Thinking of selling home to go into renting...

SnowBunny

Hi everyone,

I've been visiting these forums for a while. Thought it was about time I joined and said hello.

Me and my husband have been on the housing ladder since June 2006. The value of our property has only increased a little - we're very lucky in that we've avoided negative equity.

Trouble is - we bought our first home in an area of the country that we don't like. Hate in fact. We chose the property over location and although we don't think it was a mistake because it suited our needs at the time.. and location wasn't as important back then. But location has suddenly become crucial and we're keen to move asap.

However, we have relatively no capital to play with. And to move to the area we like, we'll need a much bigger deposit.

I've just got a much better job.. So has hubby - we're going to be cash rich in 2010. But it'll take us about 18 months to save the big deposit we plan to accumulate.

The specific area that we want to move to is lovely. Great schools, great amenities.. closer to family and friends. But we don't know the area very well. We're worried about our next house move because we don't want to make the same mistake again.

So my question is... Is it quite normal to step off the housing ladder and rent for a while? We're on an interest-only mortgage at the moment anyway so aren't actually paying anything back.

We'd love to rent a home in the area we love before we buy anything. Plus it'll be a second chance to buy our first home properly. I.e. By putting down a much bigger deposit and taking out a repayment plan.

The alternative is to stay put in our current home until we've got the money to move. However, I'm worried that might be another three years. The thought of being here that long depresses me.

Obviously, I'm aware our emotions are at play here. I guess I'm just keen to know what our options are. And to have other points of view.

It'd be especially interesting to hear from others in a similar boat, who've done what we plan to do.. or who just rent and have never bought a home. Sometimes I wonder if being a homeowner is all it's cracked up to be... Don't get me wrong.. I do want my own bricks and mortar.

Just not where we are now. :rolleyes:

Fire_Fox

There isn't much of a ladder for your to step off at the moment anyway! You won't get another mortgage until you have sufficient deposit, and you will need to factor in the costs of buying and selling (estate agents, solicitors, removals), and will usually need to be out of your probationary period at your new job.

Why don't you work out a really austere budget (MFW or DFW boards can help) and save every spare penny for the next few months? Weezl74's diaries are inspirational, as is the 'Live on £4k for a Year' thread. If you have a house can you take in a lodger for additional tax-free income? Sell one car? Go vegetarian?

nembot

I was in a similar predicament a year ago, but ended up renting my house so I could rent somewhere closer to work.

In 12 months (touch wood) had no issues with my tenants and the quality of life moving to the country is just great.

SnowBunny

Well... work wise... I actually run my own business. But I hate telling people that because it sounds like I'm a show off. When I say I've got a new job, I mean I've won lots of new clients on 12 month contracts.

Been slogging my guts off for two years and it's finally starting to be a success.

As for hubby - he runs his own business too and it's going exceedingly well.

Money wise - we've struggled for years... Because of me leaving full time employment with a health problem.. three years ago... We're just starting to get back to normal and I suppose that's why I'm keen to move. Whilst we can.

I definitely think staying where we are for now is a wise option. And saving is key. As we've never done it before. Never had the spare money. I think we'll wait for six months and see where we are.

And selling one car is a great idea. I actually now work from home so there's no need for me to have a car. We can share one between us for now.

As for renting out this house and renting somewhere else. I never thought of that. But I just want rid... This house is a large three bed semi... worth £156,000. It's not in a particularly rough area. It's quite nice here. It's just not very affluent and the schools are not great.

The area we want to move to has just loads more going on.. Nice pubs, restaurants, coffee shops, festivals,... It'd just be so nice to move and finally live somewhere that's nice. :T

marcg

I'm surprised no-one has dragged you into the market going up/down argument yet.

In summary, you need to consider if you think the market is going to go up or down.

If you think the market is going to go up then you would be better off to upsize now since a 10% (say) increase in value will mean a 10% increase in the cost to move.
ie House A worth £100k today and house B worth £120k: cost to move £20k today
House A worth £100+10%=£110k tomorrow and house B worth £132k: cost to move £22k tomorrow

If you think the market will go down however, it makes more sense to move tomorrow.

The other thing to consider in the meantime are the costs to move and rent rather than buy - if you keep the first house to rent out you will need permission to let from the mortgage company (which will cost you more than you are paying at the moment), then you will need all the landlord-type stuff: energy performance certificates, gas safety certificates, insurance, money for repairs etc etc. Not worth it if you think the market is going to move up.

SnowBunny

Thanks for this Marc. It's definitely something we've thought about.

I think the main issue I was worried about was stepping off the ladder. Because no one knows what house prices are going to do.

Of course, there are always costs involved. And whatever we choose to do - it might mean we lose out in some way.

However, sitting tight for now - with a plan to save as much as possible by June 2010.. is kind of what we always planned to do.

Another option is to just visit the area as much as possible over the next six months to get a better idea on whether we want to move there. Perhaps buying another house would be a wiser move... You're never completely stuck anywhere really are you?

BitterAndTwisted

In my opinion, you're not actually on any "housing ladder" with an interest-only mortgage, you're just renting from the bank instead. Sell the house and rent in the area you want to buy in so you won't be in danger of making the same mistake twice, then save like demons for a decent deposit and a repayment mortgage

SnowBunny

Well exactly.. we always wanted to get into the repayment side of things. But one thing happens after another. Circumstances didn't change.

We were kind of relying on house prices rises. Like everyone else I suppose. In six months time, we'll be able to start the repayment option but why bother when we don't even want to live here.

I think realistically we'll have quite a bit saved by June. Then if we rent for a year, we'll have plenty more and be in stronger position to buy! And buy the house we want. I want at least £35,000 saved in 18 months time. I reckon we can do it.. :T

kinglewis

I have sold my property and am currently renting whilst researching the housing market and saving like mad for a bigger desposit.

The renting is cheaper and in a better area and I don't have to worry about things going wrong/decorating the property.

As the current housing market isn't moving much either way.. I'd say go for it. Sell up and rent for a bit. Lifes too short to worry about what 'might' happen.

Good luck!

Spuddle

Me and my OH planned to sell the house and rent - we were then advised to go BR and do a VS on the house. OH was in that bad debts he couldnt work out of and was having to pay different creditors on different months because they wouldnt calculate them lower.

House went back to northern rock, and we started renting a much bigger and far far better house for just £110 more. BEST decision ever!

Gwhiz

Just do it. It makes no sense being somewhere where you don't want to be and, more importantly, don't have to be.

Life is only full of regrets for the things you did not do, not those things you tried and did do.

Sounds like selling and renting is the ONLY sensible solution for you.