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Original poster

How to stretch 50k

96 replies

use257 · 23/02/2022 19:37

We are a family of four. Two dc under 2. We will be receiving 50k. We aren't home owners but we need at least 20k of it to settle debts and get a family car so that leaves 30 for house deposit. In our current situation that could get us a 180k house, but every 3 bed near us for that price is diabolical.

So, we were thinking of getting a buy to let mortgage and buying a 2 bed to rent out. At least then we are homeowners and can decide in the future whether to sell it and hopefully try and make some profit, or just to keep renting it out.

Or we could try and invest the 30k to make more money to pay a bigger deposit and be able to afford a better house.

OH's boss has heavily alluded that he will be getting a promotion in the next 2 years which could add anything between 10-20k to his salary. Then we would be able to afford a larger mortgage (I don't work at the minute). Should we wait for that?

The only problem is that now our rent is about half of our total income so its very expensive. Would be better to get a mortgage ASAP as then monthly payments would be less than half of what they are now.

MN is so good for different perspectives from all kinds of people. Give me your best ideas!

OP posts:
Catfox1 · 23/02/2022 19:43

Have you owned property before? Lenders tend to be suspicious of giving BTL mortgages to first time buyers, I’m not a broker though and they can be little miracle workers so may be able to find what you’re looking for!

ddshocker · 23/02/2022 19:44

What car do you have already and how much debt?

Dammitthisisshit · 23/02/2022 19:51

It’s not worth getting a buy to let imo. I have a flat I rent out. Once you have factored in management costs, repairs and the fact that you will pay tax as income then it’s a lot swallowed up. I have a flat I rent out and all it takes is 1 bad tenant or 1 unexpected problem (boiler replacement stung me this week!) and everything you have made is gone.
Then you’d need to time selling it to buy your own property taking away the advantages of being a first time buyer. It’s different if you own several properties but your incentive is presumably to get away from renting into your own place as quickly as possible.

MayBeeMee · 23/02/2022 19:52

Buy the 2 bed and live in it, the children can share. Then upsize to a 3 bed if/when the promotion happens. If you btl you’ll have to pay extra stamp duty, tax on income and potentially capital gains tax.
That way you’ll benefit from any market increases over the next couple of years. You’ll struggle to meep up or get ahead by investing the money over less than 5 years.

SandysMam · 23/02/2022 19:54

Buy the crappy house or a flat or anything and just live in it. Even if it is not perfect or ideal or a bit of a squeeze. 30k is so easy to fritter away, once you are on the ladder you are on and having a secure roof over your head, particularly if you would otherwise private rent is the best feeling. You can improve the house, extend in the future, sell up and buy better when increased in value etc or even rent it out in a few years and rent somewhere more suitable but you will have your own place and as long as you can pay the mortgage, it will always be there for you and something to hand down to your children.

JeremyBeadlesTinyHand · 23/02/2022 19:54

I wouldn't get a buy to let. I'm not sure if you would be able to anyway, the deposits and mortgage rates tend to be different. We are accidental landlords (had to move for work for a few years) and the stress/no guarantee of rent being paid really isn't worth it. We only kept the house because we knew we could pay the mortgage and bills even if the tenant went AWOL. But even then the court costs for eviction could ruin years of saving.

Your children are so young, could they not share? Or could you not find a large 2 bed and partition a room for them them? Then you could potentially save more to get a bigger house.

Investing isn't a good idea short term. If you need the money in the next 5 (maybe even 10 years) you should completely avoid it.

MerryPoppings · 23/02/2022 19:54

@MayBeeMee

Buy the 2 bed and live in it, the children can share. Then upsize to a 3 bed if/when the promotion happens. If you btl you’ll have to pay extra stamp duty, tax on income and potentially capital gains tax. That way you’ll benefit from any market increases over the next couple of years. You’ll struggle to meep up or get ahead by investing the money over less than 5 years.
I agree with this. Or buy the not so nice 3 bed and do it up slowly. You'll get a bigger return then as well.
3WildOnes · 23/02/2022 19:55

How much are three bed houses where you live? Would childcare be more than you earn? I would probably try and work part time for a bit if that meant you could afford a three bed.

titchy · 23/02/2022 19:57

Agree with buy a 2 bed/shabby 3 bed now and upgrade in a couple of years. And don't spend £10k on a car - half that would be fine surely.

LizzieSiddal · 23/02/2022 19:59

Is it the area which is “diabolical” or the state if the house?

If it’s the area buy a 2 bed in a nice area and let the Dc share for a while. If it’s the state if the house, buy an3 bed and do it up room bu room.
Like others have said I wouldn’t do a buy to let.

cdba88 · 23/02/2022 20:00

What area is it?

I'd buy the 2 bed and live in it. Or the 3 bed and slowly do it up.

