Buying a 2 bedroom house is my biggest regret

[Helmlover]

This thread is by no means to gloat but I would genuinely appreciate some advice on my current situation.

I am lucky enough to live in my own house which is paid for. However it is only 2 bedrooms with no scope to extend (we have already looked into this). I live with my partner and his 2 children stay with us twice a week, who occupy the 2nd bedroom.

The issue is, I would really like a child of my own so therefore we would need to move house. We tried to sell a few years ago with no interest whatsoever. I know that if I tried to sell again I would need to lower the price, but the truth is I’m not prepared to lose 4,5,6 grand as that is a lot of money to me, and have worked too hard to just throw money away.

Can anyone offer any advice on other options? I have thought about renting it out but I don’t know if it’s worth the hassle.

OP, I know it is hard if you think that you are losing money, but houses are a strange market and they are only worth what somebody will pay for them. I have seen houses sit on the market for months, because the vendor won't reduce the price, then as soon as they do, somebody buys it. When I bought my house, I paid X amount, then 2 years later, the identical one next door went for £5K less. It's just swings and roundabouts.

Have a look on rightmove and zoopla, get a realistic idea of what it is worth, get it on the market with a good local agent, and start looking in a slightly cheaper area for a 3 bed house.

Also, as suggested by PP, make sure that you protect your money and own the house in shares that match the deposit that you each put in.

OP if you take out a 100k mortgage on your next home over 30 years, you will 'lose' 100k in mortgage interest (ie end up paying back 200k total!!) If you were renting a 3 bed house you could 'lose' 12k per year.
6k isn't so bad, although I completely understand that because it is negative equity it feels much worse.

Is there no room in the garden for a small extension (maybe a double) so there would be scope for 1 or 2 extra rooms. Other than that, I agree with renting it out and buying/renting a 3 bed for yourself.

And I agree with others- you can't protect yourself from negative equity, but you CAN protect yourself from losing a lot more than 6k if your relationship ends or your partner dies without a will

Get a decent architect in - they see ideas that normal people don't.

We changed our mortgage on a house we struggled to sell to a buy to let mortgage. We would’ve lost the house we wanted if we’d waited any longer.
Did the same thing. I was starting to feel trapped and I’m glad we did it.

In terms of house prices 5-6k isn't that much. I'd lower the price and sell.

(Hint: now you are in tne property ladder, if your house has dropped in value since you bought, so will 3 bedders, so you will be able to buy a 3 bed cheaper than you would have done had prices risen. You will just be putting the current value of your 2 bed house, at whatever level, into your 3 bed house)

^^ this

We tried to sell it for the price that I paid for it, back in 2012. But I realise I’m hindsight now that I didn’t get a great deal when I bought it back then

Prices have tanked since then and will o down further.

We sold our house recently. We knocked 25K off to get it sold, luckily didn't lose out because we'd had it a long time, but to give you an idea of how thins are going...

2 bed house in SE, decent area. Valued in January at 275K, sold for less because we wanted it gone. Friendly with EA who said good job we sold when we did because he had just had to take 228K for a house (in better condition, (new windows and kitchen)) round the corner.

Things are going down fast and will go further after brexit.

Sorry typos

Could you split one of the bedrooms to make it 2 rooms

£6k isn't that much. My friend paid £180,000 for a house in an 'upcoming' area in 2006. It's now worth £100,000 as the area never took off. She has just got out of negative equity.

Could you turn your thinking on its head?
If you had been paying rent on this 2 bed house, that would have been money lost.
Instead, you have a lump sum in the house! So, instead of the impossible task of starting on a massive mortgage for a family home, you are part way there ....?
Are you saying you had planned on living mortgage free for ever? Surely, even losing a few thousand, the sale of your house could be at least half the cost of a 3 bed? With good financial and legal advice, you could still be mortgae free and your DP pays the mortgage on the remaining half of the cost?

Real life Welcome to it

As usual, profound compassionate advice from AF.

In a similar position OP, can't really suggest anything. I am struggling also but try to take comfort in the fact I am secure. Can you potentially get a sofabed for your partner's kids?

