Kyle T
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Registered: 11th Sep 04
Location: Selby, North Yorkshire
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Hello CS, this is a thread topic which ultimately only I'll be able to make a decision on but I'm looking for a variety of opinions or maybe even some alternative ideas. I know CS has some rather strong opinions on home owning and renting so im looking forward to some honesty either way. My personal stance is that I'd prefer to own where possible as I like to settle in and know its mine till I don't want it.
My situation is as follows:
I bought my first home at 21 (2008) when I was single and not earning much money, it's a one bedroom Redrow new build which was for sale at 88k. I got an 85% mortgage and Redrow provided the other 15% in a ten year interest free loan which needs paying if I sell the property before 10years is up. I've got most of that 15% locked up in company shares which I can't get for another four years.
For a couple of years now I've been living with my girlfriend as she has been in education but she is now applying for teaching jobs starting in September, that combined with the fact my salary has pretty much doubled since I bought the house means we can afford something much nicer/larger in terms of bills and monthly payments.
My next door neighbour is currently trying to sell for 80k (identical property) so if I was to sell for that I would pay off the 72k left on my mortgage and would have 8k towards the 13k I owe Redrow. I could find the other 5k quickly (downsize car if needed) to pay off Redrow but that would mean I'm only breaking even, ie 0 deposit... 
Given three years or so and we could easily save enough deposit for a mortgage big enough for the type of house we would want, and my shares would almost be "ready", but that's a long time to remain in our tiny property and we will need a second car when she starts working with nowhere to park it!
On to the point... Finally. I'm now considering selling up, squaring up with Redrow and then renting a larger property for a few years while we save for the deposit. The drawback is obvious, I'm paying somebody else's mortgage for x years but at the minute I feel the lifestyle improvement would be worth that. I've checked rental prices locally and there are four bed properties around for similar money I'm currently paying monthly so i won't be losing too much ground towards the deposit, I may even be able to lower monthly payments...
If I could get a 100% mortgage I wouldnt hesitate, but I don't know how much longer I can live with this limited space and storage...shit piled everywhere as we just don't have space, not a nice living environment tbh.
The patient/sensible option is to suck it up and stay put, I could increase my mortgage payments or just save save save and then move in three or four years... I'll be old by then though and probably will be slightly insane.
I want to speak to my mortgage lender about it but I don't think they can help me without some equity
So CS, what are your thoughts? I welcome people either talking me into it or out of it but I strongly feel there are pros and cons to either option. 
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Aaron
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inb4theportfoliosanddeadmoneycomments
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Kyle T
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Registered: 11th Sep 04
Location: Selby, North Yorkshire
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quote:
Originally posted by Aaron
inb4theportfoliosanddeadmoneycomments
I'd be disappointed if the didn't come flooding in tbh, why else ask CS 
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John
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Registered: 30th Jun 03
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Difficult one. What about a loan to pay off redrow?
Teaching jobs aren't the easiest to get just now, I'd wait until she gets one of them for definite before weighing it up. That might not happen until 2 years time for example.
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XE Col
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Registered: 23rd May 10
Location: Rochdale, AKA:Boissy07
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Is renting your house out not an option? Then rent a larger property whilst still gaining equity in your own? Get someone to pay your mortgage for a few years until the shares are freed up?
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VegasPhil
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Your lender is the first port of call. They may allow you to rent it out on your resi mortgage with permission from them without the need to Remo to a BTL product.
Then you can do into rented yourself as per your plan above.
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Hammer
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Registered: 11th Feb 04
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Don't allow the stigma of renting to influence your decision, if it's purely financial do the sums and base it on that.
I'm of the same 'dead money' opinion but its hard to argue with those that say renting is now as good an option as it ever has been.
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Kyle T
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Registered: 11th Sep 04
Location: Selby, North Yorkshire
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Teaching jobs are hard ATM for sure, but she's plugging away and has a couple of promising opportunities lined up. Still I won't commit to anything till she is in and working... Infact she will force the decision by not getting a job and may make life simpler 
A loan is a sensible option to settle Redrow, it would save me faffing around selling the car and will probably come into play if we pursue selling up. It still leaves me down a deposit though for a few years.
