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!

I personally wouldn't buy a property to rent out whilst renting a property for myself at the same time. That seems counter productive.

Do you need a new family car? Do you have a car atm that meets your needs?

As for the poster who asked if you really need to pay off your debts... You absolutely do! Lenders will be far less likely to lend to you, and likely to give you a smaller loan if you have £20,000 of debt.

A £20,000 deposit is a great amount. I'd say buy a house now that you can afford, even if it's small or in a less desirable area. Then in 5 years time, for example, your partner may have the promotion and be earning more, and you may be back to work so earning a wage too. At this point, a bank will likely lend you more and your first house will have increased in value. Additionally, the monthly mortgage repayments could be tailored to be lower than your current rent payments (depending on the length of the mortgage term), but you could also make regular or one-off lump sum overpayments (if your mortgage provider allows this without an overpayment charge) that means when house hunting again at some point, you'll have a larger deposit in that of your first home.

Get married
Buy the biggest property you can get a mortgage on
Buy a much cheaper car.

I'm a relatively high earner and I have never spent anywhere near £15k on a car. Not even half that, and I have had some nice second hand cars, including a slightly less than one year old fully kitted out Audi. If your wage does not even cover two lots of nursery fees you are wasting an opportunity to make a real difference to your long term financial security by chucking £15k at a new car that will lose a massive chunk of its value as soon as you drive it away from the dealer.

Steer clear of buy to let's, the mortgage rates are higher and you cannot any longer set mortgage interest off against rent income tax to reduce the taxable profits. Along with a whole load of other expenses which you cannot set against the income. Your income could be seriously eroded by tax and void periods and one non paying tenant could wipe out any profits and leave you with hefty expenses. I wouldn't do it and I think I probably have more cash reserves than you. Also any increase in value you realise on sale will be subject to capital gains tax which will take a chunk out of any equity to transfer to a property when you eventually buy a family home.

I think advice to get on the property ladder by buying the best family home you can afford now, taking the increase in value tax free and using against a bigger property when your joint income increases is sound. Otherwise you may never get on the property ladder as price increases constantly outpace wage increases. Honestly, in a few years you would bitterly regret not doing this.

Agree with others - if you can buy now, do. Don't wait, price increases will just swallow any increase in deposit you can save over the next few years.

A 2 bed or a 3 bed you can do up is fine. You'll save money paying the mortgage instead of renting and you can put that extra money towards improvements.

I def wouldn't do the BTL. Not as secure as they used to be.

I would try to use most of it for a house deposit and get out of rental. Think of the money you'll save and having your own home is security and an investment at the same time.

Firstly, congratulations - a gift like that is a lovely opportunity for you both.

I would say, you need to look into what you will be able to borrow with a mortgage broker. When we bought, they wanted to see where the money came from, and unfortunately a gift isn't always looked well upon - they like to see that you have managed to save as well.

Secondly, as others have advised - getting a job, even a small one, will really help. While you aren't working, your husband has 3 "dependents" on his wage which shrinks your allowed borrowing.

My DH and I were able to purchase a dump of a 3 bed - genuinely a dump! As our first purchase. We had to replace the kitchen and bathroom and deep clean everywhere before we could move in - we smashed out the work in a fortnight so that we weren't paying for rent and mortgage too long. We didn't spend a huge amount on doing it up, but within 3 years we had increased the price of the property sufficiently to buy a nice 4 bed in the area we wanted to live in. Try to look at the properties based on what they CAN be. Look past the decor, obviously you will want to take any major issues into account and steer clear of anything you can't repair/can't afford to repair.

You haven't said how old you are - but if you have time on your side please consider looking at your first house as a temporary move - it's your first step onto the ladder and the sooner you own a property, the better - prices generally are always going up and you don't want to end up priced out of the market further down the line.

Get on the property ladder now. I am in a 3 bed and my two small children will share a room as soon as the baby moves out of our bedroom. Don't even consider buying a 15k car that will halve in value before you've turned around twice (when your house could grow by the same amount in that time)! And no to investing too. Not when you're renting and fate/luck/circumstance has given you the ability to buy a house, now.

Get on the property ladder, bricks and mortar increase in value far quicker than money in the bank.

Use as much of the money as possible to your deposit, I'm sure you can find something that can work for your family.

15k on a car when you rent and aren't married is MADNESS.

Pay off the debt, definitely but you do not need to spend that much on a car. You'll regret it so much. It's so hard but much better to save save save and get on the property ladder

I'm a relatively high earner and I have never spent anywhere near £15k on a car. Not even half that, and I have had some nice second hand cars, including a slightly less than one year old fully kitted out Audi really? I'm looking for a second hand car, prices are high and you wouldn't get a high value car nearly new for 6K!

The advice on here is sound to spend the money all on a deposit (after you have paid off the debt)- I would go straight to a good mortgage broker and ask them what you can do with differing amounts of the deposit and then including what level of salary and then buy something asap.

But the advice around cars is a bit suspect, second-hand car prices are reasonably high and some of the quotes suggested here don't sound reasonable to me, looking as I am, on websites and visiting dealers at the moment.

It's a bit like when everyone tells the Op they can spend 5k on a kitchen, which they might have done a few years ago, but in a pandemic, with a shortage of builders, materials, and prices going higher due to Brexit and other factors, things just aren't as cheap as they used to be.

I would get a car on finance (and not even a good one) rather than spoil your one chance to get on the property ladder.

