Sort of cross forum question!

Metermaid

This question covers house buying, mortgages, savings, pension....etc etc so wasn't sure where to post it!

Position - we are a married couple both 45, we own a house worth 250K with a mortgage on it of 44K which is currently on interest only. We have an endowment which matures in 2018 - originally taken out for 62K but now is likely to have a short fall, lowest predicted being 30K. (it's apparently not the right sort to cash in and it has life insurance and critical illness cover so we've kept it). We are probably going to move in the next few months and for the first time are thinking whether we should be putting the mortgage up rather than trying to decrease it further.

Looking at maybe buying for around 300K (borrowing around 103K, around 70K which would be on repayment) - thinking that this would make more sense and be an investment for the future, we can downsize in later years but should be making the most of being able to afford a larger mortgage at the moment, as this would hopefully also 'make up' for poor pension outlook in the future.

Hope I'm making sense! - would be extremely grateful of any comments on the sense of this and whether our thinking is good or flawed!!

Thanks in advance

MM

Metermaid

Any thoughts anyone?

Alan_M_2

Right now we are at what appears to be the height of property prices with the prospect of a correction/stabilisation.

Do you think right now is the best time to be taking on more debt when you're in such a good financial position as you are?

silvercar

We are a similar age and moved to a bigger house in the Summer. If you don't do it now, you won't do it at all.

The theory was that we have a bigger mortgage while we can afford it. We then have 2 options in the future. Either keep this house (if we have managed to reduce the mortgage) or sell it and buy something smaller.

Not actually worrying about the house price movement as we will not be constrained as to when we sell. Also we will stay in the same area if we move again.

We actually did a bigger house price jump; I wonder if your costs will eat into your benefit. Remember you will have 3% stamp duty, that is £9,000 plus estate agents fees and other moving costs, as well as the £50,000 house value increase you will have a lot of expenses, well over 20% of that £50k increase.

sue_balu

Just a thought.......
Could you consider investing in a second property now, say, small bungalow (or whatever property you could conceivably find yourself eventually downsizing to in the future) whilst staying in your current property until retirement or whatever.

You could rent out the smaller place until you wish to move into it. Whereby you sell your current property and keep the proceeds "for a pension". There would be no capital gains as the first property has always been your main residence.

The mortgage on the second property can be offset against tax on the rental income.
If in future the 2nd property is not what you really want you could live in it for a short time before selling and buying again - also without a capital gains tax liability.

pusscat

Hello

we are in a similar postion but a few years younger. After much hard thinking we have come to the following decisions:

Completely clear the mortgage over the next few months
Continue with the endowments but using them as a savings policy as there is no point cashing them in.
Sit tight for another 12 months, save and see what happens in the property market.
Make a decision then.....

Our feeling is that doing the above will give us the best of all worlds. We are looking to trade up to something in the £500k bracket, at the moment the market here (E Yorks) has been pretty stagnent above £300k or so for the last year to 18 months. Actual average selling prices of detached proeprty in the postcode has fallen inthe last 2 years....Somethings gotta give.....and I don't want to risk being the one who buys just before that happens.....

Things may be different in other areas of the country.....

My view is that if I pay off my mortgage and wait and save:

if house prices rise I have had the rise on my current property plus additional savings.

If house prices fall I will take a lower cash fall on my current property than I would on a more expensive one purchased at the peak of the market and will have saved enough to offset much of the fall anyway. Also, when I look to trade up everything above me will have fallen too - great news for me to purchase. (especially in £ rather than % terms)

If house prices stagnate them I will still be in the same financial position as I am now in a years time (or however long it takes to become clear) - just with more savings which means greater bargaining power.

Hope this helps, this has taken us many late nights to decide on but it seems to offer the best all round solution. The market has become a mexican stand off at the moment, no one knows which way it will go, but I don't want to be the idiot who bet on the wrong way.....

Puss xx

Metermaid

Thanks for replies, sorry I haven't responded, the dreaded AOL never seems to informs me of replies!

Update - we have to move as husband's job is re-locating, the area we will be going to is more expensive so to even stay in the same sort of property is going to involve spending in the region of 290-300k. This will be an assisted move so essentially the stamp duty is the only cost we have to meet ourselves. Also, after many years of moving around the country it looks as though this move will be to a property we can stay in - so hopefully riding out any property market dips.

Anymore thoughts are very welcome

Rita

aurora_borealis_2

We're in the same boat.
Trade up or down? Two children are in uni so we could go smaller.

But ... my salary has risen significantly - and will continue to do so.
Plus, OH can take a lump sum of £100,000 in three years and continue to work.


We've just about decided to trade up - by quite an amount

We can review in three years when we have the lump sum.