Should I move?

AndyBanks

Hi all,

I'm currently looking to move house but the continuing news about dropping prices is concerning me. I'm after peoples opinions on my situation to try and guide me as to what I should do.

I currently own a house worth £130k-£135k with an outstanding mortgage of £88.5k.

The house I am looking at is £186k but I suspect this would come down to £175k (ish)

I understand that falling house prices will affect me wherever I live.

Financially we can afford to make the move and based on the figures above we would end up with a mortgage in the region £130k on a property worth £175k-£186k (based on selling mine at £130k). We would be a long way from negative equity and could withstand a drop of 30% in prices before negative equity became an issue. We would be able to stop in this property for a good 5-10 years as it is in a good school area and is a 'family' size and style house.

To top it off, the owner of the new property is a developer and would look to part exchange ours at market rates in order to free up some capital for him.

So, what are the pitfalls of moving whilst the market is in it's current state? Should we just get on with it as either house will devalue over time (until the market picks up). To me it seems like a good time to bargain hard and get the new property at a good price but I am having doubts.

Any thoughts are appreciated.

beecher

Just remember if you realise it is a good time to bargain hard, then so will the person who buys your property. People tend to overestimate what they'll get when the sell, and underestimate what they'll pay when they buy

I'd want to know what the developer judges to be the market rate for your property.

Falling house prices will mean that the gap between your house and the next house up decreases so I suppose it is possible that it might be better waiting for a little while longer, but that depends on your area I suppose.

Would you have to pay an ERC for your existing mortgage?

AndyBanks

There's no ERC as the mortgage is portable and I would be happy porting it over. The extra borrowing would be an additional loan from the same lender but actually at a better interest rate than we are on now.

The area is West Yorkshire and it's a pretty sensible down to earth area in terms of prices. It's not like we're in the London area where a lot of property has massively inflated in terms of price. Don't get me wrong, prices have gone up but not stupidly.

beecher

Well if you want to move, and the move is not going to stretch you, go for it. Just make sure you can also afford the payments if interest rates go up a bit, and check exactly what money the developer would give you in exchange. I take it the new mortgage is going to be a sensible salary multiple?

chappers

exactly go for it , what you might lose in afall in value on your current home you will benefit from in the house you purchase, as you said this will be your long term home and you won't be overstretching yourself.
People see theri homes now as piles of pound notes and panic when they Phink the value of it may be falling but it is your home and provided you are not overstretched you should have no problem climbing the ladder as your needs change.
providing your new mortgage is affordable then I see no reason why you should let the housing market scupper your plans

AndyBanks

Yes, it would be a good multiple. £130k mortgage is a 2 x multiple of combined salaries.

Also, we'd be tied into a fixed rate deal for 5 years (4.5 years on existing borrowing, 5 on the new) and there are no charges on the new mortgage. We also get 10% per year overpayment allowance so we can chip away at the debt if we are ever in a position to do so.

beecher

I would go for it then

Trollfever

The area is West Yorkshire and it's a pretty sensible down to earth area in terms of prices.

Are you near Leeds?

AndyBanks

20 minutes in the Bradford/Halifax direction

Not wanting to reveal too much as estate agents read these kind of forums...

moneysavinmonkey

contrary to what seems obvious it is actually better to upsize in a falling market, and downsize in a rising market...

If you trade up then a 5% fall will take more off the price of the house you want to buy than the house you are selling.

As house prices are still falling then the longer you hold off the better the deal, but against this credit conditions continue to tighten so it might be better to move sooner rather than later.

Incidentally you expect your house to sell for roughly 3% less than top valuation but are expecting nearly a 6% discount on the house you want to buy.... unless your old house is in a sought after area and the other isn't then your figures look a little unrealistic.. probably looking at nearer the £125 mark for your house (which takes you under stamp duty level as well which would be a consideration perhaps?)

AndyBanks

moneysavingmonkey - thanks for your thoughts... very helpful.

As for the valuation side of things, I'm basing my current home's valuation on the price my next door neighbours has been valued at (£135k) and the price of next door but one 6 months ago (£140k).

The house I'm looking at purchasing is priced 5% above an identical house that sold 5 months ago. Considering that the market has actually deflated since then (by how much though?) I think my valuations aren't too far out. The property is also listed as "offers in the region of" and the guy who showed us around actually suggested they'd accept £180 for the property. This leads me to believe I've got quite a strong negotiating position on this.

I do expect to get knocked down on my sale price but can comfortably absorb £10k difference between each valuation before I'd have to review my finances.