Stay Put, Sell and Buy Bigger House or Rent and Buy 2nd Home with Large Mortgage?

Sar12

My husband and I bought our first house at the end of December 2006 for £144K, its a small 3 bed semi and since then I have had little girl who is in bedroom 2, and bedroom 3 (the box room) is my office for when I can work from home. I am now pregnant again with baby number 2, so when he/she comes along we'll be struggling for space. There is the option of knocking through to the garage and creating and office/playroom and then we can have the box room back again. - so that is option number one.

Option 2 - We sell up, although we bought at near the peak and I reckon we'd get about £160K max for it now and since we've bought it we've put in a new bathroom, new kitchen, new windows and doors and done the back garden, so would be lucky to break even. We are in a fortunate position that we have been overpaying on our mortgage from near enough day one and we are now mortgage free though. We also have about £60K deposit to put down for the next house, so we could potentially have £220K towards a house before getting a mortgage and realistically the most we would probably want to spend on our forever house would be £350K, so the mortgage would only be £130K, which doesn't sound too bad.

Option 3 - As we have paid the mortgage off on the current house and have £60K for the next we rent out this house and buy a cheaper 2nd house but obviously we would need a bigger mortgage say £200K. The current house is walking distance from town, has off road parking and is on a quiet little estate and the houses here tend to rent and sell quickly and I believe we'd probably get £700-750 per month rent before any expenses.

Our Circumstances -
Ages - I'm almost 40 and my husband is 44
Salary - I currently take home just shy of £2800 a month and my husband takes home roughly £1900 a month.
Is Work Stable? - I work on a contract that is being re-tendered and I will find out in October whether the company I work for has won it, if they don't I will be either tupeed across or I suppose I may be made redundant and this would be at a statutory rate. If I lost my job I'd most probably have to take a pay cut to get the next job, possibly 6K or more a year.
Maternity Pay- As I said I'm pregnant and will go on maternity leave in January, my company doesn't give an enhanced maternity package and so I will just get statutory pay for the time I'm off, last time I had 7 months off (I am holding back some emergency money though from the deposit we have got).
Child Care Costs - Child Care is £42 per day, my daughter is in nursery 3 days a week, currently which will drop to one day when I'm on maternity leave. When I go back to work we will have to pay for 2 children for 3 days for a max of 6 months, by then my daughter will turn 3 and she'll get some free childcare.
Husbands Concerns - My husband is concerned about getting a £200K mortgage (probably over 20 years) at our age, as he believes the older we get if we lose our job it may be hard to get another one. I'm more inclined to think that if we get into trouble we could just sell our current home (as previously said they usually sell quickly around here), also the rent will help with the mortgage on the new home (not sure how much we'd have though after tax, agents fees etc), and I would like to overpay again on the mortgage to try and pay it off quicker.
My concerns - I have never rented a house before, I would probably use an agent though, it does seem a little daunting, just incase things didn't go to plan, i.e. bad tenants, tenants don't pay etc. I do think though, it is a good asset to hold on to, as house prices are definitely going up and so if we did decide to sell a few years down the line hopefully we'd actually make some money from it, or its an investment for our children or our pension.
I'd love to peoples thoughts on this, perhaps from people who have done something similar and their experiences and others who understand the money side of things and can advice sensibly on this.

Thrugelmir

Secure your employment first. There's no immediate requirement for the space. In the meantime you'll continue to improve your financial position.

Personally I would sell up and buy something that meets your needs as a family. Rather than the hassle of extending the existing property with a young family in situ.

Sar12

Thanks for your response Thrugelmir, I agree I wouldn't do anything until I know what's happening with the contract I'm working on, which will be next month. In the meantime though I wanted to get peoples opinions on the different options available so I can at least start thinking/researching etc.

tom9980

Anyone who wants to be a Landlord and is daunted by frankly reasonable and easy to learn regulation shouldn't be a Landlord. Delegating it to often sub standard agents who only care about a percentage of the rent and have no legal responsibility makes the whole thing less profitable than it should be and puts most/all of the risk on you. If you want that responsibility then you must spend 20+ hours doing proper basic research, please don't be another amateur landlord with no clue.

I would wait for your job situation to be sorted out because you are likely 2 years away from needing that extra room anyway with good organisation. Then think about moving when your new baby is a year old.

dimbo61

Well done on clearing a mortgage, doing up a property and saving £60K while also having time off to have your first child.
That is some money saving on £4700 a month take home ?
I would carry on building savings while enjoying the new bump and time off.
If you get made redundant you might get a good payout.
Renting is a job and comes with responsibilities and the Buck stops with you.
I would save for the forever family home if you can afford to sell and move