How to afford a family home

[Propertyladder]

I have name changed so as not to be identified. I see some really good advice given on finances by posters and was hoping you could help.

When DP and i got together, i owned (still do) a holiday let abroad as couldnt afford a property here and DH had a 3 bed flat here in UK on mortgage. I moved in with him and we had 3 DC and when I was pregnant with 4th dc, DP got made redundant.

So now we have 2 dc sharing a bedroom each and dp and i in 3rd bedroom. We need a bigger place but we have debts and i don't know what would be the best way to go about this.

We owe just under 60k on this flat. Dp is now self employed but is not getting a salary yet from his business. I work full time so dp has to manage childcare and work by juggling.

My lovely mum has given me 20k to put cover a deposit for a house but i am unsure that i can do that as we now have a 60k mortgage with just me earning and therefore nobody will give me a mortgage when i am already paying for our current debt.

So....lovely mners, could you please advise how i can pay this debt off quickly so we can afford another property? Not able to sell the flat for various reasons and the holiday let is only worth about 25k if sold. I currently get 4k rental per annum from it.

Many thanks in advance.

Would the flat rent out? Rent on that should cover it's mortgage and a little profit, proving that and with a 20k deposit and depending where in the UK you live you should be ok getting another. We got a first mortgage with hAving 20% deposit, income of 45k and debts of about 25k between us. Basically as long as the debts were getting paid they weren't too fussed on the amount owed. More just income left after outgoings :-)

You'll need to give more info if you want ideas on your options ie, how much you earn, how much a new property would be, how much your debts are etc.

Why can't you sell the flat? Could you rent it out?

Having 4 dependant children plus 1 adult relying on 1 wage is going to make things tough unless you have a very high income and/ or live in a very cheap area.

A good start is to put your details into the high street lenders online mortgage affordability calculators to get an idea of what might be possible.

Thank you for your replies. Everyone at home running riot so I have to keep going awol.
Yes i have considered renting this flat and it would cover the payments but i dont think they would give dp a rentals mortgage as he has no salary as self employed. If i was to add myself on the mortgage then would they look at the rent to cover the mortgage payments or my salary? Asking because my salary cannot pay 2 sets of mortgages (1for flat and 1 for new house) flat would be covered by rental and new house by my salary. Would this be possible or do banks look at salary to cover rental mortgage too?

What is the equity in your flat? I would think that would make a big difference to the BTL mortgage rate you would be offered. I think lenders would want to see a rent of 125% of your monthly mortgage cost. They shouldn't be too fussed about your DH's income - they'd just want to see the rent cover the mortgage.
Are you sure you want to be a LL with 4 DC 's if you are already juggling? I'm sure people do, but I personally wouldn't want the stress of a phone call about a broken boiler at 4am and/or finding good tenants. Alternatively find out the cost of local agents (possibly 10% of rental fee).
The new Government 'help to buy' schemes mean you can buy with a 5% deposit. What is the average cost of a house where you want to be?
You'll get a lower mortgage rate if the LTV on your new home is higher.
As said above, either share a few more details here, or plug your figures into an online mortgage calculator.
I would strongly advise you to get income protection insurance if you don't already have it.

Some lenders do grant permission to let a property without changing onto a bug to let mortgage but it's often not a long term solution.

You really do need to check out affordability calculators on line if you don't want to disclose salary etc on here.

The Nationwide one for example allows you to enter details of other mortgages and rental income to let you know how it will impact you.

If your DP has no income and you have 4 children your affordability will be greatly reduced as you are essentially supporting 5 people as well as yourself.

Thank you again for your replies. I didnt know that the mortgage companies would look at rental paying the mortgage. I thought that they would want it to come from the salary. The rental would be around 105% of payment required i think (i am basing that on interest rate of 6% ish! I think!)

I would not consider doing it myself. It would have to be through an agency as i work full time and dp already juggles a lot of child care and trying to get the business up and running!

Some answers- my earning are just over 30k. The ltv is around 55% i think. It is a very modest flat. We had a good deposit before dp was made redundant and then the savings went very quickly. We actually had a good 20% saved at the time for a house worth 250k but that is now gone due to a whole load of circumstances. Now we are hopefully through the worst and need to get up and start again. We are in the North so £250k would get a you a standard 4 bed house.

