WHEN you're deep in debt, the dream of owning a home can feel unattainable – but Wanni and Thilini managed to clear theirs AND buy their first home in three years.
Software developer Wanni Fonseka and his wife Thilini Balasooriyate, a doctor, owed a whopping £26,000 three years ago.
They had racked up the bill by spending money on clothes, holidays, and gadgets – and spending money on their two young kids.
Their credit card debt stood at £14,000, while a car finance loan totalled £12,000.
But after facing up to the amount they owed, they sat down to figure out how to clear it with the aim of being in a position to buy a house for the whole family.
They used the snowball method to clear their debts.
This is where you pay off the minimum repayments on all of your debts, and with the extra cash leftover, put it towards paying more off the smallest one you owe.
Although experts usually recommend you pay off the debts with the highest interest rate first so you don’t pay more on big fees, the couple decided to tackle their smallest ones first after watching a YouTube video on the method.
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The couple raided their bills, managing to cut the cost of food and paying for their mobile phones by up to 75%, to clear it.
They also cut out going out for meals and takeaways and stopped going on holidays to put even more cash towards paying off their debts.
In two years, they managed to clear it once and for all, alongside saving for their home.
By July 2021, they had the keys to their new £405,000 home – which they could afford thanks to the Help to Buy scheme.
This is where the government lends you up to 20% of the value of your property – or 40% if you live in London.
The loan is interest-free for the first five years and you only have to put a 5% deposit down for it.
We sat down with the pair to see how they kept on track with clearing their debt and saving at the same time for The Sun’s My First Home series.
Tell me about your home
It’s a three bed detached new-build home in Aylesbury.
There are two floors, and two bathrooms – one is an ensuite in the main bedroom.
We have a toilet downstairs, and the kitchen is separate from the dining room.
We have a medium-sized garden at the back.
How did you decide on location?
At the time we were hunting for a house, Thilini was working in Oxford which is around a half hour drive away from Aylesbury.
It takes me that long to get to work too – which meant it was a good place for us both to commute from.
It’s also not too far from London on the train.
How much did you pay for it?
Before we moved, we were paying £900 a month in rent for a two-bed flat.
Our mortgage isn’t that much more expensive – we pay £1,040 back a month, and took out a £303,000 loan on a 32-year term at a five year fixed interest rate at 1.8%.
The house was £405,000 but we took out a £80,000 Help to Buy loan.
Because we used the scheme, we only had to put down a 5% deposit, which was £20,250.
We got £15,000 to put towards the house by the developer, Barratt Homes.
That’s because Thilini works in the NHS, and they said it was a thank you to her as a key worker getting the country through the Covid crisis.
We didn’t pay any stamp duty because the stamp duty holiday was still on during this point – saving us £6,000.
How did you save for it?
We saved for our house at the same time we were clearing our £26,000 debt.
In 2018, we sat down to work through a budget to tackle paying it off after we faced up to our financial situation.
We owed £14,000 on credit cards, and had a £12,000 car finance loan.
After working out our outgoings, we worked out that we could afford to save up to £400 for a deposit for a home, and still have £300 to pay off our debts per month.
We used the snowball method, which meant we met our minimum monthly repayments on all our debts, and then any extra cash was put towards the smallest debt we owed.
It made sense to use this method for us, because it felt good we were making a dent on our debts.
To save more money to put towards our debts and savings goal, we raided our bills, cutting some by up to 75%.
On our mobile phones, we would usually choose to upgrade when our contract was up to get the latest phone.
But we decided to keep the handset, which meant we were just paying for calls, texts and data – cutting our costs from around £50 each to £12.
We nearly halved our food shopping bill to save more money too.
Before, we were spending £600 a month easily.
But going to the supermarket with a shopping list and cutting out desserts and other treats meant we managed to get this down to £350.
We also halved our spending on meals out and takeaways.
Each month we were spending up to £400 on this – but we cut this down to £200 maximum.
And the Covid crisis meant we were spending much less on holidays.
Before, we would spend £5,000 a year on taking trips back to Sri Lanka – where our families are.
That meant in total, we probably saved £10,000 over two years by shelving holiday plans.
At the end of two years, we had cleared our debt – and celebrated by cancelling our credit cards.
We continued with the budget though while we kept saving for the house.
Any complications?
If you have a history of debt, sometimes it can be hard to get a mortgage.
But because we always paid the minimum monthly repayment off on time, we never got a bad mark on our credit file.
After we cleared the debt, we rang up the credit agencies check that our debts were listed as closed now – that’s so lenders could see we had wiped them off.
It meant we didn’t have too much trouble getting a mortgage.
How did you afford to furnish it?
We made sure to shop in the sales to get our furniture for less.
Shopping for discounted sofas and beds probably saved us £2,000.
Apart from that, we got everything in phases to spread out the cost.
Advice for other first time buyers?
You need to find out what you are spending.
We spent more than we earned which is why we got into debt – once you re-calculate your budget, make sure to stick to it.
If you don’t need your credit cards anymore, don’t keep them.
If you miss a payment, it could hit your credit score.
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