There is a single property on my estate up for rent ATM and its for an amount roughly equal to my mortgage payments so if I could be confident of consistent "renters" it's certainly an option, but I've got no idea what financial credentials I would need to allow me to rent out one property and take out another mortgage? Either way I guess that elusive deposit would still bum me.
Thanks gents, keep discussing... It helps me to think 
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XE Col
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Registered: 23rd May 10
Location: Rochdale, AKA:Boissy07
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quote:
Originally posted by Kyle T
There is a single property on my estate up for rent ATM and its for an amount roughly equal to my mortgage payments so if I could be confident of consistent "renters" it's certainly an option, but I've got no idea what financial credentials I would need to allow me to rent out one property and take out another mortgage? Either way I guess that elusive deposit would still bum me.
Thanks gents, keep discussing... It helps me to think
Only have the one mortgage, if you rented yours out, I know it's not as simple as that, but then rent a Place yourself for a couple of years, you can then put your house on the market at a more sensible time for you, ie you can pay redrow, and have a deposit for a new house once the house you already own has been sold? This way you would only need one mortgage, whilst you rent anther house, then once the capital is there sell house, pay off the mortgage and ten take another for new house
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Kyle T
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Registered: 11th Sep 04
Location: Selby, North Yorkshire
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Ah I see, that makes much more sense!
I guess that my current lender are the right people to speak to about that? Under what circumstances would I be allowed to rent my current property on my current mortgage?
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Kyle T
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Registered: 11th Sep 04
Location: Selby, North Yorkshire
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Hmm just done some googling and it seems it's my lenders discretion as to whether or not I can rent my current property.
Something that concerns me from my wee google session is that I may have to pay income tax on the rent I'd be receiving and based on the rent rate of the other property on the estate that wouldn't cover my mortgage payments never mind leave room for gaps in rental and potential costs.
I'm not sure what "may" means exactly though in this case so something else to ask my lender or at least someone in the industry I guess!
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James
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Registered: 1st Jun 02
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You will pay income tax on the rental income after the allowances that you can offset, there's a full list on the HMRC website but it's stuff like mortgage interest (but not capital repayments), letting agent costs and maintenance etc.
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Colin
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Registered: 4th Apr 02
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Rent your place out for a few years until its got a few quid equity in it? Then rent/save up a deposit for a new place.
I personally wouldnt sell at a loss if you've been paying a mortgage for 4yrs.
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Ian
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Registered: 28th Aug 99
Location: Liverpool
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Not really done any proper maths on it but first glance it appears like you can't go anyway - if you come out having forfeited your equity for a quick sale and sold your car to pay Redrow, you've got no deposit and the likelihood of getting a 100% mortgage on the next place is very small.
I don't really buy that you can rent while saving, particularly as you'll want to have come out of it living somewhere larger meaning you'll be paying more pm, you'll need another car, everything else gets more expensive not just the rental bottom line, bills etc. for example. If you rent as the next move you'll probably be in that long term until you either do accrue a deposit or you find a lender who'll go to an LTV percentage that you can meet.
Even 10% gets larger if you need it against a more expensive property. Plus you've arrangement fees and the like with the cheaper ones, legal fees, you're going to need £20k for a £150k house.
As I said, no clear maths on it yet but the sensible thing to do while you've got an interest free loan is to actually leave that debt in place for as long as possible and use any extra money you have to pay off debts which are actually incurring interest such as your actual mortgage.
Also your additional salary and hers when she starts earning it won't count for as much until they've been in place a while. You can't go to a mortgage lender and talk about salary multipliers on a situation which you've been in for a week.
Ultimately anything is possible if you throw enough money at it and bigger houses are nicer, but at what cost. You need to work it all out but I would think a move means you're a renter for the foreseeable future. Which also is no bad thing.
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IvIarkgraham
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Registered: 27th Mar 04
Location: Ellesmere Port, Cheshire
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stay where you are for a few years whilst saving a deposit would be my advice
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AndyKent
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Registered: 3rd Sep 05
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You haven't said why you need to sell the house other than to have somewhere bigger?
If you don't need to move, don't tbh. Cheapest option is to stay where you are.
Also highlights the reason I don't like these FTB 'get you on the ladder schemes' leaving you with a 15k debt over your head for 10 years...
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John
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Registered: 30th Jun 03
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quote:
Originally posted by Ian
You can't go to a mortgage lender and talk about salary multipliers on a situation which you've been in for a week.
