Should we get off the housing ladder?

MrsOB_2

Hi

I could really use some advice and wondered if I could get some here!!

Basically, we live in a house which is too small and we need to get somewhere bigger now we have 3 x kids. We bought our current house for £200k and we have an interest only mortgage. The old rate we were on just expired and renewed at 5.49 fixed for 3 years - monthly payments of approx. £960.

We would ideally like to rent our property out and rent a bigger place but our mortgage company want to charge us an extra 1% which would bring our payments to £1150 - we could only get £950 rent for our house. So the renting somewhere else idea is not an option.

Part of me thinks we should just sell our house - it's currently worth about £230k - and rent. We would have some money in the bank and would be able to rent a bigger property. But my husband thinks that if we get off the ladder we will never be able to get back on it ........ wish I had a crystal ball to see what will happen with house prices etc over the next few years.

If anyone has any opinons or experience I would really appreciate hearing them - we just keep going round and round in circles and cannot agree what to do.

Please be gentle, I'm a newbie here!

Thanks

Errata

If you're children are inconvenienced by being a bit squashed up, they'll be far more inconvenienced if they find themselves moving from rental to rental every six months.

MrsOB_2

Thanks for being gentle...... obviously we would have looked for a long term rental and we do have the opportunity to rent from an aquaintance who is moving abroad for 3 years.

poppysarah

MrsOB wrote: »

Thanks for being gentle...... obviously we would have looked for a long term rental and we do have the opportunity to rent from an aquaintance who is moving abroad for 3 years.

The worst sort as they may turn up in 6 months and want their house back.

MrsOB_2

OK ..... so 'hypothetically' we can get a long term rental ........ is getting off the property ladder a bad idea?

bosseyed

Hmmmm, tricky one.

Personally I'd be tempted to keep the house and just make do with what you have - assuming you can afford the mortgage etc then perhaps theres no real pressing need to change? I suppose you need to ascertain if its case of need a bigger place or want a bigger place? If its 'just' that you want somewhere larger (don't we all) then it might be worth seeing if you can rejig the space you have, sell stuff, extend etc etc rather than move house entirely.

It took me and my wife long enough to actually buy a property therefore I wouldn't want to step off the crazy merry go round at all if possible (cling on for dear life!), as you say theres the thought that if you did sell up and rent, then the market goes mental and you find yourself unable to buy again for a long time, if ever.

I'd suggest if you have doubts about selling up then don't. Either way, good luck

woodsey2002

How are house prices in your search area, have they already come down a lot or is there more to come do you think, if you sold now then of course if prices come down further in a years time say you might be able to buy somewhere bigger for far less than you could today but no one has a crystal ball I'm afraid so it's a huge risk.

also I see you just remortgaged, fixed for three years, will you have a penalty to pay by selling the house? depending on how much this is, it might cost you more than the extra £200 pounds a month your bank want to charge you to let the house out.

if you have the option of renting your friends house for a period of time then maybe rent out your house and rent theirs for 6 months and see how it goes..of course if you do decide to sell then prices may have dropped again in that time but you might take that long to sell it anyway.

Personally I hate renting especially with children, it never feels like a home and I'm never sure when we'll have to move again, we've been unlucky and moved 3 times in less than 2 years..we can't find a suitable house to buy either though so it's a nightmare but whenever we mention viewing a property my 8 year old cries as he simply doesn't want to move ever again.

Can you maybe extend the home you have because I'd stay put in your shoes.

and I agree with the above poster about people who move abroad, that happened to us and they came back although having dealt with the bailiffs looking for them for the 8 months we were there I was glad when we did have to leave.

Ferdy147

You already rent...from the bank. You do not own the house the bank do and you pay them rent monthly.

You don't say where/when you bought the house but given it's an interest only mortgage that's recently come to an end I'd guess it was bought somewhere around 06/07? Would that be right? If so then it's likely that you bought at/close to the peak and that you're actually in negative equity. If you did indeed buy in 06/07 I doubt the house would be worth more than what you paid for it.

Do you have any savings and if not how were you planning on paying back the amount you borrowed from the bank?

Also if you did get £950 for your house....would that be after agency fees, insurance costs, maintenance costs and have you factored in a few months where the property is unoccupied?

I would tell the husband that you're not on the propertly ladder as the bank own the house and you're simply renting from them.

Alll the best....doesn't sound like a great situation to be in.

MrsOB_2

We bought the house in 2006 when I was pregnant with first child. It wasn't ideal (only 2 bed) but all we could afford at that time. It was £200k and we took out a 100% LTV mortgage. Similar houses in the area are on the market at over inflated prices of £230k but selling for around £220k. We now have 3 children and a real lack of space - it's getting us all down.

The £950 per month rent would be before any agency fees etc :-( and if tennants missed a month it would be very bad news.

We have about £6k savings.

I think we were so caught up in the 'you must get on the propery ladder' hype that we bought a house without thinking about what we would do when our family got bigger.

Ah, I don't know - we just cannot even talk about this without arguing :-(

tyllwyd

Is there any option of buying a larger property at a similar price by moving to a less desirable area, or buying somewhere older?

Ferdy147

MrsOB wrote: »

I think we were so caught up in the 'you must get on the propery ladder' hype that we bought a house without thinking about what we would do when our family got bigger.

Thanks for not viewing my response in a negative way as it certainly wasn't meant that way.

If you can sell the house and end up with a bit of cash at the end of then do so. If you have some savings then I'd say sell the house at less than you paid if required provided that you're can repay the bank with the sale price + savings. Ie be prepared to sell at 196k (taking agency fees/solicitors fees into account). You may then have redemption penalties as well to think about also.

Given what you have said renting is NOT an option. You will not have the house rented for every month of every year, no maintenance costs, free agents etc.....you simply aren't in a position to do this.

I really do feel for people that cannot afford to have a decent sized house and are made to feel 'they must get on a ladder' and take on extortionate debt. This was the result of slack lending regulations meaning anybody and everybody could get a mortgage of whatever amount with no or very little checks being done.

Because of what I've said above I genuinely believe house prices will fall in coming years. People have a basic right to be able to afford somewhere to live and given the ridiculous price rises of the last decade the majority of people are unable to do this. People rightly cannot get the mortgages they used to be able to abnd as a result house prices WILL fall. Currently you have interest rates at an all time low and the government paying peoples mortgages if they're unable to do so. This cannot go on indefinitely.