Thanks again.

Have I understood this correctly- you have no deposit, 5 dependants, and are looking at houses more than 8 times your salary

That's before taking into account the debts you mentioned in your OP

I don't mean to be harsh but moving without selling the flat to release the equity in it is simply not an option, and even then you'll need to set your sights lower.

Mortgage lending is all about affordability and you just won't be able to demonstrate you can afford to borrow what you want.

If your DH is going to be self employed you'll need 2 years audited account before his income will be useful.

If you spend those 2 years paying off your debts and building up your deposit then you'll be in a very different position.

How much equity do you have in the flat? Could you just sell and move? What is your husband's income because £250k is a lot baed on a £30k income.

We have a family income of about £60k and are pretty much at our limit with a £190k mortgage.

Selling the flat will release around £50k of equity. Adding in the £20k from your mum gives you a potential deposit of £70k which means you are looking at servicing a mortgage of £180k on a £250k house.

Your current mortgage is £60k so even if you were to get a mortgage, your monthly payments would be x3 what they are now.

As said above, I'm not sure it's achievable on just your salary.

You've not mentioned the age of your DC's but I'm assuming they are nursery / junior school age and if you save for 2 years as suggested by BearBehind, hopefully you'll also see a saving over that time in childcare costs.

Hats off to you for supporting your family on just your own salary, but unfortunately I don't think there is a quick solution to your circumstances.

If you are currently paying 6% interest with 55% LTV in your flat you need to review your mortgage deal. I'd suggest that even with a penalty clause, you would (could) get a better deal by moving.
BearBehind might be able to shed light on how lenders might assess your affordability, especially under your circumstances, and as you implied the mortgage was just in your husband's name?

I'm not a mortgage advisor (and if I were I couldn't advise on specifics here) but I've just put the basics into the Nationwide mortgage calculator (had to guesstimate a lot)-

Both adults born in 1980
Second adult has zero income
£5000 debt
4 children (2 aged 6 to 11 and 2 younger)
Property value £105k
Deposit £60k

It didn't even offer anything so they couldn't currently remortgage the existing property let alone take on another.

Even in a 4 bed home your children wouldn't have a room each so the best advice I can think of is get your heads down and build up a deposit and put any move on hold for a few years.

Why don't you sell the flat belonging to your DP. Work out first how much mortgage you would get based on your salary. And £4K per year return on a property worth £25K is quite good considering current rates of interest and what that sum of money would earn in a deposit account. Can your DP not get a job even part time so he can still do some childcare. I think you have to look at ways to increase your income before you take on a substantially bigger mortgage.

Thank you everyone for your posts.

So....here is what i take from this so far. Leave the idea of a larger space for now. Not going to be able to get a mortgage on current property, let alone another one. Tbh, i did suspect as much. Concentrate on getting this debt paid off, then think about a house.

Right, so if i was to put mum's 20k into this property (not sure i would want to, as it's more for a deposit, not sure dp would be comfortable with that either) and then save the rental income, then i could be potentially debt free in 5 years? Or am i being too optimistic?

Then save up for a small new deposit, but set sights on a property worth about half of what i am currently dreaming about! So, in all it would be 7 years or so before i could contemplate a move! Well, thanks for the reality check. I needed it, but kind if feel deflated too. I think my goals were not modified in accordance with our not so new set of circumstances, but kept the same as they were when dp was employed and 250 was within x3 salary range, especially combined with the saving we had. We have considered part time work for dp, but the childcare issues, affordability and logistics get in the way.

The reason dp does not want to sell the flat is because he has always been very careful with money, hence getting a small flat on a affordable mortgage. He also wants this to be a part of a pension pot so doesn't want to leap into a bigger house if it means debt up to our eyeballs, especially with him not able to be contributing financially right now.

Does your mum want to give you the £20k now? Is it specifically for a deposit?

How much are your debts? Could you use that money to clear them?

Since the new affordability checks were introduced last year, having 4 children is going to drastically reduce what you are deemed to be able to afford. Debts reduce it again.

Remortgaging the flat in your husbands name isn't going to be an option with no income and doing it in your name might not be possible even with the extra £20k.

