Would be be stupid not to do this now?

Sausages

My husband and i are considering moving while prices have fallen and mortgage rates are low. My question is, would we look back in 5 years and regret NOT moving if we don't do it? Here's our situation...

We're in Yorkshire. The house we want to buy is a 4 bed detached and we're currently in a 3 bed semi-detached. We bought our house for £140,000 in summer 2006 and have done work to it to slightly increase it's value, but with market conditions it would probably only sell for the same or £5-10,000 less than what we bought it for. We have had valuations from estate agents who told us to market it at £145,000 and it might get £140,000 within about 8 weeks.

We were lucky enough to buy our first house before the prices sky-rocketed, so if the house sold for £140,000 we would have £73,000 equity. The house we want to buy is on at £190,000, but we think we might be able to get it for £180,000, meaning we would need to add £40,000 to our existing mortgage making a total mortgage of £107,000.

I am not working at the moment to care for our daughter and i plan to stay off work until she goes to school. My husband brings home £1,600 per month basic after tax, which means that we can afford to spend £600 per month on the mortgage. The rates at the moment are great, so we would be looking at only paying £550 per month for a couple of years if we fix it that way. We have no other debts apart from our mortgage - no HP, cards, loans etc. No outgoings apart from bills, mortgage, food, petrol etc.

So, please tell me honestly. Do you think we would be crazy to pass up the opportunity to move up the property ladder while prices are in our favour?

My thinking is that if we buy now we can afford for prices to drop another 40% (assuming we get the new house for £180,000) before we're into our equity. I get the picture that won't happen (although i wouldn't bet my life). Plus, if we find we can't afford the mortgage in a few years because interest rates are too high, we can sell and downsize again. It would be easier to downsize later, rather than attempt to climb the property ladder after prices and interest rates have gone back up.

I am hoping that this will be our last house move if we do it, and that the big 4 bed detached will be our investment for the future so that when we retire we can downsize and use the difference.

What do you think?

Thank you in advance. I hope this is the right forum to post this question.

getmore4less

if rates go up to 6% can you afford it then?

Prices are droping why not wait?

Why fix for 2 years? if money could get tight if rates go up 5-10y might be better

What happens if the job is lost?

How much are you saving each month now?

How much do you have saved up.

beecher

Sausages wrote: »

The house we want to buy is on at £190,000, but we think we might be able to get it for £180,000, meaning we would need to add £40,000 to our existing mortgage making a total mortgage of £107,000.

I am not working at the moment to care for our daughter and i plan to stay off work until she goes to school. My husband brings home £1,600 per month basic after tax, which means that we can afford to spend £600 per month on the mortgage. The rates at the moment are great, so we would be looking at only paying £550 per month for a couple of years if we fix it that way. .

What rate are you using to calculate this? Around 3.5% over a term of 25 years? At 6% over 23 years it would be closer to £715 and chances are that's where rates may well be in 2 years - who knows, they might even be more. Would you be able to afford this? You say you could downsize but what if house prices have come down another 20% by then>

I think you'd be crazy to take such a gamble in this present climate but that's just my personal opinion.

Sausages

getmore4less wrote: »

if rates go up to 6% can you afford it then?

Prices are droping why not wait?

Why fix for 2 years? if money could get tight if rates go up 5-10y might be better

What happens if the job is lost?

How much are you saving each month now?

How much do you have saved up.

If rates go up to 6% in two years time after a fixed rate ends the payments would be £685 and we would be able to afford this if i went back to work. However, i would prefer to stay off work while our daughter is young, so we will need to consider this.

I'm just impatient, that's why i don't want to wait! Ha ha! There aren't a lot of houses that come up for sale in our price bracket, and in the area we like. At the moment there are a couple, but there may not be any in a few months... then again, there might be a couple more...

Perhaps it would be wise to consider fixing for 5-10 years instead. I guess interest rates aren't going to get any lower than what they are now? My husband is very hesitant to do this, but if it's the right thing he would.

