Stuck in unsuitable home. What can I do?

Toggertytoo

We live in a 1 bed flat - thats me, my husband and 5 year old. We had always planned to move once our child was school age to a larger 2/3 bed with a garden. Problem as house prices have dropped we don't have enough equity to put down a deposit on a bigger place.

Our mortgage company won't allow us to rent our place out ( though about doing that and renting a bigger place for a while). New build nearby has a deposit match scheme but that means finding a larger 20% deposit as its a new build.....

Any ideas ? So stressed that we will be stuck here for years..... have about £7000 equity but need about £25,000 for a deposit....

poppy_f1

sell up and rent somewhere else may be your best bet

DannyboyMidlands

It would seem that you need to sell up and rent like poppy says or stay put and save for a few years. Considering that prices are falling across much of the UK, I'd go for option 1.

alyxzandra

Do not if this will help, but we were in the same boat so we built an extension and was able to make our place into a 2 bedroom place. But, we have a ground floor maisonette with a large garden.

PPPingu

would your deposit be based entirely on the equity in your current home, ie do you have cash to add to it at all?

G_M

I don't really follow your logic - since prices have dropped, the place you buy will be cheaper and the deposit you need will be less.

If trading up, as you are, falling prices work to your advantage.

BitterAndTwisted

Unfortunately there is no magic wand so if you can't bear living where you are now sell up and rent while you save a larger deposit

forward_thinking_2

G_M wrote: »

I don't really follow your logic - since prices have dropped, the place you buy will be cheaper and the deposit you need will be less.

If trading up, as you are, falling prices work to your advantage.

Not sure I buy this logic. If I buy a house for 100k with 20k deposit and the house value falls 10% then I only have 10k deposit for my next house. Supposing I wanted to upgrade to a house that would have cost 200k but that had fallen 10% so is now valued at 180k then I have only 5% deposit.

If it were the other way around and the prices had gone up my equity in my house would be 30k and the house I wanted to buy would be 220k but I still have a deposit greater than 10% so I can still overcome the ltv barriers.

Falling prices are good if you are looking to buy and not already exposed to property or if you have substantial equity and can still secure a mortgage with a low ltv.

HAMISH_MCTAVISH

G_M wrote: »

I don't really follow your logic - since prices have dropped, the place you buy will be cheaper and the deposit you need will be less.

If trading up, as you are, falling prices work to your advantage.

The crash proved this is absolutely false in real life for most people, for several reasons.

1. Falling prices have wiped out the equity needed for a deposit on the next place for many people, who now can't move at all.

2. Typical FTB house prices fell much further than typical 2TB house prices, so the gap widened instead of narrowing.

3. Banks are refusing to lend at competitive rates for anyone with less than a 25% deposit, and are refusing to port mortgages on the better old deals for many more.

If you're a rich property speculator looking to upsize from a half million pound house to a million pound house, the crash may have been ok for you.

But most ordinary FTB-s looking to trade up lost out badly.

HAMISH_MCTAVISH

forward_thinking wrote: »

Not sure I buy this logic. If I buy a house for 100k with 20k deposit and the house value falls 10% then I only have 10k deposit for my next house. Supposing I wanted to upgrade to a house that would have cost 200k but that had fallen 10% so is now valued at 180k then I have only 5% deposit.
.

Yes, but it's worse than that in reality.

FTB houses fell by more than 2TB houses on average, so for most people the equation looks more like this:

100K house falls 20%, so now worth 80K.

160K house falls 10%, so now worth 144K.

Gap before the crash = 60K.

Gap after the crash = 64K.

The thing we learned from this crash is that not all segments of the market fell equally, and not all segments of the market recovered equally.

The gap between the rungs actually widened for most people at the lower end of the market, as typical FTB level flats/terraces fell by far more than family properties.

So the "upsizers benefit" meme trotted out by so many is a lie. Most upsizers don't benefit.