How to stretch 50k

[use257]

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!

@VodselForDinner

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.

No, both equal debts and money gifted to us as a family unit. From his family so would be legally his money maybe

No, both equal debts and money gifted to us as a family unit. From his family so would be legally his money maybe

I would prioritise getting married tbh. There's enough posts on here where a SAHM gets shafted by her partner with money/propery to confirm that only marriage offers the best legal protection.

Buy a two bed house or flat, your DC can share for a good number of years as they are so young. Upgrade later on when either you or DP gets a promotion/wage rise. Many people can’t afford a three bed house as their first property, you need to start off buying anything you can afford and work up the ‘ladder’.

Please remember that income from a buy to let is taxable so you won’t have as much profit left over as you might expect. My advice would be as others have said to get a 2 bed to live in, even if it’s just for 3 or so years whilst you save more and your partner hopefully gets promoted to Extend your borrowing capacity.

1. If you are a SAHP get married for your own financial protection.

1. As everyone else has said, BTLs are much, much less profitable than they used to be. You need to go through the finances very thoroughly to understand whether it's worth it.

1. If it were me I would prioritise getting my family out of private rental. You are so insecure and the LL can up your rent at any time.

Can you get a job? That would make the biggest difference in terms of mortgage affordability, rather than waiting on a vague promise of a promotion for your husband - and would give you some security too. Because at the moment it’s your partner buying a house (his deposit, his mortgage), not you.

A pp mentioned that the £20k might go further on the house than on paying off debts. This is true - but if you and your partner separate then you will be left with debts and no claim on the house. So I’d suggest paying off the debt first, unless you get married.

You aren’t married and aren’t working. You’re in a very vulnerable position.

You've had lots of good advice on here. Just wondered if there are any shared ownership properties in your area that would be worth considering?

I expect you might need to adjust your entire approach to finances.

You have getting on for £20K of debt, yet you’ve chosen to have to have 2 children close together (instead of spaced to reduce financial impact) and your response to an amazing windfall is “oh let’s buy a car!”
And you want a 3 bed house, not a 2 bed flat. Oh and not a “diabolical” one.

I appreciate that debt can be situation specific and not poor planning. And not all pregnancies are planned. And maybe the amount you’re allocating to a car is sensible. And maybe you’ve costed out cost of buying so 3 bed makes sense. And maybe “diabolical” isn’t a massive exaggeration 😉

Look, in the context (and I know I’m reading a lot in here) the BTL sounds like a get rich quick scheme.

I would revisit the car purchase and make sure you’re not over spending.
I’d forget the BTL and your expectations of a first home and go for a non-diabolical 2 or 3 bed home.
I’d look at shared ownership.
I’d address the reasons you owed nearly £20K in the first place.

You’ve got an amazing opportunity now with this gift - don’t blow it on a BTL when you don’t understand the market and how to manage one. Bad tenants, void periods, tax liability… it’s really not easy money.

In your circumstances that would not be a good idea IMHO. Concentrate on getting you debt pai off and keep looking for a suitable property to buy to live in.

Please tell us your area and let us house hunt for you.

One of those rubbish places for 180k might be worth buying and doing up slowly.

Thank you so much everyone!! Overwhelmed by all the great advice. Much appreciated. I'm reluctant to give my area to maintain anonymity.

No we don't have 20k of debt, around 5k all together but for the car we want (big enough for 2 large car seats, new enough to last us a while and nice enough to make us feel happy) will be about 15k. Car prices have recently shot right up, and well we just want a nice car😬 it's a treat after a hard few years.

I wouldn't be looking to make any profit on a BTL so no, it's not to get rich quick.

I'll have a look at shared ownership, I've had a look at an online mortgage in principle and we won't be able to get anything that we'll be comfortable in I don't think. Of course we can redecorate but with 2 young babies we struggle to do basic improvements in our current house, never mind overhauling the whole thing. We are thinking of just putting it in isa's and assessing the situation again in a couple of years when dps salary will be higher either through promotion or already confirmed pay rise.

Still haven't read everyone's messages properly will have a proper look through later

@MyAnacondaMight

Can you get a job? That would make the biggest difference in terms of mortgage affordability, rather than waiting on a vague promise of a promotion for your husband - and would give you some security too. Because at the moment it’s your partner buying a house (his deposit, his mortgage), not you.

A pp mentioned that the £20k might go further on the house than on paying off debts. This is true - but if you and your partner separate then you will be left with debts and no claim on the house. So I’d suggest paying off the debt first, unless you get married.

You aren’t married and aren’t working. You’re in a very vulnerable position.

