What does having a house (to live in) actually 'cost'?

dopester

carolt wrote: »

But IHT levels are expected to rise under the Tories, thus removing this need.

Re the baby-boomers not trading, up, a recent article I read (can't find the link now) pointed out that large numbers of baby boomers were going to need to downsize to fund their pensions - a long way off from trading up.

Yes - exactly. Many baby-boomers will have been more inclined to the advantages of taking on further debt during the boom, to trade up to houses which meet their likings.. with the extra space, the gardens and what have you.

Especially when houses are gaining in value 10%+ a year and people have a mindset where they expect such gains to be permanent and to continue.

Now many a baby-boomer (including those who don't have much by way of debt but have much of their wealth in the market value homes) will see advantages to trading down.

aging homeowners, who are depending on their homes to provide retirement security, will try to sell.

Now with the crunch, there is more caution from those looking to trade up, as a further market fall on a more expensive property is financially a bigger hit. The caution in that respect is very evident in this thread.

To move from a home where you have little or no mortgage debt, to buy a finer home but take on a lot of mortgage debt with it... and possibly see further falls eroding your equity. It gives you a lot to be cautious about trading-up in my opinion.

if a growing number of middle-class boomers elect to remain in housing they consider merely adequate, rather than risk their equity in larger luxury homes."

carolt wrote: »

But IHT levels are expected to rise under the Tories, thus removing this need.

We'll see if that comes to pass. Whether it does or not, I don't see such a move supporting the value of homes at the upper-end anyway. Those who need to sell will sell, and accept whatever lower prices the market offers, setting new market value for homes in the upper end.

I'll admit in late 2009 there has probably been a big drop in the number of people who would previously have been hit by IHT in 2007. The HPI boom rocketed many past the IHT threshold.

Also think of many a baby-boomer who had shares in RBS or HBOS... long term gains then rapid market value falls. (I know quite a few hard-hit pensioners there). Fewer over the current IHT threshold. The shakeout and destruction of wealth in many markets, including the housing market - with the possibility of much more volatility to come/

dopester

michaels wrote: »

I am thinking of investing another 200k in in my own house (by moving) and am trying to work out what it will cost me per month to see if it is worth it - ie should I stay in the current house and have lots more disposable income or will I have a better quality of life by having a bigger place but more income

So what's up then? After contemplating it for a couple of weeks, I've finally decided to bump up this thread.

It's not intended to be a nasty bump against the OP - although I sure felt some frustration at the time of the original thread was in play - but maybe serve as a general warning to others, or subject to further discussion if you think I'm wrong.

Improved lifestyle? Invest another £200K?

I wish you well Michaels, but you could have chosen to wait. Not upsize and take on a lot more mortgage debt, or putting your long-term savings on the line, just before a General Election, as Labour's paradigm is disintegrating all around us. Just before years of major cuts in public sector spending, and also tough times for many private sector businesses. Events still have a long way to run.

It guts me that so soon after purchase you are under the shadow of redundancy danger, trying to work out whether to pay down mortgage -vs- benefit entitlements / tax breaks. Calculating the prospects for getting new employment in a well paying middle-management position. I hope you can escape the cuts, but I do think you could have avoided what might be a lot of unnecessary stress in having pursued the improved lifestyle choice.

I really don't see why the rest of us should be paying for such improved lifestyle choices if applying for mortgage rescue type benefits towards your mortgage ends up the way it goes. Even if you have been sensible to keep enough in savings to pay off the mortgage debt, it's still an asset subject to significant value change in the market circumstances, imo.

Nothing personal Michaels, but I'm not bunkered down at my parents' home for no reason. It's very far away from being an adequate lifestyle, let alone some highly improved lifestyle I "deserve". You can be certain I want the adequate lifestyle (a home), and have the savings to make that so (with long-term savings to boot), but why overpay now, in this volatile and artificial market? When paradigm changing events are only just turning and playing out.

carolt wrote: »

To me, an extra 2 beds, bigger garden and off-street parking should not cost £1180/month. I'd suggest you're being robbed, given you can rent a whole house with big garden and 3+ beds and off-street parking for that or less. In your area.

