Staying put vs. selling up

garvbuck

Hi there,

This is my first post on the MSE forums. I would really appreciate some advice on what might be the best thing for me to do in my current situation. In August 2007 (I know, worst month ever) my husband and I moved to our current home on a 100% mortgage at £207000, plus a £1500 arrangement fee tacked onto the loan. As I was on a four-year fixed-term contract (with a small but significant hope of permanent employment at the end of it), and he was on a permanent contract, we took out a five-year fixed rate at 6.65%. The early redemption charges are 5% in the first year, 4%, 3%, 2% and 1% in each year thereafter. If we sold after this August, it would therefore amount to around £6000. We currently owe around £204,000 + the arrangement fee, and the house has been valued at £200k.

I have now been offered a permanent job sixty miles away, which I cannot afford to turn down. It is a very tricky commute from where we currently live. My husband is a teacher so it is likely he can move locations quite easily. We are about to start paying an extra £300 into our mortgage per month, in a bid to cut what we owe. But we also pay £1275 a month on a house that would be around £700 a month to rent.

So (after all that!) our current thinking is that it might be cheaper to sell up, take out a £10,000 loan to pay the early repayment charges and the small deficit in equity, and live in a cheap rented house for a 2-3 years, rather than to stay put paying a hefty mortgage and have to get a second car, and have me driving 120 miles a day. That way we could pay off the debt and save for a proper deposit. We have no savings. What do people think? Is this a stupid idea? We are decorating the house to sell as we speak, and I am taking on some audio typing to try to make a couple of thousand pounds before we move. We're trying to cut back on everything we can, and we're trying to think of small moneymaking things we can do on the side (tutoring, selling some of our furniture, etc etc.).

Any help/tips/advice much appreciated!

Thanks.

StuartGMC

Firstly sympathies to you both for the situation but well done on getting that new job in this climate.

Also, you have only had a small reduction in the valuation, does this also reflect the prices being achieved for similar properties? What about the fees associated with the sale; are these still 1-1.5% which you also have to cover for estate agent plus costs for the solicitor?

You will also want to have a bit of latitude in the size of unsecured loan you are taking on in case of any last minute "negotiation" by your buyer meaning accepting a lower sale price.

Regarding the commute, I the same round-trip each day for 18months in the early 1990s but it was about 1hr to work and 1.25-1.5 return unless it was a Friday or accidents etc. I will admit that it was tiring but we had been living for 5 years with weekend commuting. Before rushing into decisions, can you also check the cost for short term lodgings so you can stay say, Mon & Tues evening, home Weds then stay Thurs if your journey time is more than this? Thus you can at least have an arrangement in place irrespective of the position on selling your home, which hopefully will reduce some of the pressure you will both naturally feel.

Do you have a detailed household budget both for now, and to clear the loan plus generate a deposit in the short-term? Whilst it is still guess work, houseprices may start to rise in late 2010 so you would of course want to ensure you buy before they start to accelerate.

So you need to look at the balance in terms of the present house and costs, plus the extra costs associated with the new job.

Then look at the total costs associated with the wish to sell (what interest rates apply to the loan) and possibly an interim period when renting a place too, and the high likelihood you will still need two cars unless OH can be restricted to a commute time (not distance I would suggest) distance from your job?

Overall from your posting, it looks like the simple financial arguments may indicate selling would be the best option but I think you must look very carefully at the full costs and realistic sale price you'll achieve.

Best wishes in resolving this.

garvbuck

Thank you for this post - you confirm my feeling that it's going to be a pain either way. But I'm also sensitive to the fact that my situation is a lot better than many at this time, so I don't want to moan! It's just a tricky decision.

The small reduction is because we live in Cambridge, where prices have held their own more than in other areas. We do have a detailed household budget, but I guess we're going to have to do some hard sums...

StuartGMC

I live not very far away, but out of the city prices have dropped further of course.
Good luck.

Harry_Powell

How long will the commute take? That's the more important thing rather than the distance. I live just outside London and my commute in can take anything upto 90 mins even though the distances are much less than the one you quoted.

I think a regular 1hr commute is acceptable under normal circumstances with a max of 1.5 to 2 hrs in 'worst case scenario' conditions.

I'd certainly consider commuting for at least 12 months before moving, just to make sure that this is the job for you. It could be an expensive mistake to move for a job and then find that the job isn't quite what you'd hoped for or the company makes cutbacks...

Gorgeous_George

Without doing the maths, selling up and renting at the new location seems blindingly obvious.

You could try to negotiate a waiver of the ERC. Keep your cards close to your chest and only tell the lender what you need.

Good luck.

GG

seeff

Few thoughts:

Rather than pay the ERC and selling up maybe you could rent your current house out - and use the income to pay your rent / pay the existing mortgage.

Bear in mind that you'll have to pay estate agent fees, etc when selling. Plus costs like rental deposit and removal fees - these really add up so make sure you're £10k will cover it.

As mentioned in the post above, look for options for the occasional overnight lodging - especially comparing it to the monthly interest on your £10k loan! A tent might be nice and cheap in the summer if you've got showers and stuff at work!

Consider alternative transport - eg half way on train or bus. Commuting in a car can be stressful. Trains and buses aren't cheap but really easy and way more relaxing on long trips.

Definately don't move until you're OH has a new job.

garvbuck

These are all really sensible suggestions - thank you. There's no chance I won't like the new job, or that they'll make cutbacks (I am a postdoc researcher at Cambridge now, and this is a permanent lectureship at the Uni of East Anglia - it's the job I've been working for for the last eight years!). And I don't start until Sep 2010, so we have time for my OH to look for something.

It takes 1hr10 to get to Norwich if all is fine, which is doable I think. Though the road is single carriageway for quite a lot of the way, which is a worry!

Renting out our house is a possibility - thanks. It'll be tricky because it won't nearly cover the cost of the mortgage, but I guess it might cover the cost of our rent in Norwich, and buy us some time so that we can wait until prices go up - however many years that takes!

Thank you so much for your suggestions.

Gorgeous_George

seeff wrote: »

Few thoughts:

Rather than pay the ERC and selling up maybe you could rent your current house out - and use the income to pay your rent / pay the existing mortgage..

... and then sell in a few years when prices have fallen even further.

GG

Harry_Powell

Gorgeous_George wrote: »

... and then sell in a few years when prices have fallen even further.

GG

...or move back in to it if the job doesn't work out, or the OH's new job doesn't work out or they miss the friends and family they have moved away from.

I've known a few people who move for their jobs and then regret it when the job turns out to be a lemon, or they get offered an even better one somewhere else, or their partner and family are relocated and come to resent it.

To be honest, the mistake they made was in buying a house in the first place when their careers were in such a state of flux. My girlfriend and I have rented for a long time, partly because we were waiting for house prices to fall, but mainly because we enjoy the flexibility renting gives to our career mobility. If they do sell up, then I'd suggest they rent for a long time before buying again.

garvbuck

Thanks everyone. Like I said - this is a very established and definite career move for me - as both a PhD student and then as a postdoc on a temporary contract you basically apply and apply and apply for a full-time, permanent contract as a lecturer at a decent university. It's very difficult to get a position in the early stages of your career, and so I am very lucky to have been offered this job. We know Norwich well because we both support the football club, and our families live in Kent. We haven't lived near them since we went to uni nine years ago - and Norwich is much nearer than a lot of the other options we had for universities I might go to. He's a teacher, so if his job doesn't work out, he can apply for different jobs in the same area.

So as much as is possible (and I know there are always risks) this is a permanent move for us.