Stepping off the property ladder?

Flimsy

Hello all. This could be a long and rambling post so please bear with me but all the info is relevant to help me try and make a decision :undecided

My husband put to me a suggestion yesterday to help solve our house problem. We really aren't happy here in this house, we moved here for family reasons and subsequent arguments have made things very awkward. My dad lives in the same street, and my mum lives with us and has done for 3 years now. We have tried to get her to decide what she wants but she is happy to let things slide and stay here. Our house is very cramped and cluttered and I hate having people around as I'm so ashamed of it.:embarasse The house itself needs everything doing to it, electrics, kitchen, bathroom, plastering so doing anything like that would add to our discomfort and to be honest we can't really afford it. Even if this place was A1 perfect it still wouldn't feel like home. We did see and try for a house last month but just couldn't raise the last 10k or so.

We have 2 children and due to health reasons (and broodiness) we are trying for our 3rd (and final!) baby. I feel our situation is impacting on the children socially as we never have visitors They are both very outgoing and fun and I'd hate to see them end up awkward and shy like me Anyhow, my youngest has a tiny bedroom so once she is out of a toddler bed it will be a massive squash to get a single bed in there without moving the bathroom which will be a huge and expensive job.

My husband is taking another job at the bank he works for, it means he will no longer be able to earn a bonus meaning things will be a bit tighter money-wise but all the experience he will earn on his new department will make him eligible for management training after a year. I don't work at the moment but I do as much as I can to save money by cooking meals from scratch etc and of course looking after the children.

His idea is to sell this house and rent somewhere where we can just 'be' and invest our equity which is around 30k. I'm terrified of stepping off the property ladder in case I can't get back on. He thinks that it would be better as we could just relocate quickly when the time is right as we want to make a long distance move sometime in the future anyway.

Would this ever work?

Thanks for reading

Alfie1999

You will probably find a number of posters suggesting it is NEVER wise to get off the ladder.

I'd say if you're going to do it now is a good time for 2 reasons:

1) The chances of a correction are far, far more likely than further large rises

2) You're clearly not happy so rent somewhere where you are

I've no axe to grind either way but if my missus would let me str then i'd do it in a flash.

jetsetwilly_2

I am getting off with 40k profit from my home.

Moving abroad in 1 year so will rent for 12 months and keep my 40k safe from any possible price drop

phlash

The market is overdue a correction. STRing (Selling to Rent) could be a financial saving but is a bit of a gamble.

But is it more of a gamble to bet on the house holding value?? And secondly will the house out perform what your £30K could get in other investments?

Interesting questions, and you will get different answers from many different people.

In my opinion, and I only offer it as an opinion, I would take the equity and hide for a couple of years. Rent somewhere on a longer term basis, at a similar outgoing as the interest you were paying on your mortgage, and tuck what you may have used to pay off the capital of the mortgage into some good savings each month.

The level of debt, level of house prices, looming interest rate rises on the back of growing inflationary pressures, all mean that a correction is looming.
(Interest rates have gone from 3.5% to 5.5%, thats a 57% increase, the last housing correction from '89 to '96 happened on the back of a few things, but one was interest rates going up from 10% to 15%, a 50% increase. Interest rates do not have to get as high as previously seen in order to see the financial pressure of the early 90's being a burden on the majority of homeowners once again. Forcing sales.)

I would suggest these growing pressures, and simple metrics used to monitor house price growth clearly all point in one direction. (Last 10 years the average house price has increased by 204% and average earnings increase by 92% - BBC News) Mervyn King, Head of the Bank of England, and ultimately respsonsibly for setting Interest rates has said that "ultimately earnings and house prices always come into align with one another". So either earnings take a giant leap, or house prices come back out of the stratosphere?

The boom has mainly been created by speculation, availability of cheap credit and positive sentiment. With about 1 million Buy to Let investors jumping in (30,000 10 years ago when the boom started), mostly amateur and doing it for the 'benefits' of Capital gains on the property will mean that any signs of a downturn in property, will send these speculators to the Estate Agents, and then its a competition to get a sale, ultimately undercutting one another.

Looking at the news, there are alot more articles talking about doom and gloom, than there were 12 months ago. Possibly attributable to the 1% rise in interest rates since then, or possibly because people are beginning to realise that like every market, the housing market has peaks and troughs and it doesn't simply keep on going up steadily forever.

There are many more things I would add to this, but I feel I have waffled too much. But in summary;

People will ridicule me for saying it, but house prices don't "always go up" (The great global myth boasted by current "Property !!!!!!" on TV). In the long run they do, but the journey there is an up and down roller coaster ride so as to speak, and I believe were sitting at the top of the biggest peak in history!

Goodluck with whatever you decide,

franklee

Well I got off the "property ladder" and never looked back but then (thankfully) money was never that tight for me.

I think if you want to go for it then do.

If the market stagnates or falls then you may be suck where you are for quite some time.

Make sure you save the 30k towards the deposit on your next house and do not be tempted to spend it.

