Financial/Mortgage Advice please

mircea

Hi everyone

We would like to receive some advice/options for our present situation:
- Owner occupiers, house worth £150k mortgage £132k but have a 30k unsecured loan (Northern Rock) - no other debt apart from car HP
- worried about house price drops and negative equity as we would like to move in the next couple of years (house is a very small two bed terraced and we already have one child but we would like another one)
-joint incomes £60k - emergency savings £3k

We did some raw calculations and it looks like this:
Option 1 - We stay in the house and sell in two years
Worst case - prices drop 30% over two years. Our level of debt rises to £50k or £25k if we add a bedroom to the property
Best case - prices drop 10%. Our level of debt rises to £24k or we have a £2k profit if we add a bedroom to the property

Option 2 - We sell now and live with my wife's parents for two years
Worst case - we sell for £140k. After two years, saving the most we can, our level of debt will be around 8k
Best case - we sell for £150k. After two years, we paid the loan back and saved £7k.

We would really like some advice on this. Many thanks everyone.

potter78_2

There's a lot of variables to consider, but my advice would be to put the house on the market now and see if you can get a decent offer. If you do, go live with the in laws for a couple of years, pay down the debt you have left and then buy again. If you can't sell at a good price, stick it out and hope prices don't fall too far.

Doozergirl

Assuming that you're adding another bedroom, do you really need to move?

Your incomes are more than enough to cover your mortgage and your unsecured loan. It does sound like a tightening of the belt is in order because you should not be in debt with salaries to that effect and a mortgage that sensible.

You can sell up if you want, but I think you can afford to see yourself through. If your house has potential to extend then you can fit another child in to boot. If you want to move up the ladder then you need to address your debt situation regardless of what happens to the price of property.

Why on God's earth would you earn £60k a year and live with your in-laws? I don't care how nice they are, you earn enough money to keep your dignity There's a nice little car sitting on the drive isn't there?

pip_rogo

*bump* lets get some replies

mircea

Doozergirl wrote: »

Assuming that you're adding another bedroom, do you really need to move?

Your incomes are more than enough to cover your mortgage and your unsecured loan. It does sound like a tightening of the belt is in order because you should not be in debt with salaries to that effect and a mortgage that sensible.

You can sell up if you want, but I think you can afford to see yourself through. If your house has potential to extend then you can fit another child in to boot. If you want to move up the ladder then you need to address your debt situation regardless of what happens to the price of property.

Why on God's earth would you earn £60k a year and live with your in-laws? I don't care how nice they are, you earn enough money to keep your dignity There's a nice little car sitting on the drive isn't there?

Hi

Thanks for your reply. Even if we add another bedroom the house is so small downstairs that the living space is claustrophobic. I think our living room is something like 3.5m/3.5m. The debt we have is nothing to do with our lifestyle but rather with specific personal circumstances which are beyond the scope of this post.

The reason why I want to put up with the in laws is because this way I can save rent money and get rid of the loan - I don't like to be in debt.

The answer to your last question is no, there isn't. It's an economical family car, bought second hand to avoid depreciation. When purchased, we chose a Which magazine winner and got the best price we could by following the advice on this site.
Cheers,
Mircea

Doozergirl

Are you sure then that another bedroom will add £25,000 on top of expenditure to the property? If the downstairs is cramped, it will be even more cramped with a two child family, which is the reason you need to move!

You can overdevelop a house - two bed terraces, for example, often dont take well to loft conversions because the downstairs accommodation, gardens and/or parking situations don't suit the sleeping accommodation. What happens then is that the house is perhaps only worth the cost of the extension extra.

NikkiP_2

mircea wrote: »

Hi


The reason why I want to put up with the in laws is because this way I can save rent money and get rid of the loan - I don't like to be in debt.

Mircea

I think you have answered your own question.

mircea

Doozergirl wrote: »

Are you sure then that another bedroom will add £25,000 on top of expenditure to the property? If the downstairs is cramped, it will be even more cramped with a two child family, which is the reason you need to move!

You can overdevelop a house - two bed terraces, for example, often dont take well to loft conversions because the downstairs accommodation, gardens and/or parking situations don't suit the sleeping accommodation. What happens then is that the house is perhaps only worth the cost of the extension extra.

Yep - house next door added a bedroom and is on the market for 180k.

Bf109

mircea wrote: »

Yep - house next door added a bedroom and is on the market for 180k.

Means nothing. Wait till it sells and then you will see what its worth.

Alan_M_2

At the risk of appearing blunt, with a joint income of £60K you should have no trouble in clearing the unsecured loan in 2-3 years if you tighten the purse strings.

Trade the car in for something a little less expensive and remove the loan repayment.

Pump this into your house, and when things get economically better start spending again.

I guess it comes down to how much you want to compromise your lifestyle for your own financial security.

mircea

Alan_M wrote: »

At the risk of appearing blunt, with a joint income of £60K you should have no trouble in clearing the unsecured loan in 2-3 years if you tighten the purse strings.

Trade the car in for something a little less expensive and remove the loan repayment.

Pump this into your house, and when things get economically better start spending again.

I guess it comes down to how much you want to compromise your lifestyle for your own financial security.

Hi Alan
Thanks for the advice - not sure if we can tighten anymore, we are already on a strict budget, shop at Aldi, swap homes for holidays etc. but I'll have a chat with my wife to see if we can save some more.

The car stays purely because my wife commutes for 40 minutes daily to work, and drops my son off to the childminder near her school. I deliberately chose the safest family car, as I am a firefighter and I know a few things about car crashes - of course the risk can never be entirely eliminated, but I won't trade for a cheaper car unless it offers the similar level of safety for occupants impact protection.