To sell or not?

figgyroo

Bit of a long story so bear with me please...
I sold my flat in 2006 and bought a house with a friend to do up and sell on. It needed a lot of work and we became attached to the house whilst living here an decided to stay. To cut a long story short my friend got bored and decided to move on last year and I bought them out (which cost next to nothing at they had never put any money into the house apart from paying half the mortgage and bills). The house is finished now but looking back we paid too much for it and spent too much on renovations. I couldn't manage the mortgage payments on my own so a family member 'invested' in my house so I could pay a lump sum off my mortgage. I got a new mortgage last year, a stepped fixed, 3.99% for 1 yr and 5.99% for 2 yrs. All was going fine until I got a paycut at work before Christmas. This coupled with my mortgage payments due to increase in May 09 mean I will be really strapped for cash (although I will be able to pay my bills I will have no spare money). Rearranging my mortgage isn't an option as my current mortgage is now more than 4 times my salary.
I decided to try and sell my house and buy something smaller therefore decreasing my mortgage. I got my house valued last night at £25000 less than I have put into it which I was expecting. Thing is my family are really against me selling it and think I should try and stick it out. I'd rather try and decrease my debt even if it means taking a step back. What would you do?

Robert_Sterling_3

Is the original family member or another family member willing to "buy into" your house?

figgyroo

Not really, I think I've had all the help off them they can offer plus I'd don't really want or expect anymore help. Think it's time I stood on my own two feet a little more! Buying this house was a mistake really but it was my mistake and my family did advise against it...should have listened!

QTPie

Can you rent it out to cover the cost of the mortgage?

QT

figgyroo

I could rent it out for more than my mortgage payments a month but I need somewhere to live...

QTPie

figgyroo wrote: »

I could rent it out for more than my mortgage payments a month but I need somewhere to live...

But you would need somewhere to live if you sold wouldn't you? Where were you planning to live then?

An alternative would be to have lodgers, but I don't know how that would compare financially... (then you could continue to live there).

QT

figgyroo

I currently live in a large 3 bed semi. I was planning on buying say a 2/3 bed terrace in the same area which would mean I could reduce my mortgage by around £30000.

I have considered the idea of a lodger but I would prefer to live on my own in a smaller house than live with a stranger. I've read so many horrer stories about lodgers and I think I'd feel like my home wasn't my own.

QTPie

figgyroo wrote: »

I currently live in a large 3 bed semi. I was planning on buying say a 2/3 bed terrace in the same area which would mean I could reduce my mortgage by around £30000.

I have considered the idea of a lodger but I would prefer to live on my own in a smaller house than live with a stranger. I've read so many horrer stories about lodgers and I think I'd feel like my home wasn't my own.

Does this work out for you financially? Enough equity (assuming you don't get the asking price suggested by the EA valuation) for a 10% deposit? Enough salary to get a mortgage for the rest? Do you have financial tie-ins to your current mortgage (i.e. early redemption charges)?

If you can't afford your current mortgage, then you do have to do something...

QT

figgyroo

Yes my LTV on my house is currently around 65%. The mortgage I need for my new property will be around 3.5 x my current salary. I do have any early redemption penalty of just under £3k which I have taken into account.
I will be able to afford the mortgage (just) when it goes up but it will leave me with no extra money for anything else I want/need to do. I suppose my family think I should just stick with it because I can just about afford it but I am worried if something else happens like a further paycut for example then I will get into financial difficulties.

QTPie

You have to do what is right for you. The sensible thing to do would be to sit tight if you can afford to, but if it puts you in financial difficulty then that is a different matter...

Personally I would start by speaking to mortgage lenders/advisors (not your current one) and run through the figures with them. Tell them that you are thinking of selling your house and want to run through the figures with them to see what they would lend you on your next house purchase. Be pesimistic about the money you get from the sale of your current house (for a deposit): better to estimate low and do better, than the other way around... Then see what they would be prepared to lend you (after checking your salary and credit rating etc). This is what we did before looking to sell our house: admitedly we are looking to move up the ladder, but it is the same principle - checking whether ou can get the finance to move.

It sounds like what you are looking to do is sensible: better to sell by choice, than to get made to move if finances take a worse turn... Don't think about what you will loose from the house, it is more important tho think about life going forward (i.e. affordability).

BUT it is a very personal decision and you need to do what is right for you.

QT

RetroBob

I've never once seen this mentioned in a thread of this nature, but have you considered looking for a job with a higher salary?

Clearly we're in recession but companies are still looking to fill necessary vacancies and as they say, it's easier to find a new job when you've already got one. Just a thought, t'was all.