I'm not vulnerable financially, don't worry. What I would earn would be less than 2x nursery fees so it would be pointless right now. Excited to get back to work eventually though. That's why I'm thinking it might be better to wait a few years until I'm working as well then we have 2 wages to work with and I can be on the mortgage :)

Those saying that the dc can share, I just couldn't live like that. They are too young and both up too many times a night and I'm recovering from a bit of a breakdown after 2nd dc was born. My mental health could deteriorate so quickly in the wrong house, which is why i might seem like Im being picky or have high expectations for our first buy. It would be more beneficial as a family for us to stay in a nice rented than downgrade for a mortgage right now. I'm not fully recovered tbh so I'm wary of making the wrong move and taking steps back mentally.
Thanks again everyone

Good to see your debt is relatively small!

I still think you need to think carefully at how you’re responding to this money though.

You have an AMAZING opportunity, most of us here can’t imagine just being given £50K. You’ve said your rent is a proportion of your earnings (and of course it’s not the investment that a mortgage is) and yet your reaction to a (financial) life changing £50K is to spunk almost a third of it on a car!!!!
When you rent!!!!

Because you feel you deserve a treat. You could get a reliable car ticking all your boxes for £5K. Don’t spend £10K more when you don’t have a home of your own. £10K will help a “diabolical” (still amused by that hyperbole!) home be better.

By get rich quick scheme on BTL, I wasn’t talking about long term capital growth. I’m talking about a naïve view that it’s easy money. Couple of months void period / unpaid rent, and you’ve made nothing that year. Another good reason not to wasted £10K more than you need to on a car!

A home of your own, savings… you need to adjust your thinking that both those things are a much better “treat” after hard years than a £15K car that does nothing more than a £5K one!

@Cocomarine thanks to taking the time to think about my situation. Would you know what kind of larger car you can get for 5k that's not too old?

I would honestly pay off the debt and use the 45k to get a nicer house, then when your husbands salary increases use that for the fancy car if you need it at the time - surely a house is more important than a car?

Car will depreciate in value, house will increase so that's definitely the best order to do it in

You can take your pick of 10yo Ford Focus cars for under £5K, mileage under 100K, plenty of bells and whistles for that new car feeling.

I mention that model as I’ve had them myself twice (not currently) and had no trouble at all.

I’d actually start by asking - what car do you have now, and why do you need to change it at all?

If it’s on bricks outside your house with no engine in it - fair play, buy one. If it’s running fine, has airbags, maybe 3 door and you’d just find 5 door easier… then I’d say hold on. Get the house sorted first. A £15K car stops being a “treat”, when it’s money wasted!

Agree with @PenguinLove1 - save the new car for either your husband getting a salary increase or you returning to work.

I think you would be absolutely insane to spend 15k on a car when you are renting. You will look back on that decision and regret it. Use the 45k as a deposit and then you have 195k for a flat or a house. Buy the best you can and upgrade when you and your husband are earning more. If you need the little ones in separate rooms then sleep in the living room until they are both sleeping through and then move them in together and into a bedroom. House prices could do easily increase and price you out further. I really do think it would be foolish not to buy now.

Don’t use your capital to buy a car, have it as a bigger house deposit or for doing up a house
The difference between what you’re paying in rent and will pay on a mortgage will easily cover the finance on a car

Pay off the £5k debt.
Lease a car or live with the car you’ve got.
£45k split between deposit, stamp duty/costs, and a safety cushion for the costs of running a house

£15k on a car for a treat when you’re on one income and want to buy a house is madness!

You need to think longer term and less about immediate gratification.

I wouldn't be spending £15k on a nice car for a treat if I was aspiring to be a home owner.

I assume you have checked there are no issues with your dhs family member gifting such a large sum of money? i.e. asset deprivation, future inheritance tax liabilities?

Instead of seeing the car (a depreciating asset) as the 'something nice' to reward yourselves for the last few years why don't you apply that logic to getting a house @use257??

I would definitely go for a 5k car instead of 15k. We had a 5k Ford Focus too which was absolutely fine for 2 children. You can get a roof box for holidays if you need more luggage space. Then get a non-diabolical 3 bed with a 40k deposit. Personally I've only spent 15k on a car since having a lot more in savings and a 4/5 bedroom house with not much remaining on the mortgage. When we were younger we priorised housing and had older but reliable cars.

You are absolutely crazy to splurge 30% of a significant windfall on a ‘nice car’ rather than put that money to a house deposit.

Buy a two bed that has space for an extension so that you can either sell in future or make it into a three bed when the kids are older.