A huge (possibly Trophy ending) dilemma.

[Steve]

I bought a flat yesterday, with my girlfriend. It's really nice. She has paid all the deposit because she's been on the property ladder for a few years now and I'm just getting on, not only this but to get a better mortgage she has planned to pay off both our loans. Mine is about £8.5K.

The dilemma is;

Should I let her do this and pay her back from the equity when we remortgage/sell the flat with interest (She is fine with this by the way)?

or;

Sell the Trophy to pay off my loan and contribute a small amount to the flat deposit, walk to work and be thoroughly miserable but have a nice flat?

Cheers guys, I know you'll give me some sound, unbiased advice.

 

[hoolio]

Would she rather have you miserable or happy?

 

[FunkyMunky]

if she is cool with putting something in writing to the effect that she has paid off your £8.5k loan and that in the event of selling/re-mortgaging/splitting up (sorry it's a negative outlook on things) she takes that money you owe her from any profit made etc i'd go ahead with that deal....

congrats to both of you in your new purchase.... does your monthly budget also include your own broadband now? :wink:

 

[Steve]

if she is cool with putting something in writing to the effect that she has paid off your £8.5k loan and that in the event of selling/re-mortgaging/splitting up (sorry it's a negative outlook on things) she takes that money you owe her from any profit made etc i'd go ahead with that deal....

congrats to both of you in your new purchase.... does your monthly budget also include your own broadband now? :wink:

Yeh, it does, i've insisted on it, and I think I'm going to do more private jobs to earn the cash and pay her off independently of the mortgage.

Thanks, I'm really pleased with it, overlooking a Preston Park and owned by two gay guys who were interior designers or some shit so it's pretty well kitted out, they're even leaving the home cinema system with ceiling mounted projector. Monthly budget should be better than at the moment, strangely, so i might have to buy my own broadband unless the local has a bloody powerful router!

 

[oliie]

Steve,

You can PM me about this if you want to discuss more (e.g. over the phone). I've been in this situation quite a few times before both in the UK and overseas.

Firstly - you should be aiming to finance your car through your property. I dread the thought of financing a car 'as-is'... what a bad investment of the money!

To do this, you need to get the equity into the property.

My advice is to put the money into the property and take the hit for a year. Next year have the property re-valued to assess the capital gain. Take this capital gain as a guarantee for the extra loan on the capital, but take it as an interest only loan. Providing the market remains buoyant, you're using the extra equity of the property to finance an interest only loan on your car - something you could not do ordinarily (i.e. personal loan). Needless to say this remains a negligible amount over 25 years and assuming the property will continue to appreciate thus giving you the car ‘for free’ (the opportunity cost being you don’t use the equity for another investment – e.g. a deposit on a another unit, buy-to-let for example). This is the hardest decision in my experience – deciding to use the extra equity for a car or as another deposit!

This method of positive gearing will help you leverage the value later on. The risk, of course, is that the property market starts to slow and you don't realise a capital gain on the property on which you were dependant on the re-finance for. I've seen this happen before and personally I know family members who have lost circa 10% on their property over a 20 year period to the current year (industrial property in Singapore). Nothing is ever for sure, but if you don't risk you won't gain.

As always you should speak to a financial adviser but I expect an opinion similar to this. You’ll also need to consider the terms and conditions of the lender: some lenders won’t release the equity unless you reach the end of the fixed term and re-mortgage (will vary depending on your chosen mortgage option).

Happy investing

O.

 

[George K]

Ollie is not far out - mortgage borrowing is the cheapest commercial deal around (especially interest only - although long-term it is not the best answer, unless you are brave enough to keep the portfolio growing in the hope that the total gain clears all the borrowingon one property) - so certainly try to consolidate all your borrowing in this form.
Now for the lateral thinking - what about the gf selling her car (presumably she has one)and you keeping the Trophy which she could drive if she needs it to get to work?

 

[Steve]

Thanks guys, oliie, your explanation has gone a little bit over my head, I might just ring you at some point! George - she has a car and was going to sell it anyway as she walks to work too and really wasn't using it, I don't think she would be too happy about sharing the car, she would never spend £7K (half the loan) on, what she regards, as a little cheap french car. She would probably jump at the chance if it was an S2000 or an M3 (only an E46, she hates the E36 or E30), she would not even get in the Teg by the sounds of it. Bloody women eh?

The sensible and 'right' thing to do would be to sell the Trophy and maybe buy a cheap runaround or keep her Focus, but I love cars and feel as strongly about getting on the automotive ladder as I do the property one. TBH I hate 99% of British houses and flats anyway and will be building my own house one day so I don't hate it (that's why I'm in this game). I want to move up from the Trophy (hard I know) not start all over again.

Bugger and balls.

 

[Cue]

As ollie says, that's the best way to go for long term investment.

The only issue i'd see is the imminent rise in interest rates again, this will slow house prices at some point - if it doesn't they'll keep going up until consumer borrowing starts to fall, which will be crash time.

Also, consider that your interest only loan will take 25 year (ish) to pay-off, so when the time come to upgrade you'll need a pot of money or further borrowing to buy the new car, taking into account the Trophy's value against the new car (if you do ditch the Trophy at that point).

Personally I'd take he GF loan route, it's no interest and flexible payment terms, you could pay it off earlier with no penalties lol.

Plus there's the chance (ok it's a hell of a long shot) that she may nulify the loan. If you get married then it'll be defunct immediately.

Be wary though - friends and family fall out about money more times than anything else.

 

[Steve]

Thanks Cue, going with this now. It's all gonna be OK, she's a lovely girl, I might have to get a ring on that finger at some point...

 

[hoolio]

That's a little bit of good news then, you know you would of missed it madly, am already missing mine and it's only been 28 hours and 41 minutes.

 

[Guest]

This thread makes my face hurt. :-s

Glad you're going to get a good solution to it all though, Steve.

 

[Johnnytheboy]

I bought a flat yesterday, with my girlfriend.

Fascinating. I bought my house with money.

:lol:

 

[Cue]

I bought a flat yesterday, with my girlfriend.

Fascinating. I bought my house with money.

:lol:

lmao, that's a new concept..... i saw that Macintyre programme last week and a guy bought his wife with sea shells...... I thought... this may catch on lol.

 

[__CA__]

www.oceanfinance.co.uk :wink:

 

[MCoupe]

Thanks, I'm really pleased with it, overlooking a Preston Park

I had a flat here many years ago, nice area Steve, you will make money on that flat without doubt!

Keep the car, as already stated you will be miserable without something in your life that you enjoy. A fun car is a necessity!

 

[Cool Hand Luke]

Keep the Trophy and do some additional architect work out of hours - drawings for conservatories, extensions, loft conversions, etc - if you want to clear the loan quicker