Rent, Loan and Buy new

Gaz911

Hello,

I am new to this forum and was wanting some advice.

Me and my finacee currently live in a house which when purchased in summer 07, had 10% equity. THis has probably reduced now but by only a few thousand.

We want to move house to something larger, as our current house is small and making us depressed.

Due to the falling house values we are reluctant to sell and plan to rent our home. We then will need to get a personal loan in order to get enough deposit for a new house.

This would result in us paying out for 2 mortgages on a interest only basis for 5 years and a personal loan for 8 years. After 5 years we may then sell our orignal house and then move to repayment.

Is there any pitfalls we are not seeing? I understand our out goings will be high, but if we rent our 1st house for the majority of the 5 years, then we will not be stretched too much.

Has anyone done this? Any advice?

Tassotti

As long as the rent on your old place is 145% of the rent, you should be okay

Doozergirl

Any pitfalls?

How about 2 properties mortgaged at more than 100% of their values? Two properties on which you are not paying off any of your debt except the money you should have already saved toward the deposit?

What happens if the houses are worth no more or less even in 5 years time? What if interest rates are higher again? You're paying more for essentially renting 2 houses. You've gained nothing.

Any lender will want to know your other debts, will not accept a loan as a means of deposit and, even if you lied, they would see your loan and reduce the amount that they will lend you on the second property anyway. There's also the issue of permission to let the property from your existing lender when you have no equity, the issues of how you service 2 mortgages and a loan when your tenants leave or don't pay the rent.

If you see negative equity on your property as an issue, why continue to plunge yourself into more debt?

Honestly, I'm not one of those who would say don't buy at any cost, but this is potential financial suicide and isn't thought through at all if you can't see any potential pitfalls. Relying on capital gains in a falling market is insane.


If you have any equity in your current house then sell that and move the normal way. Or have a massive clearout and redecorate your house or something to make it more bearable - it doesn't really sound like you need to move - if it was big enough then, it's big enough now, you've just accumulated stuff that you don't need.

LittleMissAspie

Gaz911 wrote: »

Hello,

I am new to this forum and was wanting some advice.

Me and my finacee currently live in a house which when purchased in summer 07, had 10% equity. THis has probably reduced now but by only a few thousand.

We want to move house to something larger, as our current house is small and making us depressed.

Due to the falling house values we are reluctant to sell and plan to rent our home. We then will need to get a personal loan in order to get enough deposit for a new house.

This would result in us paying out for 2 mortgages on a interest only basis for 5 years and a personal loan for 8 years. After 5 years we may then sell our orignal house and then move to repayment.

Is there any pitfalls we are not seeing? I understand our out goings will be high, but if we rent our 1st house for the majority of the 5 years, then we will not be stretched too much.

Has anyone done this? Any advice?

Are you a troll or just a walking cliche?

neas

You are screwed if any of the following happen (most likely some or all will happen):

1. You lose your job and cant afford rent repayments
2. Houses don't recover to summer 2007 prices and you are in negative equity on both properties (as being interst only you wont repay capital
3. Rents fall
4. You cant find a tenant for 1-2 months on the rentec accomdation.


In summary... its a very stupid move.. and exemplifies the exact british attitude that got us into this recession in the first place...

"Why save when I can borrow shed loads of money, nothing bad will happen"

And your house has prob lost more than 'a few thousand'... house prices hace dropped 15% On average.

Quite simply, sell the house now so you can break even.. and rent out a house/flat while house prices bottom out.

Robert_Sterling_3

I would not say that NEAS if I could think of a more polite way of saying the same thing.