Whether you think it's worth it to me has as much to do with how secure you think your income will be over that time, how confident you are house prices will stay at current levels or above, in case you need to sell promptly, and how much that extra £1180/month is relative to your income.

To me, it's a lot. So I wouldn't consider it. If it's small fry to you, then go ahead.

Actually, thiking about it, have a close friend who underwent exactly your dilemma. They were living in a slightly manky 3 bed house, worth about 250K, sufficient for them and 2 kids. Thet decided to trade up, as had more or less paid off the old mortgage. Bought for 440K in Dec 2007 (I did try to warn her...), 5 bed house with massive outbuilding, virtually another house in the garden, in slightly better area. Personally, I think it was vastly overpriced even when they bought it - despite extensions, it still cost nearly 200K more than the previous ceiling price for the street. :eek: No idea what it's worth now - but less. Husband's self-employed and has been undergoing a rocky spell. So lots of stress for my friend.

On the positive side, she gets to live in a much nicer 5 bed house, kids have an art room, she has an office, husband has a music studio and office in the garden.

So, at least she has a nicer house to have sleepless nights in.

If husband can keep earning enough, their gamble will have paid off - eventually. I don't think about the alternatives - she's a close friend.

Primrose wrote: »

Do you want to still be able to sleep at night if the going gets tough?
If you do, and don't want to spent the rest of your life looking over your shoulder, worrying what you'll do if the financial axe drops, settle for what you've got.

Harry_Powell

Excellent gloat at someone else's misfortune there, dopester!!

Some of us refuse to throw ourselves on the charity of our parents when times get hard. Each to their own though.

dopester

Harry_Powell wrote: »

Excellent gloat at someone else's misfortune there, dopester!!

Some of us refuse to throw ourselves on the charity of our parents when times get hard. Each to their own though.

There is no 'misfortune' here, as I see it. Major decisions made against a background of many obvious negative changes for the economy to come. I'm sure the OP considered them. The risks were put to them a few times in the thread before action was taken to proceed. No misfortune. It looks like they have savings so at least they can be cushioned from the impact of their decision to upsize.

Some of us have refused to put ourselves in positions of throwing ourselves on the charity of other taxpayers with mortgage rescue schemes, and other benefits it's suddenly "unfair" that others qualify for, when the party music stops.

That is what family and friends are for; caring and looking out for one another. Not encouraging them to go from a comfortable position to taking a very dangerous position in a very unstable market. Where serious risks exist which can easily impact badly on you for many years to come.

Maybe we would have joined the party much sooner, if we'd known the greed of their own involvement in green-lighting these schemes would be strengthened by the urge to preserve the value of their own homes, pushed to crazy highs in the credit boom. Forget fair markets, where unsustainable positions are shaken out, and new entrants allowed in... rig it to hell.

Not to mention the market cheating with hundreds of billions of pounds in QE and ultra low interest rates to try and delay the effects of horrific mistakes made by borrowers and "end of boom and bust believers" at the expense of those saving towards a home at realistic market value. Hopeless actions which make the eventual crash even worse imo.

Harry_Powell

Some of us are not so risk adverse that we hide away from the world in our mother's back bedrooms. While micheals may have been too adventurous, do you not see that you're just as bad but on the opposite pole and that if micheals deserves derision, so do you, and in equal measure?

PasturesNew

*votes 1 for back bedrooms ...
I'm hiding out in one right now, while I wait for ... a job. Without one I can't live anywhere else as I've no idea where one might be, meaning I can't rent OR buy until I know what I'm doing. Current situation is: 1 job app in, if I hear nothing then I'll give business link a shout and see if I can start my own business .... even though I don't think I have the people skills (negotiation, assertiveness) to be able to deal with clients. My main issue is: [1] asking for a fortune, even though I'm worth it [2] responding and resolving issues when they're being 4rses and moved goalposts or are just ranting.

michaels

Hi

Don't worry about me - I am really pleased I moved - each day my kids play in the garden and are happy alone makes it worth having moved. The old place had 2 beds and a loft room - I think inadequate for two girls and a boy (happy for the girls to share but how big could my son have got and still shard our room?

If I get made redundant I reckon I have enough savings to tide me over for 300 months if I don't get any other income coming in and of course after about 280 months my savings will be small enough to qualify for benefits.

