Sell up and rent?

[SO16_Saint]

What would you do?

 

We're in a position where we could sell up our house weve owned for 8 years and make 50k. After fees and paying off debts we would be left with around 18-20k in the bank.

 

We couldn't get another mortgage due to finances and work situation currently, but could rent for similar to what we pay mortgage now (plus some debt money).... So be financially better off.... But renting.

 

I Cant decide whether this is a good idea or plain stupid?

[Colinjb]

Is the payment on your debts in excess of any rise in equity that you are also making?

[Ohio Saint]

Firstly, how old are you? This would be a massive factor in such a decision. You are looking at a piddling amount for a young person, but if you have one foot in the grave, then it could be the way to go.

 

Edit: also, do they do "reverse mortgages" in the UK?

[SO16_Saint]

Firstly, how old are you? This would be a massive factor in such a decision. You are looking at a piddling amount for a young person, but if you have one foot in the grave, then it could be the way to go.

 

Edit: also, do they do "reverse mortgages" in the UK?

We're in our mid 30s with 2 kids under 4.

Is the payment on your debts in excess of any rise in equity that you are also making?

Not sure I understand the question

[buctootim]

We're in our mid 30s with 2 kids under 4.

 

Not sure I understand the question

 

Is your house increasing in value by more than your debt repayments? (it almost certainly is). For the average property in the UK cost £178,000 a year ago and now costs £188,000, so you've made as much money in a year as you would have spent to rent it. Houses make you money and as a nice bonus you get somewhere to live free - wrong, but true.

[SO16_Saint]

Is your house increasing in value by more than your debt repayments? (it almost certainly is). For the average property in the UK cost £178,000 a year ago and now costs £188,000, so you've made as much money in a year as you would have spent to rent it. Houses make you money and as a nice bonus you get somewhere to live free - wrong, but true.

Oh I see, yes you may be right... But what with the impending rate increases surely the price increases will slow down and possibly reverse?

 

Would it not be worth cutting and running and putting the amount we lay in debts into savings and get a good deposit up and buy in 3-5 years time?

 

It's never a sure thing and always a gamble i guess

[Colinjb]

Oh I see, yes you may be right... But what with the impending rate increases surely the price increases will slow down and possibly reverse?

 

Would it not be worth cutting and running and putting the amount we lay in debts into savings and get a good deposit up and buy in 3-5 years time?

 

It's never a sure thing and always a gamble i guess

 

Yep, Buctootim understood my point.

 

An interest rate rise will cause mortgage payments to increase but the price of property will at the very least stagnate.... If you rent you are just putting money into someone elses pocket (Often landlords will have mortgages on their rented out properties too, the rent prices will also go up), if the house price stays still you are at least paying off the mortgage and adding equity.

 

Personally, I think you would be mad to sell. Take a lump sum now and in 3-5 years you will have spent more on rent and have less equivalent value to play with to get somewhere else, leaving you 2 steps forward now, but 3 further back down the road.

[buctootim]

Oh I see, yes you may be right... But what with the impending rate increases surely the price increases will slow down and possibly reverse?

 

Would it not be worth cutting and running and putting the amount we lay in debts into savings and get a good deposit up and buy in 3-5 years time?

 

It's never a sure thing and always a gamble i guess

 

I don't think anyone can say with authority exactly what prices will do. However imo they will likely continue to rise because there are so few new houses being built, the population is increasing and the Bank of England will be very careful not to raise interest rates too fast and risk crashing the economy and housing market again.

 

Even if prices rises stay at the current low (by historic terms) rate of around 4% that is still an increase in value of £8,000pa on an average house - £40,000 in five years, more than you could save. See if your mortgage company will agree to you paying interest only for a couple of years and use the cash saved to pay off your other debts faster. If you present it to them as prudence, ensuring you don't get into difficulties whist you have a temporary income squeeze they should go for it. Get a money adviser at CAB to help you frame the approach if necessary.

[Whitey Grandad]

I don't think anyone can say with authority exactly what prices will do. However imo they will likely continue to rise because there are so few new houses being built, the population is increasing and the Bank of England will be very careful not to raise interest rates too fast and risk crashing the economy and housing market again.

 

Even if prices rises stay at the current low (by historic terms) rate of around 4% that is still an increase in value of £8,000pa on an average house - £40,000 in five years, more than you could save. See if your mortgage company will agree to you paying interest only for a couple of years and use the cash saved to pay off your other debts faster. If you present it to them as prudence, ensuring you don't get into difficulties whist you have a temporary income squeeze they should go for it. Get a money adviser at CAB to help you frame the approach if necessary.

