Pay our way out of mortgage or stay put?

AmyFlo

I know hardly anything about mortgages and how they work, best advice needed!
We are 3 years into a 5 year fixed rate deal with Northern Rock. It was a 100% deal and a unsecured part on top of around 2.5%. When we got it we were told that when we wanted to move we would simply "port" the mortgage to a new propoerty and it would be like a renegotiation of the existing deal. We bought our flat for £128K and would be surprised if we could get more that £130K for it at the moment, although there are so many good deals out there on houses that it seems mad not to try to move to a bigger property now at a reduced price. Budget for new house is £200K.

The maddest part is I am in a more secure job than I was three years ago (if there is such a thing) and we both earn a third more!

Now three years on and we are planning a family, one bed flat will not do the trick! Northern Rock say they are not "porting" any more and our options are:-

1) Pay off the current mortgage and take a new one but pay 25% deposit on the new home (avoids early repayment fees)

2) Buy our way out of the deal and go to another lender at a fee of £3500

We have been saving for three years and have a deposit available of nearly £15K, but even though this, to me, sounds like we are a good bet and an ideal customer for many mortgage providers, it is simply not enough! I can't bear the thought of throwing away £3500 of our hard earned savings to Northern Rock. Help, what would you do?

beecher

If you're wishing to buy a property at £200k, then a £15k deposit isn't enough. You need at least £20k and then money for fees etc on top. You might also be quite shocked by how much you'd get from selling your house - it could very well be less than £130k.

Keep saving til you've got £20k and then see where you are - nothing much else for it really.

AmyFlo

I just don't think we can have a Baby in a one bed flat? Hasn't anyone got any ideas?

opinions4u

AmyFlo wrote: »

I just don't think we can have a Baby in a one bed flat? Hasn't anyone got any ideas?

Cot in the kitchen?

mothershipton

We were in a similar position in the last recession and ended up having our first child in a one bed flat, it was ok till he was about 18 months as he didnt move around much! I wouldnt recommend it... People do it all the time though.

I would try and wait a bit longer for your family if you can and save a bit more for the deposit. I would begrudge paying NR £3500 youll need this for nappies.

good luck

Dithering_Dad

The 'must have it now' mentality that pushed personal debt through the stratosphere (resulting in bank failures and a credit crunch), rampant housing and economic boom fueled by cheap credit (and subsequent crashes and recession) still seems to be alive and well. Amazing that the lessons of the past 18 months have been lost on some people.

FWIW, my advice would be to stay put in your apartment until you're out of your redemption period. In the meantime, you should pay that £15k, and every spare penny you can get your hands on, into your mortgage account and onto the unsecured loan. This will ensure that you will have cleared the loan and not be in negative equity when you finally get into a position to sell.

Having a baby in your room for upto 3 years is not ideal, but it's not the end of the world. I think you need to have a reality check - you bought a 1 bedroomed house with a 100% mortgage PLUS an unsecured loan because this was all you could afford. You now have an increased income that will allow you to keep your heads above water and make a serious dent in that debt. Instead of maxing our your finances again by buying a larger home, you have the opportunity to sort out your finances once and for all.

To be honest, the credit crunch will make the decision for you. Even if you manage to sell your current home and just break even (unlikely once you have factored in paying back the unsecured loan, redemption fees and moving costs), a £15k deposit probably wouldn't be enough for you to buy the apartment you're currently living in, and certainly not at a decent mortgage rate.

betmunch

AmyFlo wrote: »

I just don't think we can have a Baby in a one bed flat? Hasn't anyone got any ideas?

At the risk of being a complete "Bloke" - Why not just put off the baby planning for a couple of years and hopefully by then you will have the house you want.

Cheers

Dithering_Dad

betmunch wrote: »

At the risk of being a complete "Bloke" - Why not just put off the baby planning for a couple of years and hopefully by then you will have the house you want.

Cheers

Thanks for this - for some reason I had assumed that the baby had already been conceived.

Problem solved, either put off having a baby until you can afford to have one in an appropriate home of your own, or sell your current place and rent a more appropriate 2 bedroomed home and have the baby now.

From the brief details you have provided regarding your financial circumstances, IMHO you simply cannot afford to buy both a new, larger home and start a family and be able to provide some financial security for your family (especially when you consider that you will lose your income when you stop working to have children).

You either therefore need to make a decision on whether a house or starting a family right now is more important to you. Kids are great, but don't underestimate their cost - kiss your savings goodbye once they appear :rotfl:.