When I got my mortgage they were happy for both of us to be in this situation, gf had just got a permanent teaching job but hadn't started yet and my wages had just gone up.
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Kyle T
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Registered: 11th Sep 04
Location: Selby, North Yorkshire
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quote:
Originally posted by Ian
Maths
Thanks Ian, I need some people to start telling me that either I can't afford it or that it's a really bad idea just to make me slow down a bit and run things through properly. To be clear though, I'm settled on the fact that we will not be selling one property and buying another one any time soon.
I wasn't really clear on a timeline for the possibilty of me renting but this isn't going to be done until at least very late 2012 or early 2013 as I need to make sure my missus gets settled into work, will need to buy her a car and we've got an Orlando holiday booked for July which I'd like to get out of the way.
It's funny you used a 20k / 150k example as 150k is around the purchase price I'd be looking at based on current examples locally, could get a 3bed detached with a garage and drive space for two cars for that. 20k is also the figure which I'd arrived at (15k deposit, 5k for other costs) based on a few basic lender calculators and a bit of finger in the air stuff.
Once she's working, we could probably maintain our current standard of living, get her a car and put away a little over 1k a month into savings. If being really ambitious (and well behaved) that would leave us two years to get the sort of deposit we'd need and some furnature etc. Realistically, I'd probably project a three year timescale because of the well behaved part 
We've been living on my salary alone now for a few years, and it's increased by about 75% since I've met her so our standard of living has slowly crept up and up to fill the increase, being totally honest I could wind my neck in a bit and double my current mortgage repayments if I wanted so that would be an option if we decide to stay put for the next 2-3 years.
(on that note, based on my loan amount, interest rate, monthly repayments and payment term could I calculate how much I would benefit by if I was to double my monthly payments? In the last four years I've paid off a massive £2k and the rest has all been interest, so by doubling up I guess I could give myself a headstart on having a bit of equity if I do stick around).
As for renting out my current place, the more I look at it the more it seems I'll be just bleeding money as I couldn't charge a rent rate which would cover my costs. Ultimately this may end up worth it regardless as I can retain the interest free debt with Redrow until my shares become available. I'd need to have a long hard think I reckon, but I'd need confidence of a pretty consistent rental which I guess you just can't be sure of.
As for an interim renting property, I referenced a 4bed that I'd seen which is way overkill. All my requirements are is at least two bedrooms (one to be used as an office), room for two cars, some external storage (shed/garage) and just a bit more internal space in general. When I come to buy again it would be three bedrooms at least for the event of a you know what turning up, but that's certainly not on the scope for our proposed rental duration.
quote:
Originally posted by AndyKent
You haven't said why you need to sell the house other than to have somewhere bigger?
If you don't need to move, don't tbh. Cheapest option is to stay where you are.
Also highlights the reason I don't like these FTB 'get you on the ladder schemes' leaving you with a 15k debt over your head for 10 years...
Basically my reasons are as follows:
No Storage space, we've got room for one wardrobe and one chest of drawers... result is piles of ironed clothes on the bedroom floor and pretty much any flat surface.
No Parking space for a second car, each property on my estate has an assigned parking spot so "her" car would need to be parked off the estate.
No spare room, we've basically got a bedroom, a bathroom and an open plan frontroom/kitchen which means when either of us need to work at home when the other wants to watch TV, play xbox, masterbate, etc it's just not ideal.
No Garage, shed, driveway, etc - makes storing my fishing gear and washing my car and stuff like that an absolute nightmare.
As for the "get on the ladder scheme" I've got absolutely no regrets, it got me my own place at 21 with a low salary and no partner - I thoroughly enjoyed living on my own even when I had barely any cash for a social life or hobbies. Perhaps renting for the last four years would have been a valid alternative but I fell for the stigma like many others. I'm "struggling" now to leave, but it's only because I'm impatient and greedy for an improvement in our standard of living - there's no hard reason forcing me out, I just want to improve my situation and if that comes at a cost... so be it.
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Ian
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Registered: 28th Aug 99
Location: Liverpool
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quote:
Originally posted by John
quote:
Originally posted by Ian
You can't go to a mortgage lender and talk about salary multipliers on a situation which you've been in for a week.