 

Sound advice. I too think you'd be mad to sell. When my daughter first got set up with her (now) husband they were renting and paying about the same as they would for a mortgage but house prices were rising every much by about the same amount again and much faster than any money they could save. Don't forget the money lost in legal fees, estate agents and any stamp duties every time you move.

[SO16_Saint]

All good advice, thanks. It's easy to get carried away with the lure of having money in the bank but all things considered, it's probably not the wisest of moves and if we wait 5 years we'd keep all of the equity and move in one go

[igsey]

I think the decision is made easier knowing you have kids - if you have any choice at all, do not rent with small children. Owning gives security - you're not going to get kicked out at the end of a year because somebody else wants it or the landlord doesn't fancy it anymore. Equally, you don't have to worry about a child drawing on the walls (guilty!) and then being charged by your landlord for it.

 

Keep the house, watch the price rise, sell up when the kids have left and move to America where houses are cheap!

[eurosaint]

Don't rent, you'll lose control of your own affairs and that's the last thing you need !

Sensible comments on this thread so far, take heed is my advice !

[Ex Lion Tamer]

Yep, landlords can be a nightmare, you are very lucky to own, SO16_Saint

[SO16_Saint]

The Mrs is keen on selling up. I'm not averse to it. Both have positives and negatives and I keep going from one to the other.

[Colinjb]

The Mrs is keen on selling up. I'm not averse to it. Both have positives and negatives and I keep going from one to the other.

 

Be sure to list them. But really, while there may be short term positives to what you might be doing through selling up consider the long term handicaps.

[rallyboy]

I'm no expert but if you own, your investment is gaining value everyday.

 

So I would politely suggest it would be bonkers to get off the housing ladder and try to get back on it in a few years time when prices have risen and you have poured rent down a black hole - unless you have a lottery win around the corner.

[SO16_Saint]

Be sure to list them. But really, while there may be short term positives to what you might be doing through selling up consider the long term handicaps.

Thanks again, I will.

 

We're sort of handicapped with our financial situation anyway, at least for the next 5-7 years so. Being an adult sucks

[Colinjb]

Thanks again, I will.

 

We're sort of handicapped with our financial situation anyway, at least for the next 5-7 years so. Being an adult sucks

 

Reading between the lines, I am in a not dissimilar position myself. I have a lot of financial commitments that are taking resources away from areas that I would rather be paying for right now. However, should I weather the storm the financial future for myself and my family will be secure and there will be far greater options for us all.

 

I would take short term pain to secure long term gain every time.

[Big Bad Bob]

Weather the storm my man, a fewe years back I was in considerable amount of debt and my repayments left me with -ve disposable income at the end of the month.

 

With an impending Big Bad Bob junior on the way I approached the Consumer Credit Counselling Service who helped me contact the people who I owed money too and we came up with a plan to pay off all of my debts, basically a IVA but not!! Basically the CCCS worked out what my disposable income was at the end of the month and this is what was put by to pay of my debts.

 

5 years of not doing a lot later I am now debt free (except our mortgage) and enjoying life a lot more due to less worry about what I am spending money on.

 

Anyway, don't take the short term view, keep the house. Renting is dead money and only makes someone else richer.

[SOTONS EAST SIDE]

BBB yes the Debt thing we have all been there, or are still there. Pay it all off, regain control of your money. And save for what you want. I have learnt that lesson the hard way. Good luck with what ever you decide SO16_Saint.

[SO16_Saint]

That's the thing, BBB. We're in a fairly good position month to month (same route as you, but formally) but we're able to clear all the debts and have a bit (a lot, comparatively) left over if we sell now. Granted, Wed have a lot more in 7 years time when we're free.

 

We're just not keen on being handcuffed if I earn more some months and being stuck in the house for the next 7 years.

[buctootim]

Its not even just the money. Your kids will be starting school fairly soon. You don't want to be forced to keep changing schools and moving away from their friends because another tenancy has ended. Sounds like you're having a hard time coming to the realisation the single life is over (not a criticism, most parents have that struggle, I did). Once you get over that hurdle planning for the long term becomes a no brainer imo.

Edited 11 August, 2015 by buctootim

[The Cat]

We considered doing this a while ago but one major consideration was that because our mortgage rate is so stupidly low (base rate + 0.14%) we'd never get a similar deal if we decided to buy again a few years down the line.