In life I tend to be overly conservative - I can not tell you how pleased I am that I decided to move on this occasion - I hope your lifestyle works out for you as well as mine has for me.

Oh yes - I forget the 200k would be total investment after I extend - I carefully (back in character) chose a property with a smaller up front cost (only 75k more than I sold my old house for) so that I could be flexible over when I extended it to be the house I really want.

neverdespairgirl

silvercar wrote: »

For a lot of people the trading down is a possible option in the future, if when the time comes, finances mean you have no need to trade down, a lot of people won't.

It may be a wish to have a big house when the children will enjoy their own bedrooms and the use of a large garden. Once they have flown the nest their may be a less pressing desire to have room for the grandchildren to come and stay and enjoy the garden, but the urgency has gone. If you need the money/ can't afford the upkeep then trading down becomes attractive. If you are well off by that time, you may prefer to stay in your home - having got used to his and her studies, the cinema room, art room and gym, or whatever else you rename bedrooms 2 to X.

My parents did that - traded up to a 6 bed, 4 bath, 4 reception room detached house when their children were 9 to 16 (4 of us).

17 years later, they live there with my mid-20s brother, as the older 3 have all left home. (and 2 dogs, 2 cats). They've been talking vaguely of selling and buying something smaller, for about 5 years. But it's all vague talk, to far.

I dare say they will, sooner or later. But they like the house, position, neighbours, garden, etc

Harry_Powell

michaels wrote: »

Hi

Don't worry about me - I am really pleased I moved - each day my kids play in the garden and are happy alone makes it worth having moved. The old place had 2 beds and a loft room - I think inadequate for two girls and a boy (happy for the girls to share but how big could my son have got and still shard our room?

If I get made redundant I reckon I have enough savings to tide me over for 300 months if I don't get any other income coming in and of course after about 280 months my savings will be small enough to qualify for benefits.

In life I tend to be overly conservative - I can not tell you how pleased I am that I decided to move on this occasion - I hope your lifestyle works out for you as well as mine has for me.

Oh yes - I forget the 200k would be total investment after I extend - I carefully (back in character) chose a property with a smaller up front cost (only 75k more than I sold my old house for) so that I could be flexible over when I extended it to be the house I really want.

Great to hear it. I think what the ScareBears forget is that the important thing is not the size of the mortgage, but the ability to pay it. You could have a £500k mortgage and £200k in investments and you'd be better off than someone with a £50k mortgage and zero savings when a job loss occurs.

Odd though to sit in judgement on someone who seems to have a lovely house, lifestyle and happy family when you're sat loney, single and depressed in your mum's back bedroom. Does Dopester not see that most people on here would choose your life over his, regardless of his perceived financial security.

Life is a rollercoaster. Without the ups and downs, it's just a train ride to the grave.

michaels

Two more comments:

Whilst I can respect your desire not to take money from the taxpayer my take on this is that I have made lots more effort to pay in to the system than many who do receive benefits and month in and month out I do pay huge amounts to support others. Given that I am not able to change the system to be 'fairer' then I should try to benefit from the system as much as possible within the rules just as I try to get the best deal on my mortgage, open bank accounts to grab switching bonuses, matched bet etc.

The property market has always been volatile. I theory it would make sense for every property owner to also hedge property values as they would with any other major financial transaction, however there is no market for such hedging products - why? I think because people always will want a house to live in so hedging would only make sense to those looking to move in to or out of the market - so I would suggest that future first time buyers like you should actually be using options to hedge their exposure to rising house prices otherwise you are merely taking a position on the market (short in your case). Efficient market theory would suggest that taking any position against a market is a 'bet' in that if information was available to accurately predict the market movement then the market would adjust. So in terms of financial recklessness it seems I am not taking a position on the housing market as I am not planning on either investing more or removing money from the market whereas you are taking a large unhedged position.

Apologies if this is not explained too well - if it doesn't make sense please ask me (or better Generali) to explain what I am on about.

dopester wrote: »

I really don't see why the rest of us should be paying for such improved lifestyle choices if applying for mortgage rescue type benefits towards your mortgage ends up the way it goes.

but why overpay now, in this volatile and artificial market? When paradigm changing events are only just turning and playing out.