RainingYetAgain · 23/02/2022 20:05

I wouldn't BTL- as PP said, you only need a bad tenant or a large bill to be in trouble.
If your kids are under 2, you could seriously think about buying a two bed for yourselves and the kids share a bedroom. Some 2 beds have 2 decent bedrooms. Hopefully your mortgage will be lower than the current rent, and when your DH gets his substantial payrise you can think again. Yes, you will have 2 lots of legal fees but if it gets you out of renting.
I suppose the size of the debt might be relevant and how it accrued.
Have you spoken to a broker and worked out how much you can borrow?

Chatwin · 23/02/2022 20:05

How much is your current debt and monthly repayments? Do you desperately need a car or could you manage for a bit longer? How much is your current rent vs potential mortgage for a £180K property?

I would buy a flat/house to live in. Don't think of it as a long term thing so kids can easily share.

I would put everything into the house purchase, so maybe put off the the new car.

Put the money saved by not repaying your debt + difference between rent and mortgage in savings. When DH hopefully gets his pay rise you should have a bit of savings plus a hopeful rise in house prices to enable a move up the ladder in a few years.

Original poster
use257 · 23/02/2022 20:06

Thanks so much for the replies everyone im going to reply tomorrow and going to try and get some sleep before the babies wake. Im going to show dp this thread for him to have a think about the responses too so keep them coming:)
Thanks again!

OP posts:
Libertybear80 · 23/02/2022 20:07

Stick it down , do up property move, do up property, move buy something lovely

caprimoon · 23/02/2022 20:11

I wouldn't btl, by the time you've factored in buying/selling costs, paid tax on the income and any unexpected bills it's a headache you can do without especially with a young family.

I'd buy small and aim to move in 2/3 years. If your mortgage is cheaper than your current rent make sure you still put the same amount aside into savings as you probably won't notice it.

VodselForDinner · 23/02/2022 20:21

You mention DP so I assume you’re not married.

Who is actually going to receive this money, you or him?

Who had the debt?

Do you need a full £20k for debt and a car?

In your shoes, I would buy a two bed with a view to trading-up in a few years, or a three bed that you can take your time to do up.

But whoever owns the money should ring fence their deposit.

zxcvzxcvz · 23/02/2022 20:21

Everyone thinks btl is easy money. It can be but one bad tenant can lose you a years worth of rent and also unexpected outgoings. Waiting on a price to replace the fuse board and it cost me £180 for sparky to tell me that. Buy something and live in it. Kids don't need their own rooms till they're teenagers and even at that I shared with DSIS till I left home.

Sprogonthetyne · 23/02/2022 20:22

You and DH both open life time ISAs quickly and pay in the max amount for this tax year (£4k each), then the max again in April. Then you will have 16k on which you get a 25% bonus, so that 16k becomes 20k, and you still have 4k left in another saving account.

I'd then get a run down 3 bed, and use the 4k to make it at least livable. You'll then save money from mortgage being cheaper then rentand and also no longer serviceing debt, which you can spend on bigger home improvements.

If the promotion comes you can sell up and move, probibly making quite a bit on equity increase. But your not depending on a promotion that may not materialise for whatever reason.

Mummysgirl12 · 23/02/2022 20:25

Mortgage broker now!!!

DH and I could have over £100k on credit cards without it affecting our affordability (crazy I think!!) so it made sense for us to spend on credit cards and use the money for a mortgage.

I’m not saying it’s the right thing but could you limit the amount you pay debt off / use CCs?

CrimbleCrumble1 · 23/02/2022 20:27

Do you have to pay off your debts?

UggyPow · 23/02/2022 20:29

In your circumstances I wouldn’t recommend a BTL the time & profit margins aren’t what they were. And I speak from experience when I say that it can be hard watching people trash your property then eviction costs £600, can’t wait to actually get them out. They are so horrendous the police accompany me if I need to go to the property, to protect me.

You might not need to pay off your debts to secure a mortgage, and this might not be the best thing to do, remember if you are paying mortgage instead of rent outgoings will be less. If your deposit is more you might be able to afford that slightly better property or a property that you can extend out or upwards in the future

TheHoptimist · 23/02/2022 20:31

You need 25% deposit for a BTL
You pay income tax on almost all rental income (not profit)
The amount you can borrow is based on the projected rental value- not your salaries
You will pay capital gains tax when you sell

Original poster
use257 · 23/02/2022 21:00

@VodselForDinner

You mention DP so I assume you’re not married.

Who is actually going to receive this money, you or him?

Who had the debt?

Do you need a full £20k for debt and a car?

In your shoes, I would buy a two bed with a view to trading-up in a few years, or a three bed that you can take your time to do up.

But whoever owns the money should ring fence their deposit.

We are not married no but all finances (debt, income etc) are shared equally between us.
OP posts:
VodselForDinner · 23/02/2022 21:20

We are not married no but all finances (debt, income etc) are shared equally between us

So I’m guessing your money and his debts then?

If you buy a house, please make sure you legally protect yourself and your deposit. Ensure you’re joint tenants, and that you’re named on the mortgage and deeds.

Protect yourself, and your money.