FTB in a cheap area or mortgage up in a better area?(33 Posts)
DH and I have lived in rented with our DC and have never owned property. The rent is very cheap and we're working ft and plugging away at saving for a deposit but the landlord has indicated that he wants to raise the rent significantly to reflect local rates-this would effectively almost double what we pay.
To buy in our naice area, where the DCs are settled in 'outstanding' schools costs £200k+. Within 12-18mknths we would have enough for a 5% deposit for an ex local authority 3 bed house. However, 6 miles away we could buy now with a 10% deposit, renovate (kitchen, bathroom, redecoration) and overpay on the mortgage to build equity/save then move back into our naice area with a healthy deposit in time to apply for secondary school for DC2.
DH feels that this is too much of a risk (he really wants DC2 to go to the outstanding secondary that DC1 attends). I think that buying at the bottom end of the market here and having a bigger mortgage and higher interest (due to 95% mortgage) would effectively keep us skint for the foreseeable and with fewer options to move up the ladder.
We're both pushing 40 and have had enough of feeling powerless and at the mercy of landlords. We would like to have our own home so that we can have some financial security during retirement. So, what should we do-move cheaply now or save for longer and live in the more desirable area?
So if you don't buy now, your rent is going to double? I'd move to the cheaper place now and get the best fixed rate you can - I read something this week saying the interest rates will have to go up soon and I think Brexit is going to have a big financial impact too.
I don't think the rent will double that quickly but I do expect it will be hiked significantly within the next 6 months, then periodically until the LL gets what he wants for it. The house is very tired and needs work.
Good point re. Interest rates, thanks.
It depends how different the areas are really.
Also moving is expensive. By the time you've paid stamp duty, legal fees, surveys, removals etc you're looking at at least £5k so you'd have to factor that into the cost of any plan to move again in a few years.
Personally I would mortgage up and get the property I really wanted as we've tended to be cautious in the past and in retrospect would have done better financially if we'd mortgaged up. But it very much depends on your personal situation taking into account things like job security, appetite for risk etc.
The less desirable area is a former pit town. It has a nicer new build part that we couldn't afford, and a council house estate that we're looking at where lots of the housing looks privately owned and well kept although not all. The properties there are under the threshold for stamp duty but yes, there are surveys and legal fees to factor in. I think we could increase the resale value by around £20k+ by doing basic renovations costing around £10k then move within 18 months -3 years.
We would be looking at a similar properties in the nicer area-still ex LA and requiring work but costing £200k. We would be effectively 'stuck' living there for far longer as the prices of these haven't increased much over the last couple of years and it will take much longer to build equity.
Personally, I believe that the risk is in moving out of the area as we may not be able to sell on depending on how the market changes with Brexit etc. We both have secure jobs with good prospects and DH will be fully qualified and commanding a salary increase if 5k+ within 3 years. We also have personal debts of £10k which will be paid off within 2.5 yrs.
We have just done this (haven't exchanged yet). Sick of paying rent and both nearing 40. We opted for the area 6 miles from us. In our current area we could afford a 3 bed terrace in the area we have chosen we have got a 4 bed detached with garage.
We have two older boys 12 & 11 who already had a place in the nicer area high school and will get the bus each day. We also have 2 younger boys 4 and 9 months. We will just see what the high schools are like at the time for them.
We have more of a plan to stay in the not so nice area though. It's only a 15 minute drive max into the nicer area. You never know you might love the not so nice area and not want to move. Lots of children attend the high school in the nicer area here and it's not the catchment school. In these times with prices rising all the time I would just get on the property ladder as soon as possible with the smaller mortgage.
It comes down to this - none of us have a crystal ball
I think people are getting wise to the do up properties and unless you are a builder or stay a long time then the money just isn't there
Location sells over everything else
You can afford the nicer area and if prices increase the nice area will increase as well
Take a fixed low interest rate and remorgage in 3 years if the equity increases and if you can save put that towards the re mortgage
It's a dilemma, isn't it? The property saying of location location suggests that you should always buy in the best possible area, but who's to say that you if you bought in the less than desirable area it doesn't then become an up-and-coming area?
Something you need to take into consideration is whether your DC will be happy in the former pit town - is there enough for them to do when they're not in school, and will they be able to easily see either old friends from your current area, get to the secondary school easily and/or make new friends easily. I assume it's no problem for your work. And if you were to buy there, and then want to re-sell after renovation, would there be a steady stream of potential buyers, and who would they be? If you renovate, would these buyers be able to afford your home? Would you get enough equity in the property to cover your renovation cost, and resale costs and be able to see this in the selling price?