If he looses his job we will have made sue we get the insurance that covers you. His job is pretty stable, but you're right, it should be considered. In that event i could go back to work myself and he could care for our daughter, at least in the short term. I don't know if i am being a bit naive, but i don't think he would have too much of a problem getting another job.

We are saving a couple of hundred pounds per month at the moment, which is why we know we can afford a couple more hundred pounds on a mortgage. My husband often works overtime that takes his wages over the £1,600, but i didn't want to include this in planning a monthly budget. We save ad hoc when we get extra money here and there from overtime. At the moment we have £700 and we usually save until we spend if you know what i mean. We are always saving, but usually buy something with it after a while - sofa, TV, etc etc. We work this way instead of taking out loans.

beecher wrote: »

What rate are you using to calculate this? Around 3.5% over a term of 25 years? At 6% over 23 years it would be closer to £715 and chances are that's where rates may well be in 2 years - who knows, they might even be more. Would you be able to afford this? You say you could downsize but what if house prices have come down another 20% by then>

I think you'd be crazy to take such a gamble in this present climate but that's just my personal opinion.

I am using a rate of 3.5% over 25 years fixed for 2 years. I downloaded a spreadsheet off here that tells me the repayments and i would be paying £540.17 for 2 years and then that would go up to £684.25 after that at a rate of 6%. We would struggle to afford the latter payments, but i could go back to work... That's always an option, but just not a preference. If prices come down by 20% the house would then be worth £144,000 (assuming we managed to get it for £180,000). Since our mortgage would be only £107,000 (minus the payments made since taking it out) we would still have equity.


Thank you both for your advice. You've already given me things to think about.

ess0two

What price you get for yours now may well be a tad optimistic.

Sausages

ess0two wrote: »

What price you get for yours now may well be a tad optimistic.

Yeah, you're right. It might not even sell at all! Houses just aren't shifting round here... as anywhere i guess. You can but try though! We are certainly sensible though and wouldn't expect an unrealistic price. The agent said we could even test the market with an asking price of £149,950, but i don't think there's a point. People aren't daft and we need to get buyers through the door in the first place.

We have looked at a new build who offered us a guaranteed £135,000, but they wanted £190,000 for theirs with no reduction, so we couldn't afford that much extra on the mortgage (£55,000). Our repayments would be £615, which would be fine, but after 2 years they could go up to £780 at 6%.

Sausages

Does anyone else have any thoughts?

geoffky

Far too much risk..so many ifs.....interest rates will not always be this low and could go to 10%+ if they print too much money and inflation kicks in...(thats what i am planning for)

Forever_Red

If it was me and I had my heart set on moving to a 4 bed detached, I would look at fixing for 5 years. With the figures you have used, £180,000 new house v's mortgage 107,000, you would have a LTV of 59.4% (very close to going over the magical 60%). HSBC do a 3.99% 5 year fix, and over 25 years the payments would be £565 going to £689 if they rose to 6% after the 5 years are up.

At least with the 5 year fix you should have been able to go back to work after your daughter has started school and you could have built up some more savings to fall back on if times get a bit tough.

It all depends on your attitude to risk. Me personally would go for it as I wouldn't want to miss out on the house I wanted. Others would wait for the storms to settle. Have a good think about it :think: and good luck with whichever option you choose.

Alan

sammyjammy

I agree with Alan, if you really want to make this move then take a longer term fix, why wouldn't you if its your "live in it for a long time" house?

Is the house you actually want on for 190k? Is it priced to sell in the current market, it may be you could get an offer accepted around 160k depending on the circumstances.

dimbo61

Have just worked out the same deal as forever red re the HSBC 5 year fix at 3.99% with 60% LTV
Security for the next 5 years and 20% overpayment as well.
Your daughter would be at school and you could return to work even part time.
If you want and can afford a bigger house then go for it and see if yours sells
In the mean time overpay on your mortgage and save save save