Buying this year with a view to selling in 3 years.. is this sensible?

BitterAndTwisted

Three years isn't long enough to consider two moves. It's not all about buying a larger and more expensive home later. During those three years you'll have the following costs as an absolute minimum:

Two lots of surveys (and that's if you go ahead on the first properties you put an offer on, which is rare): £2k

Two lots of conveyancing fees: £2k

Selling-agent's fees (about 1% to 1.5%) Another two grand

Two lots of moving costs, say £1 k a pop.


That's seven grand's worth of equity you'll need to have built up and in the first few years of paying a mortgage hardly anything is paid off of the capital borrowed. I think the whole idea is crackers.

SuzieSue

BitterAndTwisted wrote: »

Three years isn't long enough to consider two moves. It's not all about buying a larger and more expensive home later. During those three years you'll have the following costs as an absolute minimum:

Two lots of surveys (and that's if you go ahead on the first properties you put an offer on, which is rare): £2k

Two lots of conveyancing fees: £2k

Selling-agent's fees (about 1% to 1.5%) Another two grand

Two lots of moving costs, say £1 k a pop.


That's seven grand's worth of equity you'll need to have built up and in the first few years of paying a mortgage hardly anything is paid off of the capital borrowed. I think the whole idea is crackers.

And that's just the monetary cost. There is also the non-monetary costs of going through the stress and uncertainty of buying, selling and buying again within such a short period of time.

If you are the sort of person who doesn't get stressed then it might be worth doing what you propose to save a bit of rent (although it won't be much when you take off the mortgage interest you will have paid anyway and all the costs mentioned above). It is very unlikely that house prices will shoot up in the next 3 years, so you will be unlikely to have any significant capital gain.

ukcarper

BitterAndTwisted wrote: »

Three years isn't long enough to consider two moves. It's not all about buying a larger and more expensive home later. During those three years you'll have the following costs as an absolute minimum:

Two lots of surveys (and that's if you go ahead on the first properties you put an offer on, which is rare): £2k

Two lots of conveyancing fees: £2k

Selling-agent's fees (about 1% to 1.5%) Another two grand

Two lots of moving costs, say £1 k a pop.


That's seven grand's worth of equity you'll need to have built up and in the first few years of paying a mortgage hardly anything is paid off of the capital borrowed. I think the whole idea is crackers.

On a £220k mortgage at 5% you will have paid off about £14K after 3 years, saying that iI do not think it is a good idea to buy with the intention of moving within 3 years.

continualdiamond

Nothing is certain in life. We bought our 2 bed flat in Oct 2006, which of course we now all know was the property boom. We 'planned' to be here for about 3-4 years, its now been 6 1/2 years and we've built up 0 equity.

At the age of 31 and 30 we really want a 3 bedroom house and wanted to move before we had a family. However we realised that this desire could cost us leaving it too late to have a family and decided a family was what we wanted and we'd have to make the most of the space we've got.

It's hard as everyone's situation is different and I get upset at times about the possibility of not having a nursery to decorate and having to have the baby in our room (our 2nd bedroom houses the hot water tank, boiler and fridge as our kitchen is the most pathetic size in the world).

But we just have the make the most of the space we've got and stay here for clearly longer than both of us had ever thought. Our way of thinking is that sometimes we'd rather sell, make a loss and rent instead of buying ever again and being stuck.

olympicsmummy

Dan-dan it's whatever is most sensible. They do not want it back. They are approaching 70! they will never see it again, they want me to keep it but they want it protected in case we split up. It might make my partner feel bad if I put a deed of trust in my name so it could go in parents name but dont want any inheritance tax issues!

I think we'll do a deed of trust in my name

martinsurrey

BitterAndTwisted wrote: »

Three years isn't long enough to consider two moves. It's not all about buying a larger and more expensive home later. During those three years you'll have the following costs as an absolute minimum:

Two lots of surveys (and that's if you go ahead on the first properties you put an offer on, which is rare): £2k

Two lots of conveyancing fees: £2k

Selling-agent's fees (about 1% to 1.5%) Another two grand

Two lots of moving costs, say £1 k a pop.


