Jump to content
House Price Crash Forum

Recommended Posts

Morning

I know this might fall into the 'should we buy or rent' category, but it's a little more complicated than that, so I though tI'd canvass opinion.

We put our house on the market a few weeks ago, and it went for very near asking price, so we snapped that offer up with the intention to go into rented. All fine, expect the availability of 'family homes' in this area is so scarce, that we've been looking for two months and there's simply nothing available. (Looking very actively too, visiting agents, registering with all of them, putting postcards up in shops, speaking to locals etc etc etc).

Now I wanted to sell the house, to get the equity out (not much, only about 50k ish) so that we didn't loose it come the DoubleDip.. However if we exchange (today of tomorrow) then we have two minus points:

First is that trying to find a rented 4 bed house is a nightmare, but assuming we do (big assumption) then due to the very good mortgage rate we have, it's going to cost about 1k pcm more than in rent than mortgage. So I guess you could simply say "well you've got 50 months worth of mortgage to buy a new place before you're worse off)... well not so, because...

Secondly, the mortgage we have is after the product has come to an end, and somehow we managed to find ourselves on a permanent deal that is fixed to be 0.5% over base rate - essentially it's a tiny amount leaving the account each month - assuming rates stay low.

Of course there are a few other things in the mix too, from what I can see if we sell:

Good points:

• Have flexibility

• Chain free when coming to buy again

• Equity safe (not in sterling!) and so more of it when buying again

• Getting much needed space in a larger rented place... (see below)

Negative points:

• Second baby arriving in October, current house not really big enough, extra stress if we don't find place

• Losing out 1k+ pcm until prices come down say another 20% ish

• Tricky finding a place that will accept pets (two dogs) don;t want to kennel them for long

• Rental places by good schools like rocking horse s....

• Not being able to port, or move back onto, the excellent 0.5% over base, mortgage deal. If we give it up, it's gone forever.

What do you think?

Share this post


Link to post
Share on other sites

I think this might fall into the 'should we stop to think for a fraction of a second before making a monumentally stupid mistake' category.

The mortgage deal you have is worth a lot. I doubt we will see anything like that again for many years. What you might lose in equity you would probably make up in lower interest payments.

However, from the way that you write it sounds like you have a large mortgage. Is this a concern? You need ot take into consideration how secure your jobs are, how big the mortgage is relative to your salaries, opportunities for new employment if one of you lost a job, and how long you wish to stay in the area. What sort of interest rate could you tolerate if you both remained employed? If one of you was employed?

It doesn't strike me that selling your house is a sensible thing to do without further information. If the house was being sold for 650k, I might have one opinion, if it was selling for 200k I might have another.

Share this post


Link to post
Share on other sites

If you can afford to pay out another £1,000 per month to rent ( which clearly you can) then I would put the funds into either paying down the mortgage or perhaps building an extension to cope with the new baby..... under negatives you have also not included the costs of buyign and selling and getting any new place into the shape you want it, nor have you mentioned the fact that your str fund may well shrink in value in real terms if you wait for a correction and its a long time coming.

I'd stay where you are save like crazy for the extension.

Also bear in mind that with so little equity you may well be prevented from boorwing enough to buy the bigger place you want.

If you can extend to make the house livable for the next ten years and acan afford it then the house price correction when /if /however it comes won't be the highlight of your life.. your family will be

Share this post


Link to post
Share on other sites

I agree, without knowing how much value the house has it is hard to know. If we get a further 20% fall then that will wipe out your equity if you house is valued at 500k. However if it is a 150k house, then it is not so bad.

In your shoes I would be looking to see if you can buy another house which suits you and port the mortgage - many can be. The deal you have is unlikely to be repeated in the next ten years or more. The amount you could save on interest could cancel out any loss of equity anyway.

Share this post


Link to post
Share on other sites

Well, I think you'd be mad to sell. I wouldn't want to wait for house prices to fall by a massive 20% just to break even. I suspect you've come to the same conclusion and just want some confirmation before doing the dirty on your poor buyers.

Share this post


Link to post
Share on other sites

Morning

I know this might fall into the 'should we buy or rent' category, but it's a little more complicated than that, so I though tI'd canvass opinion.

We put our house on the market a few weeks ago, and it went for very near asking price, so we snapped that offer up with the intention to go into rented. All fine, expect the availability of 'family homes' in this area is so scarce, that we've been looking for two months and there's simply nothing available. (Looking very actively too, visiting agents, registering with all of them, putting postcards up in shops, speaking to locals etc etc etc).

