Buying or renting-advice pls

Monkeychops_3

Hi all- pls offer some thoughts.

We are a family of four currently living in our first house. We bought at the height of the market in 2006 and bought a 2 bed terrace as our first home. It was 118000 and I borrowed the deposit of 15000 of my parents with the intention of selling the house within a few years and giving dad back the money and 1% of the profit!The mortgage is interest only and I owe them approx 104000.

However since we bought it we have had two children. Our financial situaiton has worsened-we have some debts and I work part time.

I am desperate to move to a bigger house.

I have had a house valuation and one ea would put it on at 124950 and the other said 199950. I spoke to our current lender and they would only offer us a new mortage of 53455.

That would get us a 3 bed house but in the worst area.

We have two loans ending in 2012 and my mortgage comp said that potentially then they would lend us 92000 (based on today's criteria).

When the largest loan finishes in 8 months I am going to pay off some of my debt for six months with the money I was using for the loan. AFter that I have to pay it to my dad to pay off the deposit money (no interest this time!). He has stipulated he wants it back by the time he retires in seven years but doesnt care how (he needs it for his mortgage).

So-I feel we have a few options.

1-stay where we are and continue for as long as we can.
2-wait til loans finish and try to move in 2012
3-try and sell now for asking price and buy a cheaper house in undesirable area (no money to do it up though) but perhaps enabling us to reduce outgoings.
4-try and sell now for asking price-pay dad back and rent (unlikely will ever have a deposit again however). This will reduce our outgoings by approx 300 a month.

I have tried to book an app with a financial advisor but he did not return my call, presumably off on his xmas hols!

Thanks for reading any any advice offered.

Hammyman

Option 4. Buying now is just daft with the state of the economy, interest rates likely to go up, job security going down. With renting someone else picks up the bills for repairs and should you end up without a job some or all of the rent gets paid. If the house proves to be unsuitable, your family expands or shrinks, you find work elsewhere etc you just move.

Monkeychops_3

Thank you Hammyman. Very good reasoning.

BitterAndTwisted

You're on an interest only mortgage so you're not actually buying anything, just paying rent to the lender.

Sell up and rent. I can't see what other options there are on a part-time wage.

Monkeychops_3

Thanks Bitterandtwisted-I do agree about the interest only bit. Sorry I was not clear-my husband works full time and I part time. Jointly we don't earn very much.

BitterAndTwisted

As long as you can sell up, pay off the mortgage and pay back the lent deposit, you should end up with some cash in the bank to put towards a decent-sized rental, so it won't be that bad. Perhaps some of the funds could be used to work towards being debt-free.

hazyjo

Trying not to sound harsh, but there were talks of crashes even in 2006 - I bought in that year myself and am selling right now for the exact figure I paid back then (to the penny). I knew there were no guarantees my house would make me money and didn't expect it. If you had to borrow the deposit, it's like asking for 100% mortgage (without some of the interest). Not sure if the bank wouldn't lend you 100% (should've set alarm bells ringing anyway), or whether you didn't have any savings (again, always hard to take on financial commitments if you've never managed to save - although I'm a fine one to talk!), or whether your parents had always promised it... I don't mean to sound preachy, and I know I could bang on about hindsight being a wonderful gift, but the market's continued to go down from about 2007... if you chose to have 2 children between 2006-2010 (presuming they're not twins), surely you knew you'd want a bigger house and that your income would be going down and your expenditure going up - all in a falling market. I agree with the above that if you can't afford to stay put, get out now and rent. Prices are still going down - gawd knows how long for - so you could end up taking a huge hit. We can all speculate on prices until the cows come home and I have my own opinions which will count for naff all, but while we're still in a falling market, if you can't afford to stay put and repay your parents, I don't really see how you have much choice. If you think you can afford to stay there for the forseeable future and pay your parents back, stay put. I definitely wouldn't buy elsewhere - especially to a worse area as you could end up in a far worse situation financially in the future if you need to sell, plus it's damn expensive to move. No reason why the kids couldn't share for another few years. Friends of mine have currently had to downsize to a one bed flat from a 3 bed house (one rental to another) - with a teenage son. Parents are on a sofabed in the lounge while the son has his own room. Not ideal, but sometimes circumstance dictates our choices. If you chose to have kids, you surely knew they'd have to be such compromises... You're lucky in a lot of respects. A lot of people would like to have 2 kids, their own home, a full time job for one and part time job for the other. Hope you don't have to lose your home, but, if you do, maybe rent a 2 bed place for a while, clear your debts, and save some of the money you would've been spending on renting a 3 bed place for a couple of years.

Good luck with whatever happens.

Jx

missile

I would suggest you need to do your sums. How much do you pay for mortgage? How much would you pay to rent a similar property? How much to rent property you want? 4 kids are expensive and how much can you afford to pay for your home.

Getting out of debt should be you priority.