Downsize to upsize? Mortgage questions

apositivethinkingcat

I am left in an odd situtation right now. I cannot quite borrow enough to get my 'dream house' where I can raise kids and so forth. And my current house is not big enough for that, but being 2 bedroom is a bit much for just me & my partner as one room is empty the whole time. It looks like if I wait until next year it's likely I can borrow more (no guarantee mind, but I will have another year of books which makes a massive difference to what I can borrow).

So, do I rent out my 2nd room, which affects my quality of life as I have no privacy, OR do I sell this place and buy a small flat for a year which would save a fortune in interest and mortgage and then try to go for a bigger mortgage in a year? Moving costs with legal fees etc, but as I have no guarantee in a year I can move then anyway - is it better to be saving up funds by living in a smaller place?

Is a step backwards worth it for a step forwards? I spend about a grand a month on interest - and as the house is not going up in value it's all money down the drain. Whereas if I buy a flat the mortgage would be tiny by comparison with a much better LTV so less to pay each month, plus more of it going on capital...

Suggestions?

Fire_Fox

You keep saying I, do you live with or own with your partner or do they have their own place?

Of course you can have privacy with a lodger: you might take one who travels abroad for work, goes home to their wife every weekend, spends a lot of time at their partner's home, works different shifts to you. If you and your partner are willing to move into the smaller bedroom you can let the larger one as more of a bedsit.

Costs of buying and selling would likely wipe out any benefit. Can you get consent to lease from your lender and rent a smaller place yourself? Do you know where all your income goes each month, down to the last tenner? Have you considered doing a Statement of Affairs and challenging yourself to live on next to nothing for a year? Have you considered simply renting a larger place so you can start a family?

apositivethinkingcat

Hey - just to clarify - my bf lives in my house and he isn't on the mortgage.

I've had lodgers before. But they were students so here all the time and wanting to socialise with me rather than go and study!

Bedsit's are larger than either of my rooms. I could write on an ad 'No use of living room' and charge less rent I guess? That might work

Looking for a midweek only lodger might be a good idea. Worth looking into... anyone done this before???

The rent for this house wouldn't cover my mortgage payments and renting large houses costs a lot - earning that much extra would mean a second job rather than time off for raising kids, I sat down with the calculator for ages on that one. The only other solution is to move and attempt to find new jobs and rent a place in the countryside/up north somewhere and start over... it's a tough one but I need to consider it.

I know where all my money goes - economy food & mortgage payments lol.

The rest goes into overpayments and saving up for things like legal fees etc for moving.

I was just wondering if a step back for a bit would help me ensure I could save every penny rather than spend so much on interest and if that was worth the cost of moving. If I had a small studio it would be 40% or 50% LTV and about a quarter the mortgage I have now you see.

So I guess my options are
- Pack everything in and move to another cheaper location and hope to get a job paying a high salary/deal with living so far away.
- Earn more so I can rent a big place and rent out my place (assuming bank will agree to changing mortgage type).
- Try to find a way to have a lodger who stays in their room / goes out a lot to help offset my interest losses.
- Sell my place and go back to renting which gets me into a bigger house and leave this house owning to others.

Does that cover it all?

Has anyone ever bough a small flat for a few years to save up money before making a move to a big family home? Up 2 rungs of the property ladder, back 1, then up 3?

Thanks!

apositivethinkingcat

Or I could go back to 3 jobs & a lodger which did bring the mortgage down faster... although my health is a lot better now I am just working regular fulltime.

I don't spend money on unecessary things like new clothes etc, I use groupons and deals for any kind of holiday (had a week in Europe for £300 inc all food, flights, self catering apartment and days out). I bake myself rather than buy treats... I bought a cheap second hand cycle so I never need to use the bus or train.

This is more an exercise in seeing if I can get where I want to be quicker and smarter than just spending as little as possible if that makes sense? If you can't hear the clock ticking, you have noise-cancelling headphones on lol

pleasedelete

My friend has a midweek lodger- just stays Monday to Thursday. He is on a long term contract- has wife and family back at home. It works quite well and they do get on. Lodger likes it as better than a hotel and unlike a flat no bills or council tax. He takes his washing home with him!

My friend put an advert up on the board of local businesses he knew had IT contractors. He does have a great flat in a good location. He only get 4/7 of rent of a full time lodger but has the place to himself at the weekends.

thelem

You're still saying I. Where does your bf fit into this? Are you planning for him to be the father of your children? If so, then his situation also needs to be taken into account - can he contribute to the cost of running the home? If not, then it's probably a bit early to be planning on buying a family home a year from now.