You'd save much more by reducing your debts as the interest on them is more than likely higher than your mortgage interest rate.

If your flat is 3 bed and about £100k there must be lots of options I between it and the 4 bed you were thinking off at £250k- it's a big price jump for 1 extra room.

In the meantime, have you considered futon-type bed rolls & cupboards instead of traditional beds? That could give you much more floor space in the day. Similarly platform beds, or sofabeds. Bunkbeds with curtains/doors give children den-like spaces. Have you a garden? We insulated a shed with a window in our last place, electrics simply by putting an extension lead through an armoured cable pipe (like a spade-proof hose pipe) & plugging it in in the house. It was a great study/spare bedroom.

If you paid off all debts ( apart from 60k mortgage) first with current income and then sold your holiday home abroad and this current flat you may have a better idea of what you can achieve.

2 properties sold, with some profit/equity from them and no debt and a gift of 20k should give you a better starting place. it may be dh finds a new job with salary or has to wait until can prove his income in coming years if self-employed as well.

I don't think you should put the £20K into the flat you're in now. I'd put that aside for the deposit on a bigger property when the time comes. I don't think you can hold on to the flat and buy another property. So it's either stay put or sell the flat. But I can understand why your DH wants to hold on to the flat.

Ditto BearBehind's advice. Your current mortgage rate is around 6%. Best buy savings rates are 3% before tax. It's always good to have a savings buffer for 'rainy days' but after paying off any other debts (loans / credit cards) you ought to consider using your mum's £20k towards paying off your current mortgage. Check for any penalty clauses first.

In the future, you are going to have to sell the flat to raise a good deposit for a new home.

Try not to be too disheartened. Focus on your DH building up two years of accounts, as suggested by BearBehind, and review your financial situation again then.

Thank you everyone for your posts. We do not have any other debt,except 2k on interest free credit card, which i pay monthly. The only reason dp takes that out (he has good credit rating, i don't as i have no credit cards or loans) is so that i have a lump sum just in case i need it.

So if we did manage to pay off the mortgage, would the bank consider 2 rental properties (10k in total) covering a new mortgage payments or would they expect it all to be covered out of my salary?

Op, you are torturing yourself here and there's no quick fix.

Your husband doesn't want to sell the flat and end up in more debt yet that's exactly what you keep trying to find a way to do.

A £30k salary with 5 dependants isn't going to allow you to borrow a great deal even with the additional £20k.

Have you tried using an online calculator and seeing what it actually says?

In theory, if both rental properties were self financing ie rent covered 125% of mortgage and they had the correct consent to let then they could be exclude from affordability calculation with some lenders.

You mentioned paying off the mortgage but that requires about £40k more than you currently have and it isn't going to be saved out of your salary any time soon plus, there are tax reasons why you wouldn't want to pay off the mortgages on rental properties but have a mortgage on a residential property.

The only way to do this it to sell the flat. That's what everyone else does, you can't just keep buying additional properties on a limited income. You have about £60k equity, plus £20k from your mum. Is the place abroad saleable? If so that would give you £105k deposit. Realistically with so many dependants you might get a £60k mortgage. So you'd have £165k to buy a house.

I understand your partner wants to keep the flat bug that's not how it works. If you want a bigger family home you need to sell it. Once you've got your family home you can work at paying that off and buying extra property.

It rings a few alarm bells for me that he wants to keep his flat instead of investing in a family home.

It rings a few alarm bells for me that he wants to keep his flat instead of investing in a family home.

Seriously?

He has no income and 4 children yet you are 'alarmed' that he doesn't want to increase their debt- even if it could actually be done which I doubt.

To own 3 properties which is what you would like on a 30k income and 5 dependants sounds rather ambitious.

Fortunately, my dp is more sensible than I am. I can now see more clearly that he is right to hold onto the flat, rather than risking it for an extra bedroom - even if that extra bedroom makes all the difference! i think I need to de-clutter too!

I had 'ambitious' plans but you all have given me a reality check. Can you tell I am an 'optimistic' person but it's time to be realistic now I have a new goal which is to get the mortgage paid off and then become optimistic again!

to everyone who took the time out to respond.