Morgage to the hilt or get off the ladder?

cheers_drive

Some background first:
I bought a house with my ex partner in April 2008 and soon after we split amicably. She moved out and continued to pay a 1/4 of the mortgage and paid the rest with the help of a lodger.
My new partner has now moved in and the lodger has gone, it's all great at the moment put for 14 months I've had my head in the sand and now I need to work out whether a) to stretch myself to the limit and take over the mortgage (the deposit was all mine and it has been valued at the same as when it was purchased), or b) to sell the house and rent for a year or so whilst trying to save.

My heart says a) because it's a great house, selling would also incur more fees and hassle. The bank is also willing to let me keep the same variable interest rate which is much lower than rates being offered with new mortgages especially as there is only 10% equity in the house.

The head says b) as to take over the mortgage my parents would have to be guarantors (i'm not ready to buy with my new partner), and at 33 years old I really would like to be independent of them. My biggest worry though is the interest rates; currently the mortgage is £1010pm which is affordable but at 7%+ I would be in trouble. There is also lots of talk about a double dip in the housing market so being out of it for a year or two may be a good thing?

I'm not expecting an answer really as who knows what the hell's happening to the economy and housing market at the moment but all the options and possibilties are clogging my head up and I can't decide what to do!

Fire_Fox

Do you have a written agreement that the deposit is yours? Are your tenants in common or joint owner with your ex? What arrangements have been made for if either of you were to die unexpectedly?

teabelly

The last thing I read about interest rates was that they were going to remain low until 2014. Renting is money down the drain. Mortgages are also much harder to get hold of than they were so you could find when you want to buy again you can't. Unless the rent is going to be much, much less than the mortgage then you may not be able to save anything. If you've paid out money on fees to sell you'll have to cough them up again to buy again. Seems a waste.

If you find it a struggle would you have room for a lodger again?

In your shoes I'd stay put. Accept your parents as a guarantor and then look at earning more money so you could take them off as guarantors as soon as possible and to build up a cushion of money in case something unexpected happened.

BitterAndTwisted

Being mortgaged up to the hilt is all fine and dandy until interest-rates rise, which they surely must eventually, or until you lose your job and can't find another on the same pay-scale. Then you will be in the mire. Unless you charge your new partner a market-rent so they do not and cannot ever have a claim on your property and you stash that money away for one of the aforesaid eventualities, so you have breathing-space to make up your mind about what your options are at a later date.

OzzMosiz_2

teabelly wrote: »

The last thing I read about interest rates was that they were going to remain low until 2014. Renting is money down the drain.

I hate this saying. Renting is no more money down the drain than paying £800 interest to the bank and only £200 on paying off the actual house cost.

If you could rent the same type of house (or equivilant) for less than £800 then you can save the rest and build up good savings. Yes, over time the interest payment on the mortgage goes down, but it takes many years (more than 13 years on 25 year mortgage) before the interest and repayment part are level!

poppy10_2

teabelly wrote: »

The last thing I read about interest rates was that they were going to remain low until 2014.

O RLY???

cheers_drive

Do you have a written agreement that the deposit is yours? Are your tenants in common or joint owner with your ex? What arrangements have been made for if either of you were to die unexpectedly?

It's a 50/50 Tenants in common agreement because although I put down all of the deposit my ex was supposed to overpay the mortgage; we split up before she could start doing that and in fact she has only payed 25% since she moved out. I was happy with this agreement and we are on good terms and cannot see the being any problems in the future. The only thing she is worried about is owing me money if we sell and I don't get the whole deposit back. We have life and critical illness cover.

Thanks for your replied the differing answers pretty much reflect what's been going trough my head.

eamon

You would probably find selling your house difficult i.e. there are fewer buyers/mortgages available. Hence taking a long time (many months) in the meantime you are still paying the mortgage anyway. If you are currently single and have no dependents why do you pay life assurance and have critical illness cover. A more suitable policy would surely be redundancy & illness. It may be possible that the savings made from changing your insurance needs may be all you need to provide funds if interest rates rise. You really need to seek the advice of financial advisors. Check out Martins guides as well.