 

Interest rates will rise slowly so getting a new mortgage in 5 years or so if you decide to buy again could be a lot more costly.

[SO16_Saint]

Just posted this to Col on PM, but it's relevant here too:

 

It's our mess and we'd like to pay back as much as possible so that is a factor too. We could quite easily have gone bankrupt and paid nothing, but we didn't see it as being fair at all.

 

Thanks for the positive words and advice. None of our family or friends know of our situation (2.5 years in to 6 year IVA) so had nobody to throw ideas out to.

 

Think we're erring towards a "no"

[Joesaint]

Dont't rent, its more expensive, and less secure for your family.

[Torres]

Obviously I know nothing about your situation SO16, but I would very strongly suggest that you'd be better off in the long term to keep the house and in 3 1/2 years when you're free of the IVA and still own your own family home you'll be delighted that you did.

[cryoman1965]

Obviously I know nothing about your situation SO16, but I would very strongly suggest that you'd be better off in the long term to keep the house and in 3 1/2 years when you're free of the IVA and still own your own family home you'll be delighted that you did.

 

THIS THIS THIS.

[SO16_Saint]

Obviously I know nothing about your situation SO16, but I would very strongly suggest that you'd be better off in the long term to keep the house and in 3 1/2 years when you're free of the IVA and still own your own family home you'll be delighted that you did.

 

Yep, i know you're right...

[Big Bad Bob]

Just posted this to Col on PM, but it's relevant here too:

 

It's our mess and we'd like to pay back as much as possible so that is a factor too. We could quite easily have gone bankrupt and paid nothing, but we didn't see it as being fair at all.

 

Thanks for the positive words and advice. None of our family or friends know of our situation (2.5 years in to 6 year IVA) so had nobody to throw ideas out to.

 

Think we're erring towards a "no"

 

I know it's hard but it's definitely worth it in the end. 3.5 years later you'll be feeling so much happier!

 

Not meaning to sermonise but....

 

My brother-in-law managed to ruin 2 businesses and ended up something like £150k in debt. He went the bankruptcy route (had no choice really I guess) but because it was so easy and he felt no pain he didn't learn any lessons. 5 years later he's got credit cards aplenty and has managed to rack up another £10k of debt. We keep urging him to be more prudent but he just says "something will turn up!"

 

I think it is 4 years since my "IVA" ended I have only just applied for a credit card and that was only to get my credit rating back up, I don't expect nor have any desire to use it!

[SOTONS EAST SIDE]

The world of finance/ loans ect is geared to put you into a debt spiral. Only the rich can play the system, as its bias towards them anyway.

[OldNick]

The world of finance/ loans ect is geared to put you into a debt spiral. Only the rich can play the system, as its bias towards them anyway.

Im not sure that is correct. if you save and pay back and cut your cloth according to your income buying your home is far better than paying a landlord.

Why pay rent so that somebody else can lie on a beach, rather than you as you size down when you get to an age?

My concern for SO16 is that the lure of all that cash in the bank will be too much and holidays to Disney etc will soon eat up the cash reserves.

I think you have come to your senses and have decided to stay and pay, rather than rent. When i read of young people with young kids struggling it does make you feel humble, but i went through that when i was young and am now well set.

Full respect that SO16 is not running away from his responsibilites and wishing to pay back. You should be proud of yourself

[trousers]

Change your name by deed poll to "Portsmouth Football Club" and within 3 years you'll be debt free without having to pay your creditors.

[suewhistle]

Yeah, but you'll be living in a rented ramshackle hovel.

[suewhistle]

Joking aside, stay in the market and stay in your house. In other countries rental gives good security - 4 year contracts and the like, but in the UK you'll be insecure with all the implications others have pointed out. It's all very well saying you'll be stuck for 7 years, but the alternative _could_ (might not if lucky) be a fortune spent on house moves, deposits and general disruption.

 

Have a look at the Money Saving Expert website which has loads of ideas for money saving and additional income ideas. If you could get (e.g. part-time job) or save £40 a week that's a couple of grand a year against debt/emergency reserve/living expenses/frivolities..

[Unbelievable Jeff]

If you need money and you have £50k in equity could you not just remortgage at a higher price. That way you're saving yourself legal fees etc at a small increase in monthly mortgage payments.

