To sell or not to sell - Opinions & knowledge wanted......

TheSaint_UK

Hi all, new to this so be gentle.... Here goes - I would be very interested on your opinions on my situation

My partner and I bought our house for £162,500 five years ago. As part of the mortgage with NR, we also got a loan for £30K..:(... yes I know!!!! This was to cover some previous debt that we had and also to enable us to stump up a deposit for the house. We now have a total outstanding of £187,700. Approx 1 year ago, we had our first child and would love to upsize if possible.

We would both love to have another child soon and would definately need to move for this as we only have a very small 2 bedroom back to back house (prices in the South-East for you!). We are begining to feel unhappy in our current house as we realise it is holding us back from our plans. Little things effect us such as never having friends round for dinner because the house is not big enough. Sound travels really badly and so most evenings we spend with the tele turned right down, pratically whispering to each other.

We have recently had our house valued at £192,500, so we have enough equity to
a) Sell the house, pay off all the debt and rent somewhere. Massive Pro's: Being effectively debt free. Massive Cons: Not being a home owner.
b) Sell the house, purchase a new property, and keep the £30K loan going for the next 30 years.

EXTRA OPTION - Stay in our house where we are, continue paying off mortgage at the Variable Rate, hope that the rate never goes up (as if) and hope that house prices increase to such an extent that we can pay off loan and still have enough for a deposit for a new property. Perhaps the most sensible option, but due to the issues listed above, it is begginning to effect our happiness.

I have the opportunity to rent from my brother (not at a reduced rate) from the middle of this year for two years (although during this time, it is very unlikely we will have the spare cash to save for another deposite, unless lenders start doing 95% mortgages again).

What would people do in my situation? Very interested to know because I have spoken to soooo many different people who have massively varying opinions. Is it better to cut all losses and pay off the debt to then rent, but not be a home owner?
Is it hugely foolish to get off the property ladder when I could probably still afford to stay in my current house?

Where do people stand on the Rent vs Owning debate?

REALLY grateful for any help /opinions. Happy to answer any questions that you may have.

Thanks all,

Dan

CloudCuckooLand

You appear to be saying you cannot save, either while renting or owning.

While you cannot save, owning something bigger is a non-starter. Whatever happens to house prices. The ongoing running costs of a bigger property require you to have spare cash each month, to be able to afford higher council tax, higher insurance costs, higher energy costs, etc, of that larger property...

Get to the debt-free wannabee forum, post your SOA (statement of affairs), and get ideas for trimming your expenditure, increasing your income.

Without the costs of servicing the £30k debt, would you be able to save? (depends on your local market, whether rents are higher or lower than your mortgage+debt at the minute) - if yes, then I'd lean towards the renting with a clean slate option.

Only you know how long you can sit in the current place and keep your sanity. And if unable to save while there, you could be stuck for ages - you still need to save fees/costs...

Relying on house prices to bail you out, is not the answer, you need to have ongoing spare cash...

delmar39

Whatever you do I would stay on the housing ladder. Yes you could sell up and pay off all your debts, but then you wouldn't have much of a deposit to buy a new place if you wanted to. House prices are low, so in future you should increase your equity, whilst continuing to pay off your mortgage.

You could simply look around to see what's on the market, but if you do sell the fees will reduce the equity you'll get (about £6k on fees very roughly).

Why not go for option b if you're totally unhappy with life at the moment? You'll just have to see you loan payments as a regular outgoing and live with it. Perhaps I've missed it but you don't say how long the loan is for.

You mention a variable rate mortgage. What's the rate? If you have a standard variable rate from a mortgage product pre financial crash, then it should be a low rate. OK, interest rates will probably rise, however, it'll take time for them to go up significantly enough to hammer your wallet.

If financially you can handle the loan costs, then move somewhere else and be happy.

TheSaint_UK

Thanks for the comments so far guys, its really interesting to see differents perspectives on this.

Sorry, yes should have said these points.....

The mortgage is a NR together mortgage and was originally over 35 years.
The rate we are currently on is 4.89% which isnt too bad - less than when we were on our 5 year fixed at 5.99%.

Ours is one of the ones where if we seperate the mortgage and loan, the interest rates on the loan shoot up by 5%. We still have 30 years left on both terms, so if we sell the house we really need to pay of the loan to avoid almost doubing the total amount repaid.

Basically I was one of the mugs who went in for the NR together mortgage cos at the time it was 'either do it this way, or don't do it at all'.

I feel that this really rules out option B.

We are very close to opting to sell up and pay of debts and start a clean slate, albeit having to rent from then on.

If we do pay the loan off, there will be a opportunity to save, just not very much each month.

TrickyDicky

I would sell up and rent. You obviously cannot afford to upsize, but really want the bigger family. If you get a nice landlord and are good tennants you would have no trouble staying in a place for years. The only downside is you do not own the property, but the rent you would pay probably wouldnt be much more than the interest you would pay on a similar place anyway. Everyone is so hung up on owning a house, they forget about quality of life.

So it looks like you're going to have to toss up having a comfortable life now with you and your family, with the posibility of more difficulties when you are older, or having a harder time now and having a more comfortable retirement.

hard choices.

Thrugelmir

TheSaint_UK wrote: »

Stay in our house where we are, continue paying off mortgage at the Variable Rate, hope that the rate never goes up (as if) and hope that house prices increase to such an extent that we can pay off loan and still have enough for a deposit for a new property.

To build equity you need to repay debt.

Rising house prices will merely widen the gap to the property you aspire to purchase.

So look at your budgets and see if you can overpay your mortgage, even slightly. Your interest rate has fallen so channelling this saving into your reducing your mortgage debt would be a start.

Before selling up, consider the longer term. House purchase is a working lifetime committment. That ultimately will mean you can live rent free later on life. So don't take rash decisions.

delmar39

Thrugelmir wrote: »

To build equity you need to repay debt.

Rising house prices will merely widen the gap to the property you aspire to purchase.

So look at your budgets and see if you can overpay your mortgage, even slightly. Your interest rate has fallen so channelling this saving into your reducing your mortgage debt would be a start.

Before selling up, consider the longer term. House purchase is a working lifetime committment. That ultimately will mean you can live rent free later on life. So don't take rash decisions.

Good advice this. :T