Now I wanted to sell the house, to get the equity out (not much, only about 50k ish) so that we didn't loose it come the DoubleDip.. However if we exchange (today of tomorrow) then we have two minus points:

First is that trying to find a rented 4 bed house is a nightmare, but assuming we do (big assumption) then due to the very good mortgage rate we have, it's going to cost about 1k pcm more than in rent than mortgage. So I guess you could simply say "well you've got 50 months worth of mortgage to buy a new place before you're worse off)... well not so, because...

Secondly, the mortgage we have is after the product has come to an end, and somehow we managed to find ourselves on a permanent deal that is fixed to be 0.5% over base rate - essentially it's a tiny amount leaving the account each month - assuming rates stay low.

Of course there are a few other things in the mix too, from what I can see if we sell:

Good points:

• Have flexibility

• Chain free when coming to buy again

• Equity safe (not in sterling!) and so more of it when buying again

• Getting much needed space in a larger rented place... (see below)

Negative points:

• Second baby arriving in October, current house not really big enough, extra stress if we don't find place

• Losing out 1k+ pcm until prices come down say another 20% ish

• Tricky finding a place that will accept pets (two dogs) don;t want to kennel them for long

• Rental places by good schools like rocking horse s....

• Not being able to port, or move back onto, the excellent 0.5% over base, mortgage deal. If we give it up, it's gone forever.

What do you think?

I think you are a nutter.

Share this post


Link to post
Share on other sites

I would have to really hate where I live to STR in the circumstances you describe.

I have just STR but I was only benefitting from a base rate +2% SVR, it was a 2 bed flat in a poor area with massive over-supply of flats, we snaffled a 3 bed house with garden in one of the best areas we could find for less than £300pm more in rent so the balance was far more in favour of STR than you describe.

And even I'm starting to think that nominally we would have been better off staying, battening down the hatches and and paying it off but you? Christ on a bike.

Share this post


Link to post
Share on other sites

Do your buyers a favour. Have the common decency to pay their costs when you pull out.

A noble sentiment but it seems a little foolish to me.

Buyers and sellers both know perfectly well that nothing is settled until exchange, that's how the game works. Both sides are well aware that an unwritten agreement to sell is not legally binding.

I would no more expect a seller to refund the buyer's costs than I would expect a buyer to pay the seller's agency fees on pulling out of an unwritten deal.

Share this post


Link to post
Share on other sites

stay where you are, save some money, build an extension, in that order.

you'll lose a good portion of that 50K in transaction costs.

What he said... is an extension not feasible?

Share this post


Link to post
Share on other sites

Are you selling as a purely financial decision, or are you selling because your current house is too small with the new baby and so doesn't meet your needs?

If it's purely financial it seems a huge upheaval to try and protect 50k of equity - especially as a house price crash is far from guaranteed.

If on the other hand you really want to sell because it's too small, that changes the picture.

I recently STRd because I wanted to move areas anyway, so just rented rather than bought in the new area. I had a +2% tracker, so not so gutting to lose either.

Share this post


Link to post
Share on other sites

Are you selling as a purely financial decision, or are you selling because your current house is too small with the new baby and so doesn't meet your needs?

If it's purely financial it seems a huge upheaval to try and protect 50k of equity - especially as a house price crash is far from guaranteed.

If on the other hand you really want to sell because it's too small, that changes the picture.

I recently STRd because I wanted to move areas anyway, so just rented rather than bought in the new area. I had a +2% tracker, so not so gutting to lose either.

Both really. Current house is too small, and will be very much so soon. Plus I'd like to ensure we have an additional 50K into the STR fund, to push it up to the 175k mark, so that we can get something with a hefty deposit in either 6 months, or (depending on how fast the market dips) just keep sitting tight until nearer the bottom

Extension isn't really an option, as it'll not add to the value, and will draw down from the STR fund to do it.

Share this post


Link to post
Share on other sites

Are you selling as a purely financial decision, or are you selling because your current house is too small with the new baby and so doesn't meet your needs?

If it's purely financial it seems a huge upheaval to try and protect 50k of equity - especially as a house price crash is far from guaranteed.

If on the other hand you really want to sell because it's too small, that changes the picture.

I recently STRd because I wanted to move areas anyway, so just rented rather than bought in the new area. I had a +2% tracker, so not so gutting to lose either.

Forgot to say:

I think one of the key benefits is flexibility: either in being able to buy chain free, or not being tied to the current area...

Share this post


Link to post
Share on other sites

A noble sentiment but it seems a little foolish to me.

Buyers and sellers both know perfectly well that nothing is settled until exchange, that's how the game works. Both sides are well aware that an unwritten agreement to sell is not legally binding.