The decision to sell and upsize is dependent on how the market is moving. I have adapted this from a guide to house buying to explain the maths.

In a market where prices are falling or have fallen there is an advantage to trade up. When people sell, there is much focus on ‘what will I get for my house?’ It is an important question, but if you are planning to trade up to a more expensive property, is that actually the right question?

For instance, if you have a property ‘worth’ say £100,000 and prices have dropped by 10%, this is now ‘worth £90,000 but you wish to buy a property that had a value of £175,000, and this too has dropped 10%, so is now available at £157,500. The gap between the 2 properties is £67,500. Had the prices been more stable, the gap would have been £75,000, so the saving now is £7,500.

Equally, if prices are rising, again using 10%, we see the values being £110,000 and £192,500 respectively, a gap now of £82,500.

This example shows how using a ‘poor market’ can be a great opportunity. Sometimes focusing on ‘how much can I get?’ is not the right question, when it should be, what is the difference I have to pay?

Put quite simply for the OP, the cost of upsizing may have fallen and a 3 bed is now more affordable even taken account of the lost value on your current home. You need to do local research.

Speak to a local agent and run the figures for your options. Bear in mind the additional tax on a second home if you decide to rent.

Having a baby is going to cost you a lot more than 6 grand you know.

The housing market (in most places) has picked up over the last few years - helped along by help to buy etc for the type of buyer who’d be looking for a 2 bed home as a starter - so you may find that your house is easier to sell now.

We had negative equity once. It was a bitter pill but this is how we approached it..

Accept it. However much you dont like it thats the market

Make sure you do the best you can to get the highest price so dont make silly mistakes like not tidying up, poor decoration etc

Realise if yours has fallen then so have others and the higher priced propeties you are looking at should have fallen more (unless the fall is because you overpaid for yours, it was new etc)

Then get on with saving to move at that reduced price. We lived on a very tight budget to save a new deposit and pay off our negative equity. But we did it in a year.

Then we moved to our best possible house and got a deal much cheaper than it would have been 4 years earlier.

OP, do you fully own your home mortgage free?

Does your partner pay rent at all?

I don’t understand why you don’t just sell and put the sale money towards an upgrade. If you aren’t in negative equity you aren’t stuck at all.

slithy she's pretty unlikely to be mortgage free given she's only owned her house 6 years. It's possible of course, if she was a cash buyer with an inheritance or something... Pretty unusual though after 6 years of owning a 2 bed house with no room to extend, which wouldn't be your typical purchase for a young 100% cash buyer.

I know it’s just when she says “it’s paid for” in op - hence me seeking clarification

True slithy so she does... An unusual scenario, to be of an age to be considering a first child, having purchased and paid off a 2 bed house without room to extend. She refers to having worked hard, implying she paid the entire purchase price through earned income...

I suppose that is why she is kicking herself particularly hard for having made the unusual for her situation choice of property she did, in that case...

I blame Phil and Kirstie.

You’re not ‘losing’ 6 grand. You’re selling a house that no longer suits so that you can get one that does. If you hadn't bought the house at what you now say was an inflated price (which you were willing to pay), you’d not be thinking of it that way.

There’s no point wishing you had bought a 3 bed House. You didn’t. You bought a 2 bed that suited you then, at a price that you were willing to pay. What’s the point in wishing? This is the nature of buying a house.

If the price of property around you has fallen since you bought your house, then you won't be losing anything if you are moving up the property ladder.
If you bought yours for £200 000 and prices drop 10%, your would sell for £20K less than you bought it but the next house, which, at the time you bought yours, might have cost £300 000, will have gone down by £30K, so, in effect (theoretical figures obviously) you are gaining £10k. As you own yours outright, and are moving up the property ladder, you don't lose out by having to sell for less if all property has dropped.
Of course if it is solely down to you paying over the odds before, then that is done and dusted now, and you are never going to get that back, so why fret over it. You are in a very fortunate place in life to own a property outright when still so young.