How best to keep my £25k

[Tusktusk]

I have recently acquired £25k. I would like to use it to put a deposit on a house. I currently rent my home but I still have a legal ownership of another property, which I will need to be rid of before I can buy my own home otherwise the stamp duty will render it totally unaffordable. I will not be getting any more money out of the owned property. I don’t know how long it will take to disentangle myself from it but it could be a year.

Here is my dilemma: I have debts that I service every month to the tune of £300. It would cost £17K to clear the debt and I would be able to still keep £8k and save the £300 every month. However, after a year it won’t have grown enough to pay a deposit and associated fees and moving costs. At my age (now 52) getting a mortgage is going to be more difficult the longer I leave it, so buying a house sooner rather than later is imperative.

WWYD? Pay the debt or keep the money intact until I am free of the other property?

I’m not a finance expert but I’d think you would see what the minimum you need for a house deposit/fees is, put that much in a high interest account for a year, use any money left to pay off the debt with the highest interest rate, then look if there’s anything else you can do to move remaining debt around to cheaper rates?

I always hear financial advisors talking about savings and how people should clear their debts first and I just think that’s only prudent if you can ever get back to the level of savings again. Someone better will come along to help though!

Have a chat with a mortgage broker about the different options and how much difference it would make to have the debt versus a smaller deposit.

Keep the money in cash in a high interest instant access account for now.

You need to speak to a broker, but the amount you are paying towards your debt will surely affect your affordability when looking at how much you can borrow anyway.

You might struggle to get the mortgage you require if you have debts so while I understand wanting to maximise your deposit, that might need to be a consideration depending on your income and cost of the house you want to buy.

Can you transfer your debts to 0% deals to reduce the cost?

Are you sure you won't get any money from the sale of your current property?

Any chance of an extra job temporarily to earn some extra money.

I would clear your debts. There is no point having savings whilst you have that debt. You’ll be paying so much interest on that. Clear it first.

Speak to a mortgage broker and find out what’s possible for you.

My own opinion is not to pay off the debt. Most people who apply for a mortgage have credit cards and loans. As long as the payments are up to date they will take the minimum payment into account for affordability. You will need that capital for the deposit and costs

I’m a similar age and about to take in a mortgage so I understand about the difficulty of buying a house at this stage of life, and alone.

I wouldn’t pay all the debt off. Instead I would look into moving it into 0% debt and paying as much off as you can within the next six months by being frugal, perhaps get another job, then see a broker. I can’t imagine you, a person of 52 buying alone, with a £25k deposit and £17k unsecured debt, will have access to good mortgage deals, unless you’re planning on buying in one of the cheapest areas of the U.K.

How much are houses in your neck of the woods?

How much money will you get from the property you legally own? Surely enough for a deposit?

The money I have now is from the property I own. There won’t be any more by agreement with exh but the property is not yet sold.

I am buying in a cheaper area. I’m looking at properties of around £150k. My income is £55k pa.

What sort of debt is it? Is it a loan, a credit card, what interest are you paying on it?

Also, do you have kids still at home?

I'd seriously look at buying a shared ownership flat or house.

Your best bet would be to speak to a broker and see how much your affordability is affected by the debt. You will struggle to buy without a deposit so understand not wanting to use all of your savings.
For a £150k house you would probably be fine with a £15k deposit but remember you need solicitor fees and stamp duty etc as well.

You might not be aware that if you pay the higher stamp duty rate because you already have a main home and then sell that main home within 3 years you can reclaim the additional stamp duty paid.

https://www.gov.uk/guidance/apply-for-a-refund-of-the-higher-rates-of-stamp-duty-land-tax

This might not help you, but you could potentially look to buy now and reclaim if you are confident in a sale.

Alternatively, is there any scope to transfer your ownership to your ex if you have no further financial benefit? Probably a no go if it is mortgaged due to the stamp duty they'd incur. But again worth a mention.

How much is the debt costing you interest rate rise? If it’s credit card then move it to 0% and stick the 25k in a cash ISA eg Trading 212 until you need it.

If it’s a high APR then pay off as soon as you can or can you refinance on a lower rate as long term it’s costing you ££££. Can you live very minimally for a bit and save like crazy? I would also say that there is a danger you won’t find anywhere quickly and then you’ve still paid all that interest on your debt.

I don’t know about that - a 52 year old with a 10% deposit isn’t great. This is the problem when you have a low deposit and you’re 50 +. Even a 17% one (£25k) isn’t high because some lenders will only lend up to retirement age. Some other lenders will lend over longer periods but I don’t think it’s sensible to have a mortgage round your neck in your 60s and 70s, when it’s only you paying.

We have just taken a mortgage with my DH at 52, we have 5% deposit plus 5% builders contribution. We have taken it over 18 years but others would lend to 75. Not ideal of course but seems like is the OP has little choice.

But you’re buying with someone else, it’s quite different to OP’s situation.

Have you spoken to a solicitor regarding the sale of the house?

Maybe, but if she wants to buy a property I don’t see the alternative? She needs to review with a broker what her options are and how they would effect repayments, affordability and lending options.

Unless the interest rate is really high I wouldn’t pay off the debt.

When we bought our house part (most) of our deposit was from selling our camper van, which we were still paying the loan for. We had no other way to save the amount we needed, so we kept the loan and paid it off over time.

As long as the debt won’t cause you affordability issues (perhaps speak to a broker?) then I wouldn’t worry about it.

Depends what other outgoings OP has, but £300 a month isn’t a huge amount of debt to be paying off, especially as she has a healthy income, and property prices she’s looking at are quite low.