You don't have much money to spare at the moment, albeit that's partly due to overpaying the mortgage. You might be able to borrow more a year from now, but will you be able to afford to continue the level of payments you currently are if you have to pay for a baby too?

You've got a spare room, so why can't you start your family in your current house? That's plenty for a first child, and even if you have more children they won't need their own rooms until they are older.

Fire_Fox

Well I don't hear the clock ticking, but I did first ask to be sterilised at 18 so .... :rotfl:

Different types of lodgers have different expectations. To want complete privacy is unrealistic, but if they are out/ away a lot you will have privacy, some people have room-based/ online hobbies. You may have to kiss a lot of frogs (= interview a lot of potential housemates) to find the right one. Only you know how much privacy works for you.

Selling and buying can kill thousands, I suspect you will be better off getting off the property ladder and renting than buying for a year or two. Bear in mind that the market can go down as well as up, it's only a safe investment long term.

AlexMac

You're presenting the options in 2 categories-

1 - rational/financial: 'massive £1k pm mortgage' v tiny loan (where do I apply?), costs, savings towards a deposit...
2 - emotional/lifestyle; future-proofing, privacy-v-lodgers, babies, biological clock...

Re 1, finances - You say you've done the numbers, and you seem to be moving to the option of downsizing for a year, but is that really worthwhile...?

or will it have to be a lot longer than a year to make an impact on the bank balance? It'll cost you £10k to move twice (agent sale %, legal fees x 2, stamp duty, removals x2 ...) and will take 6 months>

Whereas if you stay put and stuff earplugs in so you can't hear the lodger's music or couplings you'll earn £4-5k rent a room without having to pay tax, so realistically, even if you save 75% on your massive £12kpa mortgage the net benefit will be peanuts over a year...

2. Emotionally...? you're asking on the wrong forum!

Good luck; although this seems unneccessary as I suspect that anyone who can present all the options in print as you do above is well able to make up their own mind

apositivethinkingcat

Pleasedelete - you bring up a good point about how to find decent lodgers - I will look into that as it sounds like they found a way to bring in people who are likely to be quiet and sensible than the online roommate style sites I used before.

Maybe I should have presented a much simpler case as I have opened up a can of worms lol.

I say 'I' as I am the one on the forum. I talk to him outside this forum and he gets a say of course. Don't read too much in to the use of 'I' when I am talking about myself on our behalf - we are a team

I am overpaying, so unless new mortgage is higher basic than that, I can afford it. I don't have debt outside the mortgage (except a student loan if that even counts) so it is my only real outgoing.

Babywise - that's getting off the finance stuff. To avoid a whole heap of personal info - let's just say I can't start my family here for plausable reason to save time. It's too complex and not about money

AlexMac - you raise some good points. I thought about it a lot since posting on here last night. I was wondering why I couldnt really find any information about people downsizing then buying larger houses later. They just dont seem to do it.

What people do is buy a flat first off - then pay it off and rent it out - then buy a house and have a second rental income. I am looking into this as an option. it would add another year - but I could outright own a studio flat in one year then spend another year (mortgage free in the studio) saving up a new deposit & working my !!! off - by then I am likely to be able to get a higher mortgage and then I could get the house... If I could pull it off it would be a massively better long term situation... means going back to lots of jobs but a year or two of that again might be enough to make my downsize an investment...

Has anyone done that here? This place as it is now worth just over £250K - So all offers are at £250K and will always be so unless they change stamp duty laws!

Is a few years trying to fit a house' contents into a flat so I can rent it out later something anyone has experience of? Or would I just be feeling like I was 'doing something' which would be more effort than worth and instead I should stick it out here, put everything on mortgage to minimise losses and sell it for next house in a year...

Thanks for help everyone. Sorry I have more questions than answers. My previous plan was sell here, get lovely house. I hadn't figured on stamp duty threshold (my bad) or bank offer being just under what I need

martinsurrey

if the rent on your place wouldnt cover the mortgage you're paying, why not sell it now, and rent a similar/smaller place and save the difference, plus you could invest your equity and earn some interest.

When you came to buy in a year and a bit time, you would be chain free, making you a much more attractive buyer.

I just dont see that an extra set of agents fee's legal fee's mortgage fee's are worth it for 12 months ownership.

*edit

and I do know people who have done the above, sold, rented a smaller place then made a huge jump up when the right house came along

thelem

Another advantage of renting for a period is that you will be chain free for both your house sale and future purchase - it's a lot quicker and easier to move in/out of rented accommodation than to buy/sell a house.