a push