[SO16_Saint]

If you need money and you have £50k in equity could you not just remortgage at a higher price. That way you're saving yourself legal fees etc at a small increase in monthly mortgage payments.

We dont need the money, more that we considered paying money back to creditors. A remortgage isn't an option unfortunately

[moonraker]

This is a particularly British issue. We are obsessed with property ownership. The place you live in is your home, whilst as owner occupier it may rise in value (and historically this is generally the case) there are also many negatives. Any equity you have is purely on paper, you have to sell your home to release it or re-mortgage and take on more debt. The cost of ownership is rarely factored in to the ongoing cost of house. All liabilities arising from an owner occupier house are yours. Over a 20 - 30 year occupancy repairs can easily run into tens of thousands of pounds (Roofing, electrics, plumbing, drainage), when a housing slump. Interest rate hikes will reduce your ROI or worse force you into arrears (in the 1980’s they reached 18%). Housing slumps and interest rate hikes normally come along together, they hit your paper worth and can plunge one into the red very quickly, you may loose your home but you wont loose the debt, you will pay stamp duty when you buy and estate agents fees when you sell. People who own their own homes are psychologically less mobile often enduring lengthy and expensive commutes, when moving would be the more sensible option. Whilst renting has its drawbacks it allows you get on with your life and not be obsessed with your own little 'Englishman's Castle. Finally if the worst happens and you are out of work and broke the state will cover your rent they wont cover your mortgage.

[OldNick]

This is a particularly British issue. We are obsessed with property ownership. The place you live in is your home, whilst as owner occupier it may rise in value (and historically this is generally the case) there are also many negatives. Any equity you have is purely on paper, you have to sell your home to release it or re-mortgage and take on more debt. The cost of ownership is rarely factored in to the ongoing cost of house. All liabilities arising from an owner occupier house are yours. Over a 20 - 30 year occupancy repairs can easily run into tens of thousands of pounds (Roofing, electrics, plumbing, drainage), when a housing slump. Interest rate hikes will reduce your ROI or worse force you into arrears (in the 1980’s they reached 18%). Housing slumps and interest rate hikes normally come along together, they hit your paper worth and can plunge one into the red very quickly, you may loose your home but you wont loose the debt, you will pay stamp duty when you buy and estate agents fees when you sell. People who own their own homes are psychologically less mobile often enduring lengthy and expensive commutes, when moving would be the more sensible option. Whilst renting has its drawbacks it allows you get on with your life and not be obsessed with your own little 'Englishman's Castle. Finally if the worst happens and you are out of work and broke the state will cover your rent they wont cover your mortgage.

I went to a client yesterday, he bought his house in 1967 for £5k and has just sold it for £985 k. Had he rented for that time?

[moonraker]

I went to a client yesterday, he bought his house in 1967 for £5k and has just sold it for £985 k. Had he rented for that time?

I do not deny that House prices overtime have always risen and was not advocating renting as the best choice for everyone just that the true costs of home ownership are rarely acknowledge. Your friend was obviously able to weather a number of housing crisis, since 1990 there have been over 2.2m repossessions, that's a lot o misery. I have house I bought for £70k now worth £550k, however I have also spent an over £100k on maintenance and improvements and more will be needed soon. Your client has had to wait nearly 50 years for his return (and will still need somewhere to live) and similar returns are far less likely if you are starting out today. I have friend who is property developer, interestingly he has always rented his own home as he contends that it is only worth 'investing' in property to trade not to live in, don't necessarily agree with him, but he has sent 3 kids to Public Schools and has a very comfortable life.

[Whitey Grandad]

Think of your old age. No one else will.

[Toomer]

We down sized 18 months ago after all three kids had flown the nest, we were lucky we bought our house under the council right to buy 30 years ago and paid cash for it which we had after selling my mothers property after she passed away as it was not big enough for us to live in. We extended it and improved no end and made a tidy profit on it and after buying the new place and giving the kids a leg up we still put a nice amount away towards the holiday/retirement fund.

[Fan The Flames]

Twelve years ago a good friend of mine who had amassed some debt sold his flat in Stretham. I remember sitting in the pub pleading with him not to sell but he couldn't handle the burden of the debt and the length of time it would take to clear it off, he said that he would buy again when he got himself straight. He sold up, cleared his debts did a bit of travelling and had a great old time.

 

Twelves years on and he is in a rented flat, his old flat has trebled in value and he maintains its the biggest regret of his life. He now is a single dad has no security of tenure and says he has nothing to leave to his son.