Buy or rent in up and coming area?

peachespeaches

Stay on the property ladder if you can. We came off it following a divorce and didnt get back on quickly enough. Now we cant afford to buy and have to rent. Downsize a bit.

Romani_Ite_Domum

I have given this some more thought based on the info you have given.

As you have said, nobody has a crystal ball but here are 3 scenarios based on your situation. Assuming that your family income will double in 3 years and you would want to move to a better house at that time.

In 3 years prices go up by 10% or more over the 3 years (3% pa). If you really think this is going to happen, you would be better off by MEWing your existing house by £36K and using this to pay towards mortgage interest payments. The way I see the housing market at the mo, this would be a mad thing to do as far too risky.

In 3 years prices are exactly the same as now. It will cost you about £7K to buy and sell your "temporary" house. All the interest you will have paid would be like renting from the bank. You would be better off investing the equity and renting somewhere better. You would be in a much better position as a cash buyer when your circumstances change again.

In 3 years prices drop. As above but in a better position still.

If it were me in your situation, I would rent.
If prices do go down, not all LLs will sell if they can ride it out. Some may be forced to. As far as rents going up, the housing market does not dictate rents. If a crash occurs LLs will be glad to keep a good tenant. If the correction is large enough to cause a recession, rents will actually fall.

prudryden

Well - I must admit, I never thought that buying one's family home would depend on speculation. It's like buying life insurance - let's wait and see if the premiums come down - not so many people dying at the moment. Might as well go out and buy soy beans - definite up trend there.

mr.broderick

prudryden wrote: »

Well - I must admit, I never thought that buying one's family home would depend on speculation. It's like buying life insurance - let's wait and see if the premiums come down - not so many people dying at the moment. Might as well go out and buy soy beans - definite up trend there.

Pru I think I posted a similar post recently..absolutely bananas isn't it...

diesel9181

would it be possible to change your mortgage short term, maybe to interest only til you have 2 incomes? i know of a few people who sold with a view to renting and cant get back on the property ladder. if you love your house i would try and hold on to it (even defer from uni for a year to get more money together?) what about downsizing and renting somewhere small and renting out yours til OH graduates and it may pay for itself? only suggestions tho! good luck

prudryden

mr.broderick wrote: »

Pru I think I posted a similar post recently..absolutely bananas isn't it...

Sorry Mr. B. - I wasn't plagiarizing intentionally. I didn't see your post. But good to see we think alike.

mr.broderick

prudryden wrote: »

Sorry Mr. B. - I wasn't plagiarizing intentionally. I didn't see your post. But good to see we think alike.

Don't be daft..you're ok sir..

saverstacey

diesel9181 wrote: »

would it be possible to change your mortgage short term, maybe to interest only til you have 2 incomes? i know of a few people who sold with a view to renting and cant get back on the property ladder. if you love your house i would try and hold on to it (even defer from uni for a year to get more money together?) what about downsizing and renting somewhere small and renting out yours til OH graduates and it may pay for itself? only suggestions tho! good luck

thanks for the ideas.

mortgage is already interest only, and renting it would not cover the mortgage at all. although the house is beautiful, its not our 'dream' home and if we had the same amount of money to spend i'm sure we would find something we liked as much or more. so i really don't mind having to sell.

gosh it's a really difficult decision

sorry if this is being thick, but what is MEWing?

saverstacey

prudryden wrote: »

Well - I must admit, I never thought that buying one's family home would depend on speculation.

Yes, I agree its a shame its come to this, but as you can see from this board there seem to be lots of people who have maybe made the wrong decision and have either ended up renting and now unable to get back on the property ladder or else have bought at too high a price and are now in a shaky position if the market does correct itself.

Any home we buy now would not be a 'family home' just a stop gap in case prices rose so much whilst we were renting that we could never get back on the property ladder and buy that 'family home'.

Any more opinions?

Romani_Ite_Domum

saverstacey wrote: »

what is MEWing?

MEW stands for Mortgage Equity Withdrawal.
Basically you are borrowing more money against your house and you will be paying interest just to pay the interest so to speak.
If you really wanted to hang on to your present house. If you were guaranteed of doubling your family income. If you are sure prices will at least keep pace with inflation and If you are sure you could also ride out any IR increases then it would be an option.

Too many ifs for me. As your current house is not your dream house I would say the option is no longer valid.

It is a really difficult decision. I sold my 4 bed detached farmhouse ( worth £300K ) 3 years ago as I got divorced. I thought I had to stay on the "property ladder" as prices were going up. I bought a 3 bed semi Townhouse for £190K. House is Ok but location sucks in the winter and I have never been happy here. The house has been on the market for 20 months now. I just got an offer today of £190K off an £235K asking price.

Moral of the story: If you decide to buy again, make sure its a place that you will be happy in and make sure its a place that will sell easily when you want to. Unless you are in a high demand area, its always a lot easier to buy something than to sell it.

Good luck and let us know how you get on.