Also, the marriage thing is extremely important if you want to share in these assets going forward (otherwise if your partner ring-fences that deposit, you are not married, you'll have nothing or very little if you split up).

If you get a buy to let,. you will face the following unavoidable costs

Solicitor fees , registration fees and taxes for the purchase and eventual sale

Property insurance

Landlord insurance

Equipping the property with fire-certificated furnishings.

Either, paying an estate agent to manage all aspects of lets, or doing it yourself.

Cost and organising of professional emergency repairs to leaks, heating, plumbing.,locks , gas checks etc.

Void periods ( gaps between tenants, when there's no rent income but you still pay costs like CT , insurance, heating and security visits)

@FarFarFarAndAway

I'm a relatively high earner and I have never spent anywhere near £15k on a car. Not even half that, and I have had some nice second hand cars, including a slightly less than one year old fully kitted out Audi really? I'm looking for a second hand car, prices are high and you wouldn't get a high value car nearly new for 6K!

The advice on here is sound to spend the money all on a deposit (after you have paid off the debt)- I would go straight to a good mortgage broker and ask them what you can do with differing amounts of the deposit and then including what level of salary and then buy something asap.

But the advice around cars is a bit suspect, second-hand car prices are reasonably high and some of the quotes suggested here don't sound reasonable to me, looking as I am, on websites and visiting dealers at the moment.

It's a bit like when everyone tells the Op they can spend 5k on a kitchen, which they might have done a few years ago, but in a pandemic, with a shortage of builders, materials, and prices going higher due to Brexit and other factors, things just aren't as cheap as they used to be.

I would get a car on finance (and not even a good one) rather than spoil your one chance to get on the property ladder.

Also, the marriage thing is extremely important if you want to share in these assets going forward (otherwise if your partner ring-fences that deposit, you are not married, you'll have nothing or very little if you split up).

You can’t even buy a 12 month old Audi for £15k surely?! My DHs is almost 3 years old and valued at £22k by the dealer

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

That's very temporary while they are babies. Once past age 2, they could share for at least 8 years (different sexes) or longer ( same sex)
while you save for a larger house.

Agree with all the PP saying to GET MARRIED first! I know what you mean about feeling protected as your parents would never see you go without, I honestly feel the same, I know they’d be able to financially support me and my DC, but it is still insane to be a SAHM and to buy property without being married. I’m a SAHM and honestly, I trust my DH 100%, I genuinely believe we will never split up, we both come from old-fashioned Catholic families, and we were together 8 years before we got married, but I still point blank refused to have kids or buy property until we were married. It’s just good sense. And I honestly know what you mean about treating yourselves to a nice new car (we just have as we are expecting our 3rd DC and needed something bigger) but we’ve already done the 2-bed do-er upper (and had two young DC share a room, I think you’d be surprised the amount of crying a toddler can sleep through) and then upgraded to the 4-bed detached, so we’re about 7 years further down the road than you. The nicer car can wait. Pay off your debt, get married, use the rest to get yourselves on the property ladder. Honestly. You won’t get better or more honest advice than on mumsnet.

The new car will only go down in value where as a property has a good chance of increasing. I’d grab this golden opportunity to get on the housing ladder, you can sort the car out later.

Just make sure if you are not going to use it now put it somewhere that you can't just use it, I had £75,000 from my mothers house when she died, just left in a ordinary account , I would dip into in all the time, I never bought anything big but there is nothing left now , brother and sister can't believe I have nothing , sister has properly most still
brother has properly more than half left they go on quite a few holidays, and had a weeding to pay for

I'd buy the not-so-nice three bed and do it up slowly. In a few times time when your income has increased you can hopefully sell at a profit and get something bigger/nicer.

I wouldn't go into buy-to-let as an investment. It's becoming increasingly difficult to make any money out of it because of rising property prices and changes in how landlords are taxed. Many landlords who own one property are only just covering their costs month-to-month and will pay out of pocket for tax bills and big unexpected costs like replacement boilers.

Mumsnet is great for getting an insight into other people’s finances. In real life no one has a proper idea of how people manage their money.

This view that you deserve a treat is the reason why so many of us are overweight (me!) and/or in debt.

To give you an idea OP, when my children were as young as yours I was working part time, husband working full time. I needed a new car so got a reliable, low mileage secondhand car (£7,000). We prioritised slowly saving for a house move. It was hard but worth it. We went from a small mortgage on a terraced to a larger mortgage on a bigger house. If I rented I’d be doing everything I could to get onto property ladder. Don’t rely on a possible promotion.

I think you should try and get on the property ladder now. With your comment about deserving a nice car as a treat, I fear the money will just be frittered away.

@titchy she said I don't deserve advice.

Few others that are just being weird and catty so I'm leaving the thread now.

Thanks to all those that have taken the time to write out advice, I've read and considered it all

If you really want wait a couple of years, both open a Lifetime ISA before April, you can put £4000 each this tax year and then after April 1st another £4000 each, with the gov uplift of 25% this will give you £20000 for £16000. If you’re still looking next year you could transfer another £8000 and get £10000. £30000 in total for £24000 investment. This would mitigate some of the delay in joining the housing market. The only downside would be that with a s&s Lisa the market can go up as well as down, so when you are ready to buy might not be a good time to take out the money.
When we had money from a flat sale in another country we put it in premium bonds so that it would be easily accessible and there was always a chance of winning!