Bought at height of market - wanting to move on

Jen2b13

Hi
My husband and I bought at the height of the housing market in 2007. We have a 2 bed flat for which we paid 96,000 - bought with a 100% mortgage. We have a good mortgage deal and our payments are manageable at the moment. We have paid off about 10k.

We now have a little boy and it is my dream to have a 3 bed family home.

We have been told previously that we would be able to get a mortgage for up to 120,000. (although we admittedly do need to give ourselves time to save up a good lump sum for a decent deposit)

We had our flat up for sale in 2009 for a few months while i was pregnant but had very little interest and that does worry me.

We have thought about renting it out but admittedly I'm not keen on taking the risk of having to pay 2 mortgages if we are unable to get a tenant or have gaps between tenants. Also our current mortgage lender no longer has a banking licence so if we changed to a buy to let mortgage I believe we would need a large deposit to remortgage (am i right?) plus our mortgage rate on the flat would likely go up considerably.

I have even considered having the loft converted in the short to medium term to make the flat bigger, although i would prefer to move if possible. We were quoted about £18,000 for this.

My mind is tired with constantly thinking about what our next move should be... feel a bit stuck. The positives are we have a nice flat and a roof over our heads,the area is nice enough but we dream about having another child and having a 'proper' family home.

What would you money experts suggest? sit tight and see what happens over the next few years - maybe look to get a conversion in this case? or try and sell with the small bit of equity we have...? Any suggestions welcome.

myhouse_2

Sit tight, save a deposit and wait for the 3-bed house to become affordable (via price drops or your deposit increase).
If you rent it out, you will definitely have times where you are getting no rent and would need to pay to maintain 2 houses. Don't consider this unless you genuinely can afford this comfortably.

Babymerlin

hey there

i would sit tight for the moment and count your lucky stars for the lovely little boy you have....i know for one that i would give up my house for a cardboard box if it ment i would be guarenteed a child.

but, on the other hand you could put it up for sale and see how it goes.....you dont have to accept an offer if its not right for you...what is the harm.

and i like you brought at the height of market and now cant sell - so i know how you feel. big hugs. x

poppysarah

You're right to be concerned. If you got no interest it meant the price is wrong perhaps.

Unless your flat is really tiny you could probably have two kids sharing a room... Perhaps you have to decide what you want most - a 3 bed house or another child.

Kids do need to spend time outside and a house makes it much easier.

Could you save more for a year and then see where things are?

If you want to take a gamble on house prices dropping further (my money is on them doing this but sadly the govts keep inventing stupid ways of propping up an overinflated market) then you could lower your price perhaps to sell now and rent for a while.
But unless the figures really stack up you may as well stay where you are and keep paying off the mortgage as much as possible.

Do a SOA and see how much you could stop wasting and save it instead.

botchjob

I'd agree with the others that it doesn't sound like you're in a position yet to move up the ladder. Sit tight and try to get yourself into a better position over the next few years.

Worth thinking about the loft conversion. They usually at least pay for themselves, would give you more space, and should make the flat more sellable when the time comes. Worth talking to your previous agent to try to gauge how much value it might put on.

pinkteapot

Renting it out could prove costly. It may be possible to keep your normal residential mortgage on it by getting 'consent to let' from the lender. However, they will normally only grant this for 1-2 years max.

After that, you would have to switch to a BTL mortgage. For these, you normally need at least 30% equity in the property and for the monthly rent paid by the tenant to equal at least 130% (I believe) of the mortgage payment (i.e. if the repayment is £500/month it must rent out for at least £650/month). Therefore, you would need to put a large lump sum into the property when switching to a BTL mortgage; enough to bring your LTV down to 70% and possibly more if local rents aren't very high.

If you have a BTL mortgage, you should be able to also get a residential mortgage for your new home. However, if you keep your flat with a residential mortgage and consent to let, you will struggle to get a second residential mortgage.

I bought in 2006 for £115k with a 100% mortgage and sold in negative equity in 2009. Similar to you - the payments were easily affordable but we wanted a bigger place (I'd bought my flat while single and was then with my now husband). I would have had to plough about £25k into that flat to make it into a rental property with a BTL mortgage and I couldn't see any prospect of the value returning to it. It would have had to be a long-term plan; renting it out for many years to come. I decided I couldn't be bothered with it and just cut my losses.

pixiepie99

Doesn't sound to me like you actually have any equity so looks like you'll have to sit tight for a while and start saving like mad. Not good news but there are lots of us in the same boat.