Should we get off the housing ladder?

ruggedtoast

joerugby wrote: »

Sitting tight and extending, or simply altering one of the bedrooms to create two small rooms, is probably the best bet for the moment. This would be better than the insecurity of renting in my view.

You really need to start repaying your mortgage.

This. ^

Its an awkward situation because you dont have a lot capital, and havent paid off any of your principle.

As things stand and presuming house prices neither go up nor down, you would struggle to buy your own £220k house without the £55k for a 25% deposit most lenders want to give you a decent deal.

If you get off the ladder to rent, then there is a possibility that you may never get back on it again unless house prices fall significantly, your income goes up, or lending criteria eases.

Not being in the business of crystal balls who knows what will happen. Trying to time the market by selling to rent is very tricky and plenty have come to grief over it, however I would say its unlikely prices will go up much now in many places.

Rental contracts (6 month ASTs) are frustratingly short if you are trying to plan a childhood, but nail bitingly long if you are trying to time moving elsewhere. In addition the private rental market at the moment is basically, not fit for purpose for anyone with a family.

There may be some enlightened time where the legislation changes to the European model and the quid pro quo of letting out a house for financial gain, is so that the person paying you can actually then use it as a home. This is not the case at the moment.

You'll never be able to paint your kids rooms, let them have a pet, fix any mold or mildew problems yourself, or know if a Section 21 is about to flop through the post, or be sure you'll pass the next Homelet check. It sucks.

My advice would be that while cashing in your £20k may seem attractive, now only makes sense if you are going to use it to buy somewhere else.

You need to find some way to start repaying your mortgage, if there is any way you can do that by moving to a bigger place in a cheaper part of town I would do that. Even a 3 bed flat would be preferable in my opinion.

Eton_Rifle

You can try negotiating for a longer contract, you don't always have to stick with six months and then live month by month.

I had my last rental contract set for three years after an initial six months 'approval' period.

shortchanged_2

At the moment MrsOB you are doing nothing more than renting from the bank, with the even worse scenario that you are responsible for the maintenance and upkeep of the said property.

As some others have stated you really need to consider how you are going to pay this loan back.

madison-nyc

MrsOB wrote: »

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

I was in your position two years ago. My husband and I are were expecting our first child and happily private renting (this was the at the end of 2006) but with a baby on the way we felt we needed to get on the housing ladder BUT we rushed really and didn't have that much money available so ended up buying a small two bed miners cottage which , in hindsight , was way too small. Especially when we decided that we wanted a second child 18 months later.

So we put the house on the market the beginning of 2009. We thought we'd be able to upgrade to a three bed but the woolich changed the goal posts with our mortgage and wanted and extra 20% deposit instead of the regular 5% that we'd paid in 2006. So we were scuppered basically , we just couldn't come up with it. so our only options were to stay put or sell up and rent. I was very unhappy where we were living both with the area but mainly because the house was just so small so we came to the decision to sell up and rent instead. So we've been renting for approx 18 months now and I don't regret it for one second!

We made it clear to the agent we wanted a long let but after 6 monthd the owner put the house on the market! So we had to start looking for somewhere else. We found somewhere nice and have been here 12 months now.

It's all swings and roundabouts really , renting has benefits over buying such as not paying for repairs , being able to move easily if and when you want to and quite often , being able to rent a lot nicer property than you could afford to buy!

As for decorating etc. with most agents and landlords you can decorate as you please , it's just a matter of painting it over with magnolia when it's time to leave.

If your really unhappy with where you are now then go for it , it's not worth being unhappy just for the status of having a mortgage.

aqueoushumour01

If the reason is to sell and rent a bigger place then whether that is a good idea all depends on future house price levels which is an unknown. My feeling is that you could probably sell up, rent and buy again in a couple of years at similar price levels. In the meantime perhaps you save a bit of money up towards a bigger deposit. On the other hand, this is not guaranteed. However, with children, I would myself prefer a bit of stability and I'd be inclined to buy a bigger place provided there are sufficient funds to do this.

[Deleted User]

I 'm not sure why some insist that a having a mortgage is a more secure situation in which to be. As some as have pointed out, the bank owns your property - you could lose your job, maybe need to move to be closer to friends or family or need to move for employment reasons. Although some feel that renting is not as stable (and having a mortgage described as stable is debatable), it certainly is more flexible.

kaych

madison-nyc wrote: »

...being able to rent a lot nicer property than you could afford to buy!...

I think it really depends on which area you are in, where we are now, we are paying around £650 for our mortgage whereas the same flat in the building is being rented out for over £1000... but then we did manage to get a good mortgage rate and had a 30% deposit...

MrsOB_2

Wow, thank you so much everyone for your input ..... I still feel confused but I think that myself and husband can have a chat about it and take everything into consideration. Really appreciate everything that everybody has said, thank you for taking time out to give your opinions. I will certainly update once we have made a decision ;-)

Eton_Rifle

madison-nyc wrote: »

renting has benefits ... being able to rent a lot nicer property than you could afford to buy!

Yes but it's sets you up for a total mind f*ck when you do eventually buy and you find yourself having to take at least one step down in housing "status".
Don't underestimate how depressing this is and don't count on a house price crash to save you from it!

Davesnave

Eton_Rifle wrote: »

Yes but it's sets you up for a total mind f*ck when you do eventually buy and you find yourself having to take at least one step down in housing "status".
Don't underestimate how depressing this is and don't count on a house price crash to save you from it!

'Status' is a nebulous concept.

We sold to rent for a while till the right property came up. The rental house was a six figure sum more valuable than the house we left, but living there, we were hard-pressed to understand the reputation that particular road and area had acquired.

Indeed, all the experience did was underline what fantastic value we'd enjoyed for 21 years in our old home.

Size is a separate issue. We went from 4 beds to 4 beds, but with an extra 5 acres out at the back....Perhaps you meant size?