Read up on renting, there are pitfalls you need to know about. View a couple of rentals of the type you could get now to make sure there rentals of a suitable type/price are available in your area.

I think it could work out well. Interest rates are on the up and I think that will put a damper on the housing market.

lic

There are a number of things you could do.
1. Speak to your mum, tell her things are tight and will get tighter, and if she is not already paying rent or toward household expenses, as her to do so.
2. Invest your 30K in a buy to let property, such as a 2 bed house. These are always in demand, as they are normally classed as first time buyer homes, or homes for people who are downsizing. Should a 'crash' come, and I must say I do not think it will, but should it, it will not be a great as it was in the 80/90's; and the homes further up the property chain will be affect more than the lower end.
3. It also depends on where you live/invest.
4. I would always advise owning rather than renting. Mortgage repayments are always lower than rent! Plus the money is yours and not the landlords.
5. Why not get some professional advice, as your hubby works for the bank, there must be some expert he can speak to for free!

Good luck whichever way you decide to go

lic

"Looking at the news, there are alot more articles talking about doom and gloom, than there were 12 months ago. Possibly attributable to the 1% rise in interest rates since then, or possibly because people are beginning to realise that like every market, the housing market has peaks and troughs and it doesn't simply keep on going up steadily forever".

That is what news is about. How often do you hear reports of positive things?

phlash

lic wrote: »

There are a number of things you could do.
1. Speak to your mum, tell her things are tight and will get tighter, and if she is not already paying rent or toward household expenses, as her to do so.
2. Invest your 30K in a buy to let property, such as a 2 bed house. These are always in demand, as they are normally classed as first time buyer homes, or homes for people who are downsizing. Should a 'crash' come, and I must say I do not think it will, but should it, it will not be a great as it was in the 80/90's; and the homes further up the property chain will be affect more than the lower end.
3. It also depends on where you live/invest.
4. I would always advise owning rather than renting. Mortgage repayments are always lower than rent! Plus the money is yours and not the landlords.
5. Why not get some professional advice, as your hubby works for the bank, there must be some expert he can speak to for free!

Good luck whichever way you decide to go

Points 1, 3, 5) Agree.

Point 2) Please inform us why if a crash came it would not be as big as previously? It seems to me, that you have a very elementary view of markets in general. This is the biggest speculative bubble in history, and yet if it crashed it would have the smallest correction? Do try and justify.

How very noble of people to buy up property that FTB's need in order to satisfy their greed for money, when there are perfectly good other investments. (Gold has outperformed House prices in the long run, don't hear that said too often) Not only is it a questionable investment for those who were fortunate enough to earn equity in their house to use it to out bid FTB's, but it will also be the downfall of the market as a whole in the future. Its a mountain built on borrowed money, very susceptible to rate rises.


Point 4) Untrue, especially now. The returns on current BTL's are pathetic, and the yields (measure of return) are at their lowest for a long time. I pay less in rent than my Landlord does in Interest on his mortgage, an affect that is becoming more and more prevalent. Some investors don't mind subsidising their tenants because of the massive capital gains in recent years, can the capital gains keep going? Will the banks continue to lend record levels of credit? Will interest rates stay low enough in order to enable it? (BTW Interest rates are still below their long term average, flick to the BOE's site to see for yourself.)

phlash

lic wrote: »

"Looking at the news, there are alot more articles talking about doom and gloom, than there were 12 months ago. Possibly attributable to the 1% rise in interest rates since then, or possibly because people are beginning to realise that like every market, the housing market has peaks and troughs and it doesn't simply keep on going up steadily forever".

That is what news is about. How often do you hear reports of positive things?

All the time when it came to House Prices 12 months ago....("Set to rise 100%") etc etc.

Of course all the homeowners loved headlines like that, so it was positive news for the homeowner. But recently there have been a articles that would be interpreted as negative to the homeowner.... Interest rate may hit 7%...

http://news.independent.co.uk/business/comment/article2553967.ece

Bogof_Babe

Forgive me if this is inappropriate, but I really cannot understand why you are trying for another baby if your present circs are so stretched that you are already overcrowded. However that is, of course, your business not mine.

I would just add that the rental option is all very well until you reach retirement, with possibly an inadequate pension to pay your rent as well as everything else, whereas if you struggle on with the mortgage then at some stage you will own your home outright.

I think you need to project your plans forward several decades before you take a leap into the unknown now.

I also agree with the previous poster that your mum has to be told that things are difficult, and prevailed upon to contribute realistically to the household finances.

pickles110564

phlash wrote: »

How very noble of people to buy up property that FTB's need in order to satisfy their greed for money, when there are perfectly good other investments.

In the past I have tried These so called good other investments, recommeded by IFA's only to lose quite alot of money.
That is why I buy property up so if I lose it will be down to me and not paying for advice and then losing my hard earned money.


Some investors don't mind subsidising their tenants

That is because I want to put something back into society and look after those poor soles that through no fault of their own have gambled drunk and wasted their money