That's seven grand's worth of equity you'll need to have built up and in the first few years of paying a mortgage hardly anything is paid off of the capital borrowed. I think the whole idea is crackers.

Can I point out the other sides, a lot of people are talking about the cost/strees of buying, WITHOUT considering the costs/stress of renting.

Where I am a £270,000 house will cost about £1,300 to rent.

So over 3 years that’s £46,800, WITHOUT rent increases, which will be a constant worry, as will the land lord selling or being a pain in the rear, read these forums and you’ll see how many nightmare landlords there really are, not all by a fair few.

If you can get a 75% ltv 3 year fix at 2.54% (plenty around this), you’ll pay £14,769 in interest on a £270k house over 3 years, a saving of £32,031, which is more than enough to cover buying/selling maintenance costs (as long as you buy carefully).

But a house is worth MUCH more than the money you can save, it’s about the memories you can make, decorating your kid’s rooms, feeling comfortable to have a pet, grow some plants...

In the end, with the gift, buying makes financial sense imo, and I hate the constant worry about getting kicked out of a rental house, so it makes emotional sense as well (to me!).

An even better idea for a short term house would be to buy at £250k and, save the £5K stamp duty jump (also if the market does fall slightly, you won’t get stuck in the £250k stamp duty trap).

grifferz

olympicsmummy wrote: »

It might make my partner feel bad if I put a deed of trust in my name

I know you later say that you will do a deed of trust in your name, I would just like to say that you shouldn't accept "my partner might feel bad" as a reason for not being prudent with your money.

This week my partner and I are getting a deed of trust drawn up to protect her much larger deposit contribution, including a sum gifted to her by her father, and I think that is 100% fair and understandable. She has worked long and hard to save that money and there is no need to risk it unnecessarily.

Any reasonable person should be able to understand that and not take it as some personal slight or intimation of an unstable relationship.

On your main topic I have nothing to add that hasn't already been said by other posters. I personally would not contemplate two moves in three years.

If saving harder or choosing a cheaper areas is not possible then as another poster said I would try to look for a property that had some scope for improvement so that you could maybe add a loft conversion or extension further down the line once your baby is older.

Good luck!

franklee

martinsurrey wrote: »

If you can get a 75% ltv 3 year fix at 2.54% (plenty around this), you’ll pay £14,769 in interest on a £270k house over 3 years, a saving of £32,031, which is more than enough to cover buying/selling maintenance costs (as long as you buy carefully).

A 75% ltv means a 25% deposit, so that's 67K that you haven't allowed to generate any income at all over the three years if renting in your example.

Buying with your example would mean taking on a 200K debt. At 2.54% it may well be manageable but the fix is only for three years. What happens at the end of that if interest rates have gone up? To take on that debt I should think being able to afford at least 6% is advisable to cover more normal rates. Counting on a quick sale probably isn't wise.

Besides the OP only has 50K deposit and that's from family so they don't seem to have a history of savings.

martinsurrey wrote: »

But a house is worth MUCH more than the money you can save, it’s about the memories you can make, decorating your kid’s rooms, feeling comfortable to have a pet, grow some plants..

I agree with the decorating etc. However I think it more important for children to have happy parents and that's a lot harder if stressed out in debt.

poppysarah

"Buying this year with a view to selling in 3 years.. is this sensible?"

No.

Because:
costs of buying and selling and buying again.
Cost of 2 moves.
Cost of decorating X3 (Because you will want to decorate when you move in, before you sell and again when you move)
Cost of new carpets x 3 (as above, because you might need to)
Cost of tidying up garden x3.
Mortgage deals might cost you more

Add in effect of stress of moving, selling, buying, moving the kids etc.

I've added in the X3 because some people are never happy having someone else's decor. And even if you like it exactly as it is you might need to smarten it up to sell.

chappers

^^^ what she said, however you could do as others have said and find somewhere suitable that you could extend in the future, don't count on house prices rising , but be sure that at some point, mortgage rates will.