If I thought that both DH and I were getting a pay rise in 2-3 years, and the bedrooms were definitely big enough, I would buy the smaller house in the better area. It will (presumably) always be desirable and you are more likely to get more equity, faster, in the property. More stability for everyone as well by staying in the same area, if that matters.
I think the risk is that the new Hines will increase the number of pupils applying for schools so DS2 may not attend the same school as his brother
It sure is a dilemma chinup. There is a park and local Cubs / scouts group in the former pit town area. There's also a bike path that connects it with the nicer area. The DCs are in breakfast & after school clubs almost every day too but I acknowledge that they might be seen as 'different' by their peers there as they attend schools in the 'posh' area. I would make sure that friendships are retained too -this wouldn't be too difficult as they would stay at the same schools.
Properties in the former pit town sell fast and there's a marked difference in price (comparatively) for those in Need of renovation and those that have had work done (i.e. Bathroom moved upstairs). I don't know who's buying though so that would be good to find out.
Some mixed advice here, though 😐
I would buy in the nice area. I wouldnt want to risk getting stuck in an area that I didnt really want to be in.
Is there a secret option 3 of moving into a smaller rented flat in your preferred area, for a limited time, to boost your deposit savings more quickly?
Selling a property is expensive. I am a bit too risk averse to risk moving out and back in with such a hard deadline, and I think there's a risk that prices in your preferred area rise faster than those outside. The fixing-up-and-selling-for-profit model is ok if you want to live there or can be flexible on when you sell, but too risky for my liking if you definitely want to sell in a specific timeframe. It does totally depend on your attitude to risk though - with mine, I'll probably never be rich!
We've just gone for option 3 - buying somewhere smallish in the right area and saving like mad so we can afford somewhere bigger in a couple of years. We've worked out that even if the market is stagnant we'll have enough equity in a couple of years to afford all the extra moving/selling expenses and still have an extra few thousand to put into the next place.
It'll mean 4 of us squishing up in a 2 bed flat for a while, but it should be worth it - it works even if the market drops and our flat devalues by 25K or so, although if it's any more than that we might have to stay there until it goes up again.
Spent years living in bad areas - just like being somewhere nice, and it's better for the kids.
Location, location, location
If you know where you want to live, focus on that. It's too complicated and uncertain to move somewhere else with the plan to make enough money to move to the other place
Ahhhh so difficult. I was all for moving to the cheaper area when I started this thread but now I'm being persuaded otherwise
I would love to stay where we are be it really is only a short drive and we got our house for £200,000 + cheaper than a house that size in this area.
Could you possibly rent just short term 6-12
months in the not so nice area to see if it's really as bad as you think? I presume the rent would be cheaper and if you hate it you will have more money saved.
I would buy a small place in the best location then look to move somewhere bigger in a few years. Moving is stressful and expensive and if you need to be in the naice area in 3 years' time you may struggle re: increased prices leading to increased equity (any increase could easily be swallowed up in fees/moving costs) and being in a rush to sell/find something to buy. Get to the right location and you can move at your leisure when you have the money.
5 years ago we had a similar choice to you & we picked a small house in the better location. The area has become more desirable & as a result house prices have increased by 30%. The house prices in the other area haven't changed & the houses can be on the market for months.
If given the choice, don't buy the best house in a bad area, buy the worst house in a good area.
The worst thing I did was buy a house in an 'up and coming' area of Wolverhampton.
14 years later, the shithole is still a shithole, the house has required a massive spend and full DIY SOS refurbishment to bring the house up to the amount I paid for it.
Location, location, location. Every time
I know you say you'd retain DCs' friendships by not moving schools but it's a bit discombobulating for them if it means being in a different town to their friends, and at a different school to all the local children. It sounds a bit like being at a private school, you don't get the same feeling of being part of the place that you get by staying local. OTOH compromising to get on the housing ladder is what most of us have to do at some point, and as compromises go there are far worse ones.
I like Beautician's suggestion of renting in the second choice location for a while.
Pushing 40 is not old but at some point, banks might get twitchy about giving you a 25 year mortgage, so do your research sooner rather than later. I guess we all have to expect to work to 67 or 68 now so maybe that won't be an issue.
I'd consider buying something smaller in the nicer area. 2 bed house or 3 bed flat depending on if you have 2 children of the same sex who could share.
I'd move to the pit town. For the security of the smaller mortgage. But I'm very cautious that way.
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