Am I being realistic?

earthdancer

We have been thinking of moving to a larger property for some time now, our family of 5 having outgrown our 3-bed detatched property. We purchased it brand new in 1999 for £83,000 and currently have £66,000 outstanding on our mortgage. So far we have had two EA valuations - one of £170,000 ("for a modern property with no improvements made") and the other of £169,950 ("absolute tops for a realistic chance of sale, though £159,950 would probably guarantee it"). We have a final EA valuation to come on Wednesday, at which point we will decide on an asking price and EA to handle our sale.

We have viewed a 5-bed property we like very much, currently on the market at £239,950. The EA told me that it has been on the market for approx 18 months so far, with the first agent at £270,000, and then with her agent since January at the £239K price. I'm thinking that the current value has probably dropped by at least another £25K in the last 4 months? Would you agree?

We have our mortgage agreed in principle based on achieving £150k for our home and borrowing up to another £160K. That gives us an overall budget of £244K with comfortable monthly repayments. It also means that if we accept a decent offer on our property, we can put an offer in on the house we'd like with the assurance that our mortage is already agreed. My question(s) though - are we making realistic assumptions when we plan to...

- market our home at £170K with a view to achieving £160K, but scope to drop to £150k
- offer £215K as a starting bid for the house we'd like, with a view to a maximum offer of £230K

The figures add up, but if it was you, would you be prepared to accept a lower offer on your property? Would you make your starting offer on the new property even lower in the current market? The vendor of the property we like is moving into a home they already own but rent out, so it seems they have no real urgency to sell.

Any advice appreciated, thanks, ED

U've_been_framed

It is swings and roundabouts. Without seeing either property, but assuming that I was interested in them both, I would probably start with an offer if £140k on your home but be prepared to go to £160K if I really liked it.
On the other property, I would offer £200k and go up to £230k.
But this is all hypothetical. If you can accept a lower offer on your property and still be able to buy the home you want, and afford it, then go ahead.

pinkshoes

Have you looked on houseprices.co.uk to find out what they originally bought this house for? If it's been on 18 months, then it suggests they're not really in a hurry to move therefore haven't accepted any low offers. Perhaps they bought it recently so can't afford to drop below a certain price?

You're potentially going to borrow £160k for this new house, but you bought your old house for £83k, and yet still owe £66k, suggesting that in 10 years you've only paid of £17k. Are you sure you can manage such a large loan?

Georgie4

earthdancer wrote: »

We have been thinking of moving to a larger property for some time now, our family of 5 having outgrown our 3-bed detatched property. We purchased it brand new in 1999 for £83,000 and currently have £66,000 outstanding on our mortgage. So far we have had two EA valuations - one of £170,000 ("for a modern property with no improvements made") and the other of £169,950 ("absolute tops for a realistic chance of sale, though £159,950 would probably guarantee it"). We have a final EA valuation to come on Wednesday, at which point we will decide on an asking price and EA to handle our sale.

We have viewed a 5-bed property we like very much, currently on the market at £239,950. The EA told me that it has been on the market for approx 18 months so far, with the first agent at £270,000, and then with her agent since January at the £239K price. I'm thinking that the current value has probably dropped by at least another £25K in the last 4 months? Would you agree?

We have our mortgage agreed in principle based on achieving £150k for our home and borrowing up to another £160K. That gives us an overall budget of £244K with comfortable monthly repayments. It also means that if we accept a decent offer on our property, we can put an offer in on the house we'd like with the assurance that our mortage is already agreed. My question(s) though - are we making realistic assumptions when we plan to...

- market our home at £170K with a view to achieving £160K, but scope to drop to £150k
- offer £215K as a starting bid for the house we'd like, with a view to a maximum offer of £230K

The figures add up, but if it was you, would you be prepared to accept a lower offer on your property? Would you make your starting offer on the new property even lower in the current market? The vendor of the property we like is moving into a home they already own but rent out, so it seems they have no real urgency to sell.

Any advice appreciated, thanks, ED

If both houses are in the same kind of area and the 5 bed doesn't need any work doing to it then personally if yours is valued at about 160k I would think that the 5 bed would be worth more than 215k in comparison and obviously as the people selling this started at 270k you are effectively asking them to accept 55k less - their finances would have to be in a very good state to enable them to take that much of a hit!

earthdancer

Georgie4 wrote: »

If both houses are in the same kind of area and the 5 bed doesn't need any work doing to it then personally if yours is valued at about 160k I would think that the 5 bed would be worth more than 215k in comparison and obviously as the people selling this started at 270k you are effectively asking them to accept 55k less - their finances would have to be in a very good state to enable them to take that much of a hit!

The £270,000 valuation on their property was 18 months ago when property prices were a lot higher. As a comparison, similar properties to ours in the area were selling for about £200,000 at that time, so based on those figures, we're both taking quite a hit. The current owners bought the property for £85,000 but that was 12 years ago. Obviously I can't comment on their financial state but it's true they don't seem to be in a hurry to move so will probably hold out for close to the selling price I guess.

earthdancer

pinkshoes wrote: »

You're potentially going to borrow £160k for this new house, but you bought your old house for £83k, and yet still owe £66k, suggesting that in 10 years you've only paid of £17k. Are you sure you can manage such a large loan?

The reason for paying off only £17K was that we were first advised to have an endowment mortgage and then when we increased our borrowing to buy our current house we were advised to have a PEP mortgage. Both performed absolutely abysmally so we took the decision about 3 years ago, rightly or wrongly, to switch the whole to repayment and use the endowment to pay off debts we had. We still have the PEP but every statement makes me more depressed - today we have lost another £1K in value in the last 6 months. I'm tempted to cash it in and use that money to overpay on our current mortgage.

We have very carefully looked at our budget over the next few years and we asked our mortgage advisor to look at a worst case scenario (I thought) of £150K for our house and paying the full £240K for the house we like. The repayments are well within our budget with scope for the interest rates to rise significantly without causing us a problem.

Having been in a financial struggle in the past, I'm determined that any new borrowing we take on is managable and futureproofed as much as anyone can reasonably predict!

WifeofDJFLP

Hi There

can't help I'm afraid as I'm in a very similar situation to you and equally unsure.

can I ask though what rate your proposed mortgage is at, for how long and what are the monthly repayments?

we're still at the stage of deciding whether or not to sell (£60k mortgage on property worth £170K) joint income of about £42K- I have no idea what sort of mortgage we could get!

TIA

Wifeof DJFLP
xxx

earthdancer

Hi, the mortgage is a 3 year fixed rate at 4.28%, but taken over 25 years, and the monthly repayment would be £870. We intend to overpay on this though, probably setting our repayments at about £950 initially.

From June we are on our lenders BMR as our current 3 year fixed term ends in May, so we won't be liable for any early redemption payments when we come to finalise our new deal. If you aren't in the same position it's worth checking what your early redemption fees would be, or if your current mortgage is portable.

HTH