Bought in 2007

Northern_girl_2

After delaying buying a house for a couple of years becuase people were predicting a price crash I finally bit the bullet and bought a house in April 2007.

I couldn't afford to save for a deposit as I was paying my way through a Masters course, which has meant I now have a well paid and relatively secure job. I therefore bought the house for £85000 on a 100% mortgage but did get a decent rate of 4.5%, which I fixed for 5 years (for a fee of £450). It is a capital repayment mortgage.

I am now starting to panic a little at the size of the housing price crash that people are predicting. My gut feeling is that the area I live in may not crash as far as others. I think I chose relatively wisely - existing houses are currently being externally refurbished by a Council regeneration scheme (they aren't ex/council housing but fall under an improvement area) and a lot of land directly opposite that was derelict is now being developed (the first phase is nearly completed) with a mix of privately owned flats and houses.

I'm just considering my options which seem to be either to:
a. stay put and accept that prices will fall. I would just have to hope the fall wasn't too bad becuase it is an improving area. I have no concerns about making the mortgage repayments.
b. put the house on the market now and incur the legal/moving costs and an exit fee from the mortgage company (I think this would be about £2000). Looking at propoerties for sale nearby I could probably still recoupe the £85000 I paid and possibly a little more (I've made some improvements and even accounting for the diference between asking price and price achieved there doesn't seem to have been a fall in the area yet). I would then rent but that would cost about the same as the mortgage.

My head is saying plan b might be the better option. However, there is a lot to be said for knowing this is my home and I had planned to be in it for at least 5 years.

Just wondering what people's thought/advice would be?

PasturesNew

I'd say stay put.

Yes, the market's going down, but your house is cheap so even if it became worth £1 you'd only have lost £85k, not £185k.

In your case I'd say you've worked towards this part of your life where you get to shut your own door on the world. And there's no obvious benefit to selling up.

You've been through the stress of buying, it'd be stressful selling (IF you can sell it) and stressful having sold wondering all the time what to do/when it's safe to buy again. Why do that to yourself. Now's your time to kick back and relax and say "b-u-gger it"

Saving yourself from some negative equity, in my opinion, in your situation, is neither here nor there. You've not spent a fortune on the house. You've not over-stretched yourself. You're at the start of your career/wages are likely to increase significantly over the next 5 years or so.

I'd say stay there, see how your life progresses in the next 1-4 years, then make a decision.

It might be that you are in negative equity at that point. But on your increasing salary you should be able to not worry about that too much or even try to pay off more of the mortgage over that time to minimise that.

You've nothing major to lose in price.
You might as well sit it out and just take the knock that negative equity will bring.

Worst case scenario in my opinion is the house will be worth £35k less in 5 years' time.

If you were somebody at the peak of their earnings and only just borrowed 5x their salary and got a 100% mortgage and were struggling financially, I'd say sell.

Good luck whatever you decide.

baileysbattlebus

If you can afford to pay your mortgage I would say stay where you are, especially if you have a decent fixed rate for 5 years.

Depending on prices in your area, you may or may not go into negative equity and if you do it only affects you when you sell, it's not money until you need to realise it.

During the last crash our house fell in value 40% (south east) my sister's house in the north east, which didn't see the huge increases ours had, slowly went up in value. I'm not saying it will be the same this time as there is an awful lot of expensive housing in the coastal areas of North Tyneside now.

You may even find that in a falling market there will be a demand for cheaper housing as people panic and start to look for somewhere more affordable.

I would stay where you are

chappers

Indeed whooa there! can you afford your mortgage comfortably at the moment, are you planning on going anywhere anytime soon ? if you answer yes and No to the above then what have you got to gain by selling up your payments are even secure for another 4 years yet.Reasses your situation closer to the time. This is your home not a pile of £10 notes sat in your garden.

Generali

I'd hang on in there - if you're not buying, selling or remortgaging it doesn't matter what your house is worth except as a bit of speculative one upmanship at a particularly dull dinner party.

gallygirl

At the moment, if you've been paying the mortgage for a year, you now owe 83k. If you sell for 85k you have 2k gross profit, minus fees so would walk away with nothing. That's assuming you have no mortgage exit fees. With a fixed rate that good I suspect there will be.

Your mortgage payments should be around £472. What can you rent for this? Not a lot I suspect. Plus you'd need to pay a deposit up front, incur moving costs and then have to make the stuff you bought for your house fit into a new property.

If you stay put in 4 years you would owe 74.5k. So, if prices fall 10% over the same period you would have some equity. If you sell and rent you'll have paid out more in rent and have nothing to show for it.

Admittedly you have maintenance costs etc with your own house. However, if you own it the repairs get done - you might struggle to get a landlord to do so quickly.

If I was you I'd not only stay put but take advantage of a low mortgage to save as much as possible in a cash isa & then make a lump sum payment off mortgage at end of fix. For instance, save £100 a month, increase that by 3% a year, and you'd have almost 7.5k at the end. So you would then owe only 67k.

You seem secure in your job & are happy where you are. Stay put!

& finally - where on earth are you that you can buy houses at that price

Deadman_2

Northern_girl wrote: »

After delaying buying a house for a couple of years becuase people were predicting a price crash I finally bit the bullet and bought a house in April 2007.

I didn't. I'm still waiting because I'm smart.

pinkshoes

Deadman wrote: »

I didn't. I'm still waiting because I'm smart.

Gosh, what a helpful post that was. well done!


OP, I'd stay put. I think you're panicking over nothing. Think of it as your home rather than an investment, and who knows what prices will be like when your 5 year fixed mortgage is up.

DawnW

If you can afford to, and you are allowed to without penalty under the terms of your mortgage, why not overpay a bit? It is surprising how much you can save over the term of the mortgage even by overpaying by quite small amounts, and you can build up equity a bit quicker. That way, you are even less likely to be in negative equity. And remember, negative equity is only really a problem if you have to sell, and can't afford to just sit it out. Seriously, I would hang on. You could possibly even rent out a room to cover overpayments. (PS I bought at the beginning of 2008. Whether or not it is a good time to buy depends upon one's personal circumstances and what the options are, as much as anything else. I had a big deposit (over 50%), and to be honest I was worried about the advisability of leaving that amount of money in the care of the banks at the moment. Now the interest rates seem to be heading downwards, I think I made the right decision, like you, I can easily pay the mortgage, and love my house!

gallygirl

Deadman wrote: »

I didn't. I'm still waiting because I'm smart.

Not particularly helpful .

Lets say 200k property bought last year on OP's mortgage deal of 4.5%. Payments £1116, total payback £333,333.49.

20% drop means same property costs 160k. No 4.5% deals, say 5.75% best around now. Payments £1006, total payback £301,971.07.

Ok, this is assuming same mortgage rate throughout, but still goes to show not such an obvious advantage to being smart.

Oh, and if prices drop 10% figures almost identical to 200k example. Plus the rent you've been paying while waiting for the crash . It's not just the price that matters.

Trollfever

And nobody told the OP that house prices fall as well as rise?