WWYD re. moving house - rent or buy? (long)

ElleWoods

I’m currently in a bit of a quandary. My house is on the market as I want to move areas so I’m nearer to better schools as the catchment school is awful, and also want to be closer to my parents who help with childcare twice a week (I’m a single parent working full time). I also prefer the area I want to move to and feel we’d have better quality of life there. I have to apply for DS’s primary school this Autumn even though he won’t start until Jan 2011, so I feel like time isn’t on my side.
My mortgage is just under 90k and house is on the market for £105k so I don’t have much equity, plus I don’t think it will sell for that due to market forces and the fact that it’s been on the market for a month with absolutely no interest whatsoever (and a crap agent who’s done nothing so far, I hasten to add). In reality I think I’d be lucky to get 95-97k.
As I don’t have much equity my initial thought was to sell up, pay off the mortgage and EA’s fees etc, then rent, and as such I’m marketing my house as chain free. I like the idea of not having a mortgage in case a/ I lose my job and b/ interest rates start to go up and I end up struggling with mort repayments. However, there’s not a lot to rent in the area I like, anything that comes up is snapped up especially if it’s reasonably priced, plus rents are roughly the same as I pay for my mortgage each month. Then I also have to factor in things like the deposit, agency fees (both of which I’d need to pay out of the equity) and the fact that I’d never feel like it was ‘mine’ and probably wouldn’t be as relaxed living there iyswim. The other issue which is bothering me is that on my salary there’s no way I’d ever get back onto the housing market again, as I don’t have enough money spare at the end of the month to seriously save for a deposit.
Due to the lack of equity I thought I’d never be able to buy anything in the area I like and tbh if I stick strictly to that area then I can’t – the cheapest terraces there are going for £100k+. However, there are some other properties in neighbouring areas that are going really cheap. Now I have to say there is a reason for this – they are ex council properties, some are flats, which isn’t ideal with a toddler and a cat, and the areas aren’t the greatest. However, in my tiny mind I’m thinking that if I buy something much cheaper (these are on sale anything from 50-95k), do it up over the next few years, then sell at a profit, I’ll then be able to afford a little terrace in my preferred area.
So I don’t know what to do now. In short my options are as follows:
1. Sell mine then rent something in preferred area, if I can find anything, at same cost as monthly mortgage.
2. Sell mine then buy a much cheaper property, do it up with intention to move on in 2-3 years time.
3. Stay where I am and live with the school issue (although this doesn’t rest easy with me as like all parents, I want J to go to a good school).
Sorry this has turned out so long, but just after people’s thoughts really.
Thanks,
CC x

lovethymini

We're in the same boat as you!

I think gut instincts and research are really key here. Firstly though, don't let any estate agents bully you into buying something you're not 100% with (I'm saying that because this is what we're going through at the mo)

I think if I was you, I'd try renting initially for 6 months, then see how you feel after that.
Don't forget, renting is a set monthly amount, but paying a mortgage will be accompanied with the costs of maintaining your property such as boiler servicing or replacing. Then there's purchasing costs etc etc

We're also moving closer to family and better schools. We can't find our forever house, so considered an "interim" property. At first we thought we'd rent, then we realised that if we rented for more than a year it was cheaper to buy an interim property, then we did a spreadsheet and worked out that if the interim property went down in value by just 6% in that year,we'd lose lots of money, so we're back to the renting option.

Such a dilemma, not helped by the vendor's EA who's getting stressy because the surveyor downvalued the house by 5%. AArrgghh

Sorry, I think I've added to the confusion

PS lovely house!

snowjoe

I wouldnt do the investment option. Its not that sort of market at the moment. It would be too greater risk. Now is not the time to buy somewhere with the hope that doing it up and selling it on will earn you money. I think you have to be looking to stay in the home for roughly 5 years in order for it to pay off.

ElleWoods

Lovethymini - Great name, lol! The thing is, if I go into rented I'll not be able to get on the property market again for the forseeable future, as I don't earn enough to enable me to save for a deposit. So whatever decision I make when this house sells has to be the right one, as it will determine my future property-wise. In other words, if I choose to rent, I will most likely be renting for the rest of my life, bar a lottery win or other windfall.

Snowjoe - thanks for the input, you could be right. However, some flats I've seen are on at 50k but knackered, and other nicer ones are on at 95k, so theoretically I could add value by doing something up. Just depends on what prices do overall over the next few years though I guess.

lovethymini

Thanks !

Okay, two questions then -

only 1 in 5 mortgage applications are currently being approved (according to reports) - are you confident you could fund another purchase?

Also - don't lose hope - don't you think houses will come down again in the near future? This will surely enable you to buy again... with mortgage funding stalling and unemployment rising, not to mention the current average house price is still high... do you know what's happening to the market in the area you're looking to move to?

I've been using property bee to monitor the market which is really useful, except I think the Estate Agents are cottoning onto it now.

mlz1413

Option 2 without the move.

Aim to buy something cheap, do it up to the way you like it and stay there. Treat it like a home and not something that should pay you a return for a bit of decorating.

snowjoe

Cuba_Cat wrote: »

Snowjoe - thanks for the input, you could be right. However, some flats I've seen are on at 50k but knackered, and other nicer ones are on at 95k, so theoretically I could add value by doing something up. Just depends on what prices do overall over the next few years though I guess.

As much as people think they do noone knows where the market will really go. I would just be cautious as I usually am. If you purchase a flat for 50k do it up at a cost of 20-25k, also assuming it is possible to live in it whilst you are doing it up then. However worst case is that prices have come down further and I fear for things like flats which have a high amount of BTL owners, Once interest rates raise and even I know the only way is up for them some BTLers mortgages will become to expensive and the market will be flooded with property. Its possible that after all your hard work and inconvenience you are no better off than before!

Is it possible to move school in a few years time?

ElleWoods

Lovethymini - I guess in a few years time mortgage lenders might have relaxed a bit more and it may enable me to get a 95% mortgage. I suppose there is hope!

mlz1413 - I wouldn't do that as the cheaper properties are not somewhere I'd want to live long term, mainly as I don't want to be in a tiny flat as my son grows up - he needs space and preferably a garden. Perhaps no2 isn't such a contender after all...

mlz1413

No option 2 wouldn't work if it's exactly the same situation as you are in just cheaper.

Ask you mortgage company if they would let you move the negative equity - they probably won't but if you have always paid on time and can show you are not increasing your debts just moving area then its worth asking.

If you don't mind the area you live in just do not want the schooling on offer have a look at the costs of private schooling, it may not be as expensive as you think and might save you from feeling trapped if you rent.

Fire_Fox

Can you let your house and the rent somewhere else in the catchment area?