When I got my mortgage they were happy for both of us to be in this situation, gf had just got a permanent teaching job but hadn't started yet and my wages had just gone up.
Things were different in those days. OK I'm guessing, but I think it will be more difficult lately to convince someone about a situation you're only just in.
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Ian
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Registered: 28th Aug 99
Location: Liverpool
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quote:
Originally posted by Kyle T
(on that note, based on my loan amount, interest rate, monthly repayments and payment term could I calculate how much I would benefit by if I was to double my monthly payments? In the last four years I've paid off a massive £2k and the rest has all been interest, so by doubling up I guess I could give myself a headstart on having a bit of equity if I do stick around).
You could calculate it, or I could tell you now, paying it off is a good idea. If you've got spare cash, use it on the debts you already have, starting with the highest interest rate first. Perhaps its good to work it out as a bit of an incentive but even without doing so, those are the facts.
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Ian
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Registered: 28th Aug 99
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quote:
Originally posted by AndyKent
Also highlights the reason I don't like these FTB 'get you on the ladder schemes' leaving you with a 15k debt over your head for 10 years...
As opposed to your actual mortgage which leaves you with more for longer and also attracts interest?
I'd borrow some of my property value interest free given the choice.
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AndyKent
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Registered: 3rd Sep 05
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quote:
Originally posted by Ian
quote:
Originally posted by AndyKent
Also highlights the reason I don't like these FTB 'get you on the ladder schemes' leaving you with a 15k debt over your head for 10 years...
As opposed to your actual mortgage which leaves you with more for longer and also attracts interest?
I'd borrow some of my property value interest free given the choice.
See what you're saying but no, because it leaves people with a false sense of security that something is affordable simply because part of the cost is offset for 10 years.
I'd say from experience that the vast majority of people are suckered into deals thinking something is a bargain forgetting the impact of needed to find more money later.
In an ideal world where everyone puts aside £15k/120 every month yeah, you're right, but which first time buyers do that really?
Developers advertise these as affordable houses, but in truth they're as equally overpriced as normal - that's my issue.
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John
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Registered: 30th Jun 03
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quote:
Originally posted by Ian
quote:
Originally posted by John
quote:
Originally posted by Ian
You can't go to a mortgage lender and talk about salary multipliers on a situation which you've been in for a week.
When I got my mortgage they were happy for both of us to be in this situation, gf had just got a permanent teaching job but hadn't started yet and my wages had just gone up.
Things were different in those days. OK I'm guessing, but I think it will be more difficult lately to convince someone about a situation you're only just in.
A year ago 
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John
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Most of these schemes the share you are buying is all the house is actually worth from what I've seen, I agree with Andy.
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Kyle T
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Registered: 11th Sep 04
Location: Selby, North Yorkshire
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quote:
Originally posted by Ian
quote:
Originally posted by Kyle T
(on that note, based on my loan amount, interest rate, monthly repayments and payment term could I calculate how much I would benefit by if I was to double my monthly payments? In the last four years I've paid off a massive £2k and the rest has all been interest, so by doubling up I guess I could give myself a headstart on having a bit of equity if I do stick around).
You could calculate it, or I could tell you now, paying it off is a good idea. If you've got spare cash, use it on the debts you already have, starting with the highest interest rate first. Perhaps its good to work it out as a bit of an incentive but even without doing so, those are the facts.
I'm starting to sound a bit dim now so apologies, but let's assume a couple of things:
1) I decide to stick around in my current property for two years whilst obtaining the deposit to move
2) There are no repayment penalties on my mortgage (I believe my actual limit is something like 2500 per year I'm allowed to pay extra without being penalised, but let's forget that for now and pretend I can pay whatever I want whenever I want).
If I was going to put aside £1000 a month, would it be better to put it into an ISA or similar, or would it be better to simply increase my mortgage repayments by £1000 instead?
I used an online calculator and if I were to increase my repayments by £1000 each month, I would pay off my mortgage in 5 years 
That would give me a nice chunk of equity I guess, but that's five years living somewhere which neither of us want to live in - and I know I'll get penalised by my lender for doing it anyway... so meh.
If I maxed out what I believe my additional payment limit thingy is, I think that would bring me down to a 14year mortgage which is seriously crazy when it's only about £200 extra per month... I could easily afford that, but then If I want to sell within the next 12months it hardly seems worth it.
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