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WWYD - extend, buy bigger, or buy a dream house?

(26 Posts)
abitembarrassedtobepostingthis Thu 15-Jan-15 16:05:05

Warning: this could not be more of a 'first world problem' kind of a thread. I have NCed for it because I am frankly embarrassed to be posting about this. But I do need advice from people who know about property and finances, so here goes.

I don't come from a rich background at all. I'm still not wealthy by Mumsnet standards!! But I find myself, unexpectedly, in the extremely fortunate position of being more than comfortably off, and I am not sure what to do in terms of my next move on the property ladder. I am pretty naive about these things, so please go gently with me.

We own our current house outright. It's a bog standard 3 bed semi in a bog standard area in a relatively cheap northern city. The value is about £170k. We like it. The neighbours are lovely, we have a nice garden which I've worked very hard on, and we like the area. The only problem is the kitchen is pretty small.

We will be in this city for at least another 5-10 years I think, but in future the aim is to move to a much more expensive city further south (jobs permitting). DH has quite a secure job (for the times), and is paid around £55k. His boss has said that he will almost certainly be promoted in the next 1-2 years, which will be an increase on that salary or £10-15k. I am not currently working due to ill health. He is 42 and I am 37.

We are in the very fortunate position of having around £120k in savings. I know that isn't much to many people on here, but it is an absolute fortune to me! So we have several options.

1. We could stay here and extend the kitchen modestly, which would leave plenty of money over for a rainy day
2. We could move to a bigger place with more character and still be mortgage free, though this would eat up our savings, which worries me.
3. We could move to a dream place and take on another mortgage of about £100k

I am naturally quite cautious and hate debt, so inclining towards (1) and very definitely away from (3). However, my best friend says I'm being stupid and should put the money in property as it is safer. DH doesn't really care as long as we are happy.

In my shoes, what would you do?

TheWiseOldElf Thu 15-Jan-15 16:09:35

If you're planning to move geographically again in future I would extend - add value to current property and avoid expense and hassle of moving. Lucky you!!!

Surreyblah Thu 15-Jan-15 16:14:55

What a nice dilemma!

Will the kitchen extension be likely to add much value? Are house prices in the areas you might move to in the short term going up?

(Potential opportunity to make money from a move to a local property, but obviously some risk too).

Moving down south, especially if to or near London, will likely cost a bomb! So if you're sure about the move it might be good to try and grow your equity somehow in preparation.

YoullLikeItNotaLot Thu 15-Jan-15 16:15:48

I think I agree with wiseoldelf but I'm also thinking potentially DH will be 52 when you move to expensive city. Is that the right stage in your life to be taking on more expense or would you be better keeping your savings and adding to it over the next 10 yrs to you can hopefully but outright there too?

I only ask as we extended our house, but I think the value added is only marginally more than the cost of the extension but to us that's fine as we're not planning on moving and are just delighted with the extra space.

HerRoyalNotness Thu 15-Jan-15 16:19:08

If you don't need to move, I'd stay put.

And if you are planning to move south in 5-10yrs, I'd use the 120k for 2-3 deposits on buy to lets, say 2x50k, or 3x30k deposits, keeping some back for rainy day fund.

Build up the equity in those houses and sell when it's time to move.

Apatite1 Thu 15-Jan-15 16:25:25

I'd not count on any extension adding to the value of your house. For this to happen, you probably need to up-spec the existing house, add rooms, increase the energy efficiency, upgrade kitchen and bathrooms and even then, every area has its ceiling. You will make money only if it's the right type and quality of extension and you are in an area of rapidly rising house prices. Do you think this is likely?

I'd buy the dream house.

EnriqueTheRingBearingLizard Thu 15-Jan-15 16:37:35

Hello OP.

I would get a couple of local builders, recommended if you can find any, and ask them to give you ideas and ballpark figures for extending your kitchen.
Then, armed with that information get three local estate agents to come and value your house as it is and secondly if you carried out the proposed extension.

Meanwhile do some internet research on properties in the more southern area you hope to relocate to and see if you could afford a buy to let property.
If the area is more expensive and you went that route you might benefit long term from an equity increase and when you did come to relocate you would have somewhere to base yourself inbetween selling the house you have now and finding a new home.

Once you have that information at your fingertips, as well as the full costs involved in moving to a dream home (purchase price plus estate agent and legal costs to sell this house, plus the price, stamp duty, legal and removal costs for the new house) To get a good idea of the fees involved you can ring and ask for solicitor charges and all the associated legal costs and disbursements.

