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In this housing market/wider economy would you stay in your house and improve or increase debt to buy bigger?(3 Posts)
I have posted this in a few other places but thought I'd try to look at it from a purely pragmatic, financial approach.This'll be long so bear with me while I work this out...
At the moment we live in a house that we love, that is on the market with the aim of sizing up. We have a 14 month old DD, I am pregnant (due in May) and we have 2 dogs.
Our dilemma is whether to move, looking for another bedroom and reception room or whether to stay and do some improvements here. Our house at the moment is a really lovely, characterful 2 bed Victorian terrace cottage, with a great long garden and off road parking. Pros and cons as I see it are:
- We love this house
- We don't have a huge mortgage
- We are walking distance to the beach, town centre, amenities etc etc
- Only need one car
- On a busy-ish road
- Noisy, in the respect that it is all creaky wooden floorboards, stairs off the kitchen so when DD goes down we have to tiptoe round if making drinks etc
- Couldn't put an extra bedroom in, we are in a conservation area so could only do a single story.
In order to get what we need/want from another house we would need to up our mortgage by at least £50k, this is affordable monthly and we can do it on DH's salary etc. However, my/our worry is that the whole financial world seems to be going to hell in a handcart and we really don't want to be maxed out. Staying here would mean we had far more leeway each month to save/overpay the mortgage, have more leisure stuff for the kids etc. But, we would only ever have 2 bedrooms. I guess I'm worrying about interest rate rises and cost of living increases etc, DH earns a good salary and this will go up (I may go back to work at some point too) but I think the uncertainty worries me.
If we stayed we would:
- Do a single story extension, meaning a reasonable sized living room with log burner etc then a good sized kitchen diner which would have room for a full dining table, sofa etc etc. This would incorporate a good sized utility room. Downstairs bathroom , which doesn't bother us.
- Carpet throughout to try to reduce noise and make cosier.
- Nail down creaky floorboards, hang a heavy curtain over entrance to stairs to try to minimise noise travelling.
- Sort garden. It is very ornate at the moment (previous owners) and we would rip it up, turf it etc providing a good sized seating terrace area (would get comfy outdoor furniture etc to make an extra room really), large grassy area for children playing, utility area at the end for workshop, greenhouse, raised beds etc.
- Upstairs would still only be two double bedrooms, but ours is very large so whe the children got older we could swap rooms and they have the large one as play room as well.
This idea really appeals to us, to hunker down and see what happens in the economy etc but I am worried whether we should be stretching ourselves for extra space at the moment when the housing market is low. Will we regret not pushing for a bigger place? Is much more space important? We had never discounted having more than 2 children, but if we stayed here I don't think we would.
We have a fairly small mortgage here given the price of the area, but I don't know whether we should be speculating/pushing ourselves in this market.
Is this a no-brainer and I'm just over-analysing? We're both quite debt averse on the whole so I don't know whether we're being far too cautious.
There are too many 'depends' really.
-In a flat market, it might be exactly the right time to trade up because the bigger house is likely to be at a more attractive price than in a buoyant market
- Is the cost of improvements on your current house going to increase its value or is there a 'ceiling' to the price of houses in your current location? A builder friend once spent thousands massively improving & extending his home but, because it was surrounded by cheap, small, scruffy properties, it never realised its potential and he struggled to sell it.
- If you can afford to trade up and your income/employment seems relatively stable, the state of the economy (although not totally irrelevant) may have no effect on you at all. More people will keep their jobs in the next few years than lose them. Insurance could give you peace of mind.
- Savings are attracting 2% or 3% which, with inflation at 4%+, means anything you put away is worth a little less each year. In a country with a chronic shortage of housing, property over the long-term is still a reasonably good investment risk.
We bought a roomier property with more potential for expansion in 1990 when the market was very low, stretching ourselves financially in the process. In the space of the next 4 years I lost my job, split from DH and watched mortgage rates go from 10% to 15% and back again. Despite all that, I held onto the property and it's been the best thing I ever did.
For me in the current world the one thing they don't make any more is land - IMO the most secure place for my money to be.
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