My MFW journey - advice needed please!!!

Hi all,
I've been lingering on these threads for about a year now and am in a position where I feel advice from all you experts would be most welcome. This is a kind of mixture thread-wise between being a MFW and rental / selling so please bare with me!!

A little bit of background about my situation. Bought a house in 2004 with the help of a housing association who gave me 25% equity in my property on a second charge loan which needs to only be paid back upon sale of the property (or if I choose to pay it off earlier I can). Mortgage was 77,000 but in my bid to become mortgage free over the years it now stands at 12,500 which I've worked so hard to achieve, especially in the last few years. I'm on a SVR of 3.5% with Halifax so can freely make overpayments without penalty. My plan has always been to pay off the housing association but when I saw what was happening to house prices I prioritised the mortgage as I pay the HA at a percentage of the value of the house so this protects me somewhat from any fall in value.

My dilemma now, though, is that it is a one bedroom house and I am expecting a baby (literally any day now) so we can't stay here forever. The plan was to pay the mortgage down entirely by next summer then sell this house to move to somewhere bigger (and start a new MFW quest!) but 1 bed places in this area are not selling unless you take a disproportionate drop in price (i.e drop in value for my house from peak would be about 20 / 25% but a three bed semi - the sort of property we'd be moving to seems to only have dropped by approx 10%).

Therefore I'm wondering whether I'd be MSE-wiser if I stopped overpaying the mortgage and starting building up a savings pot to buy a new property but keep this house and rent it out ( I keep reading that rental yields have increased). Never saw myself as wanting the hassle of being a landlady but equally don't want to lose thousands by selling this house in a bad market.

Or do I carry on into 2011 on my MFW quest, making my last mortgage payment(in approx August if all goes to plan - yeah!!!) - then move onto paying off the housing association and try and sell the house at the end of next year?

Your thoughts and expertise would be most welcome as many of you seem to have so much knowledge and financial savvy!!!

Mummytobe xx

Replies

  • AlessAless Forumite
    127 Posts
    Forumite
    Can you really save enough money for a deposit on a new property without selling your current one? I do not know the values or what you savings are but if you only have a few months to do so it seems unlikely.

    Also can you rent out your property? If the HA own part of it do they have some rules about that sort of thing?

    Final thought, it takes a good few months to buy a property so even if you started the process now you might not be able to move until the summer.
  • museumworkermuseumworker Forumite
    2.2K Posts
    Part of the Furniture Combo Breaker
    Forumite
    First of all - well done on having cleared so much of your mortgage!

    I'm not able to give you much advice specifically as I've never rented out a property. I would check what the restrictions are with the HA, get a rental valuation, and bear in mind the costs of renting - you would have to pay tax on the income, cover any empty periods, and any costs if things need fixing, such as the boiler.

    One option is to stay put for another couple of years. I was in a one bed flat with DD until she was 2. Not ideal, but it means you could pay off your mortgage and save up a substantial sum as a deposit. It also means that if the property market recovers for 1 bed flats you wouldn't lose out too much (although if the HA have most of the equity, they would take the largest hit, so you may not lose that much on it anyway).

    Are the schools good in your area? You may find that you need to move area in a few years anyway.
    Mortgage [STRIKE]16/03/2011: £190K 01/01/2017: £107,729.65 [/STRIKE] 01/07/2017: £95,979.89
    OPs 2011-2016 = £45K 2017 OPs = £9250.20
  • Thanks for such prompt replies!! A bit more info to help the situation - Aless it's true that it will be tricky to save a substantial sum in a few months. Our original plan was to spend most of 2011 paying off the mortgage and housing association so sell up by the end of the year. The HA will let you rent the property but you have to apply for a permission for 6 months only. I think you can then reapply for a further 6 months but I don't think this would be indefinite - so at least a 6 month reprieve would give us enough time to save more in order to pay off the share they own.

    We are lucky to both have good jobs and a combined income of about 90k. I have a reasonably good maternity package and am returning full-time in May so shouldn't take too much of a hit in income over the next few months. Currently we are ploughing approx £3000 a month into paying off mort / paying off debts (OH had some substantial debt at the beginning of the year but with a baby on the way he has been a dedicated MSE convert into getting rid of this - as of the end of the month all his debt is gone -yeah!- therefore he is now freed up to either help with overpayments or to add to savings with me). Therefore, I've calculated we could save approximately £36,000 by the end of 2011 if sensible enough. This sounds like an optimistic figure but we are fortunate that our outgoings are so low with such a small house and mortgage.

    museumworker - I've been reading your thread and hope you enjoy the building-work free house soon...! Thanks for the congrats! I'm actually really proud of how well I've done as the majority of this reduction in the mortgage has happened in the past three years. I've used a combination of stoozing / sensible shopping around / meal planning and a point blank refusal to live beyond my means!! As for schools - when I found out I was pregnant it was the first thing I researched!! We've identified the area we want to move to so this next move would be to get into the catchment area etc. I'm interested that you spent first two years with your DD in a one bed flat as we contemplated this but weren't sure how realistic it will be?? We have thought that we'd need to move after a year as we don't have a garden or any outside space when this little DD to be will need to be running around etc. However, it would help our quest to move without selling this place. Our budget for the next house is approx. £250k so really a deposit of 50K would be needed to reduce mortgage to 80% loan to value (rates above this seem stupidly high at the moment). It's reassuring to know it can be done if that is what we decide... :)

    However, I'm being pulled in the other direction when looking on rightmove at all the lovely houses with such a lot of space (and gardens!) (and spare rooms!) and thinking sod the money saving sensible attitude, just sell up at a loss and move on!!!

    But then on the other hand, I think I've become so addicted to the whole MFW-thing that the thought of losing money when I've worked so hard to get myself into a good position is just soooo difficult to come to terms with.

    What to do?!! :)

    MTB xx
  • That's a purely personal decision, but I would be loathe to throw money away after working so hard, so for me the option would have to be stay where you are for now.
    RosieTiger - Highest £242,000 Feb 2004 :mad:
    Lightbulb Dec 2008 £146,000 by March 2026:eek:
    MFi3T2 and T3 No 28 - Dec 2009 Start Balance £117,000
    Current Position-Fully off set by savings since March 2013
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