Seeing those figures might help you crystalize your feelings.

IssyStark Thu 15-Jan-15 16:44:00

If you don't have to move, I'd simply extend. On top of the actual house price, there's stamp duty, surveys, removal costs etc. which makes moving very expensive. Given you may be moving again in the future, why pay out for two lots of expenses.

We're having a similar dilemma: like where we live, but just wish the kichen was larger. unfortunately with the way the garden is, there isn't much scope to extend sad

Btw, I think 120K is absolutely huge to have in savings, especially when you are mortgage free. We barely have £2k in savings (that's paying nursery fees for you) and I know that statistically our household income, which is over £80k before tax, means that we "have a higher income than around 87% of the population - equivalent to about 54.7 million individuals." (according to calculator from the Institute of Fiscal Studies). I really don't feel rich but I know I am very, very lucky to have what I do.

AryaUnderfoot Thu 15-Jan-15 17:03:27

I think you need to think carefully before extending. It's all well and good getting 'ballpark' quotes for extensions, but you then need to add one the 'we're going to have to's and the 'we might as well's to the cost:

'We're adding some radiators so we're going to have to change the boiler'

'We're getting the new room plastered so we might as well get the whole downstairs/house re-plastered to get rid of the yucky artex while we're at it'

'We're having electrical work done so we're going to have to put in a new consumer unit and we might as well get wired-in smoke detectors'.

If you're planning on moving in future, then you need to be sure that the extension is for your benefit and you don't mind not recouping the costs on resale or you have to be very careful with the budget and not get drawn into costly unnecessary extras.

I am just coming to the end of a two-storey extension and am speaking as someone who has gone a bit mad on 'might as well's. We have probably only added 80% of the cost of the extension to the value of our house, but this is our 'forever' house; the only way I'm moving out is in a wooden box!

RaphaellaTheSpanishWaterDog Thu 15-Jan-15 17:26:24

Having recently sold an extended house (SW) I agree with points made by both Enrique and Arya......

In 2011 we bought a house as a huge renovation project that we planned to stay in forever. We always go a bit completely OTT when doing houses up so knew we'd do that and some here, but not long after buying we had some painful family issues to deal with which caused us to rethink our plans to stay long term.

What we should have done at that stage was what Enrique suggests, but instead we ploughed on with our intention to build a mahoosive (single storey) extension without knowing if it would add value.

One thing led to another, as Arya says, and we ended up spending way more than we'd hoped planned. Luckily we too were mortgage-free and had the cash available to do the work, but not being ones to cut corners, instead of putting in Victoria Plumb, we went V&B and HG Axor etc.....

By 2014 the house was finished and as expected we needed to move for family health reasons (sick, elderly parents in a different part of the country) so we finally got the EAs round only to find that whilst we had added value, the profit we'd make on selling wasn't exactly going to set the world alight - which, as we'd done much of the work ourselves, felt as DH so succinctly put it, as though we'd just knackered ourselves restoring a house for someone else to enjoy!

Sorry to ramble on, but do think long and hard before committing yourselves either way.......

For us it's done and dusted now - we did sell, made our small profit and have bought somewhere far more suitable (and still no mortgage, yay!) where we are far happier.

Hope it works out whatever you decide!

abitembarrassedtobepostingthis Fri 16-Jan-15 13:22:31

Thank you all so, so much. There is some excellent advice here that I need to process. I am a bit clueless about this stuff, but I am also quite hard-headed and practical about such decisions. So I will definitely get an estate agent out and do some careful work on the costings before committing to anything (I tend to go into these things in some detail before I get started, so I will want to get a full plan costed with all major work covered, and not just a ballpark figure).

I hadn't really thought of a buy to let - I know nothing whatsoever about doing it! The area I'd want to move to is Cambridge, so hideously expensive to get even a flat there, though I can absolutely see the wisdom of doing so and being insulated from any further rises in house prices in that part of the world. I am in a northern city, and prices here have basically flatlined since 2008.

As for the practicalities of buy-to-let, I know nothing at all about the way these things work (you cannot underestimate my naivety about it) and am naturally quite risk averse. I would be frightened that a month or two without tenants would cause huge financial problems, but perhaps this is silly of me? I would also be concerned about maintenance, given that I am 200 miles away - presumably I'd need an agent?

mandy214 Fri 16-Jan-15 13:46:56

All I would say is don't under estimate the pain of extending etc simply to add value when if prices aren't increasing in your area and in light of ceiling prices you might not actually make a profit from it.