I would no more expect a seller to refund the buyer's costs than I would expect a buyer to pay the seller's agency fees on pulling out of an unwritten deal.

So, you're ignoble then.

I had to pull out of a sale once - changed circumstances. I paid my buyer £500 'without prejudice' as a contribution to their costs. Why not? I'd fecked them about and they had spent money on a survey and solicitor.

Share this post


Link to post
Share on other sites

Current house is too small, and will be very much so soon.

Get real. Come and see my family living in our small flat and tell me your house is too small. I dream of owning a three bed flat, never mind house.

It's a no brainer. With that mortgage deal; simply stay put. Either build an extension or cull the kiddies plastic toys. You'd be amazed that they can live equally happy lives without a sea of plastic.

Good look with the coming little 'un :)

Share this post


Link to post
Share on other sites

Your lifetime tracker mortgage at 0.5% base is a never to be repeated deal. If / when base rates rise, weakened banks will need to retain decent margins above base rate in order to rebuild their balance sheets. Falling prices will only do more damage to banks balance sheets, putting upward pressure on their margins to mortgage customers. I expect you would find it difficult to get better than 2.5% above base rate on your next purchase in the future, if you were to sell. On a mortgage of £100k, it could cost you an extra £2k per annum were you to sell and give up this mortgage.

Assuming you rent for 2 years before buying, it will cost you an extra £24,000 to rent.

From your situation: young family, £50k equity, extra £1000 per month to rent etc, I am going to make some assumptions and guesses about your situation:

Your mortgage is IO to make that amount of difference between renting and buying.

Your current house is a 3 bed worth £175-225k.

Your mortgage is between £125-175k

Your current IO mortgage repayments are between £100 and £200 per month and renting a 4 bed (if you can find one) is going to cost around £1200 pcm.

We talk about the big double dip to come, but what if it the economy stagnates but there is no currency crisis? If IRs stay lowish for the next 4 years, prices could hardly drop or even rise slightly. You need to think seriously about what you would wish you had done in that situation.

One key question is can your family live on your single income and pay the higher rent without eating in to the capital that you would have?

You sell. You pay a fortune in rent. When you come back to the market in a couple of years you are offered a poorish mortgage deal as your £50k only equates to 17% of the £300k 4 bed that you want to buy in a good area.

Do you really need the extra room? Could the kids share when they are a bit older? Could the spare room double as the baby's room if you had a guest bed in there? These are certainly similar to the issues that my wife and I are currently dealing with at the moment, and we sold a year ago, giving up a lifetime repayment mortgage at 0.23% above base rate. I think we will be crying when we get our next mortgage!

If you are currently in an area with good schools, (and also as dog owners) there are many good reasons for you to stay put if you can.

Give us a bit more information on your situation, and good luck!

Blimey - if those are assumptions you need to get down to Mi5 quick, they need you.

You're pretty close with the numbers, the 50k is an addition to the STR fund though, and the next purchase would be in the region of 4-500k (todays prices) with a 30-40% deposit

The dog thing certainly is an issue, far more than I thought it would be... Surprising really as you wouldn't know we had dogs just by looking in the house.. only the garden, and i'd be happy to pay for a rental garden to be returfed!

I think the 2 key issues are flexibility (as mentioned) and how much of a drop over the next year or so... I'm guessing if HPC guys see 20% as a big, near impossible drop, then we're stuffed

Share this post


Link to post
Share on other sites

Blimey - if those are assumptions you need to get down to Mi5 quick, they need you.

You're pretty close with the numbers, the 50k is an addition to the STR fund though, and the next purchase would be in the region of 4-500k (todays prices) with a 30-40% deposit

The dog thing certainly is an issue, far more than I thought it would be... Surprising really as you wouldn't know we had dogs just by looking in the house.. only the garden, and i'd be happy to pay for a rental garden to be returfed!

I think the 2 key issues are flexibility (as mentioned) and how much of a drop over the next year or so... I'm guessing if HPC guys see 20% as a big, near impossible drop, then we're stuffed

I might be a party of one but I really cannot see inflation adjusted house rpices dropping by 20% or anything like in the next twelve months.... maybe over the next three to five years we might see some falls in that order.... nominal prices might be flat over that time and I suspect for the poor buggers with STR funds they'll see bugger all return ... so all in all even after a 20% real prices drop they may not have much better options especially if you factor in the mortgage requirements and slowing pay rises etc.

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...

  • Recently Browsing   0 members

    No registered users viewing this page.

  • 259 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.