IssyStark Fri 16-Jan-15 13:49:34

But Mandy, as the choice is to extend to create space or move locally for a few years, then adding value is not necessarily high on the OP's reasons to do it.

Boysclothes Fri 16-Jan-15 13:54:34

I'd stay in the house, do a small kitchen extension simply so I would be happy to stay, keep back a small amount in savings (10k is my happy number) and put the rest into a rentable flat in Cambridge taking out a small mortgage if necessary.

bilbodog Fri 16-Jan-15 15:54:17

get some estate agents round to value your house and talk about what would be sensible extensions to do. You can then also ask their opinion on the property market in the area - have a look at what is out there now on Rightmove to see if there is anything that really grabs you - it may be that you can make your current house look like that or decide that as you have the money to make a jump up now - house prices normally go up by percentages so if your current house is now worth £200 and goes up by 10% that makes £220 but if you have a £400K house then that goes up to £440 - an extra £20K? That way you might have more equity to put down when you do move south.

Luckystar82 Fri 16-Jan-15 16:17:50

If I were you I would extend and buy a smaller cheaper property to rent out with your savings.

I agree with your friend that your money is likely to grow more in property than the bank.

You could then sell this second property a year or so before you plan to move south.

Luckystar82 Fri 16-Jan-15 16:26:33

If you want to move to Cambridge you need to move quickly. Prices in the city are sky rocketing (I have family there).

A small flat will set you back £200k. I think you should use your savings to invest now and get a smallish mortgage. You WILL make money. You would be mad not to!

However, the market in Cambridge is extremely competitive. My relatives tell me that regularly they turn up to a property and there are 25 viewers that day, house sold within days. Usually to a cash buyer.

Apparently the city has become very popular with Chinese investors. They come over for 'house buying trips' to add to their portfolio. My relative said they visited over 10 small terrace houses and about 70% are Chinese, no English so not living in Cambridge. They all have cash.

It will only get worse as Astra Zenica are moving to Cambridge soon - that's about 2000 more rich people looking for houses.

Buy in Cambridge as soon as you can I say!

mandy214 Fri 16-Jan-15 17:19:42

I just meant if you're not really going to add any value, the pain do I sound bitter having lived without a kitchen for a while of extending wouldn't be worth it. For the cost of the small kitchen extension, I'd move to a bigger house where you could potentially add value (on the basis that the costs of moving / stamp duty would be the same as the small extension).

GillSans Fri 16-Jan-15 17:27:13

Buy dream house with mortgage.

Keep your savings as you can access that easier if everything went tits up, but instead of continuing to save, overpay your mortgage as often as you can.

Kieron79 Fri 16-Jan-15 18:07:54

Hand in a minute! Am I missing something here? You have 120k in savings and a mortgage free with 170k equity and still you don't think your up to 'standard' of posters on here? I would say you are in an extremely price merged pursuit on compared to most. This isn't (at least I hope not) some elitist forum made up solely of multi millionaires. I would say most of those who do have big pots of cash will be mainly those who have gained massively through property market rises in SE and surrounding areas. fwiw I would extend! We had the dilemma if not being able to sell ours so took off market as decided to stay put and extend, on reflection we are v happy where we are, close to good schools, city and local amenities so made sense for us, every case is different though, only you know the right way forward, good luck

Kieron79 Fri 16-Jan-15 18:12:31

Hang on a minute even smile

hiccupgirl Fri 16-Jan-15 18:36:25

In your position I would extend your current home as even if it's doesn't add a massive amount of value it should help make it more saleable.

Then either buy an investment property in Cambridge ready for the future or hang on and wait till the move actually happens.

I def wouldn't buy a larger house where you are if it's only going to be for 5-10 years at the most.

Kieron79 Fri 16-Jan-15 18:43:44

Priced merged pursuit?? Privileged position!!hate iphone predictive!!

GillSans Fri 16-Jan-15 18:56:50

I thought priced merged pursuit made you sound v clever! Didn't have a clue what you were on about though grin

reallifegetsintheway Fri 16-Jan-15 19:21:07

I would, personally, do number 2 but only if it meant going detached. You have lovely neighbours at present but that could easily change. If the prices rise, you will have more equity to move with.

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