Only 5% deposit on house number 2. Stupid idea?

[coffeeandapastry]

Hi,

Firstly, when I say "house number 2", I don't mean second home (I wish!) I mean our next house.

So we bought our first house 3 years ago with a 5% deposit. Would have obviously preferred a bigger deposit, but that's just where we were financially and we were just desperate to get on the ladder, as we were both early 30's by this point.

This was a 3-5 year house, but we soon realised that the area wasn't really for us and I really don't want to live here anymore. I actually find it depressing.

We've been on the market for a couple of months now and have already reduced. One silly offer, which we obviously rejected, but nothing before or since. We're considering another reduction, but with the houses we were looking at, this would mean we'd probably only have another 5% deposit, rather than the planned 10%.

The sensible thing to do is to probably take it off the market, save our arses off until spring next year and re market with a bigger deposit. Problem is, we're wanting to extend our family and given I'm now mid 30's, I don't want to wait much longer. We can't have a baby where we are, it just wouldn't work.

DP is a high earner, so we can afford a high mortgage, but that doesn't mean it makes financial sense for the future.

This next house wouldn't be our 'forever home' and is likely another 5 year house.

What should we do? I'm really not happy where we are, but I don't want to make a huge financial cock up. I honestly don't know what to do.

TIA

Hopeful bump

As long as you can afford the repayments easily and would pay off this mortgage before retirement (I know you're not planning on staying forever but it's a good measure) I wouldn't worry too much about only having a 5% deposit. I can't remember but I think my second property was a 90 or 95% LTV but because property prices then rose, by the time I remortgaged I'm on 60% LTV now.

The other points that occur to me are that the property market may look very different after October 31st. Given that you're highly unlikely to complete your sale and new purchase before then I'd be holding off the big decisions.

Other thing is that you're frittering away money every time you move (surveys, solicitor fees, stamp duty, removals costs) so moving as frequently as you are planning to isn't great financially. 5 years is a very short time to plan to move into your 2nd home for having not been in your 1st for long.

Thanks, INeed.

The problem is, I don't think I'll feel 100% settled anywhere round here, but DP needs to be close to the train station and DD needs to be close to her school, so we're restricted in terms of where we can live. I guess I was thinking in 5 years we'll have more flexibility and could then move further afield.

Anyone else?..

I bought our 5 year house and are here 15 years later. I wish we'd waited and bought the final one instead.
Honestly, I'd stay where you are, have the baby and save up for the bigger home and move once rather than twice. It's cheaper in the long run.
I also think you need to save more as it sounds like your house is priced to give you a 10% deposit rather being actually worth it.
Are you relying on market increases or have you savings put away?

Sandra, thank you. You're probably right, it's just not what I want to hear, as I've really got my heart set on moving. There's zero sense of community here and the past couple of years have made me realise how important to me that actually is.

I do think that the house is fairly priced. We're now on at the lower end of the valuations we've had. I get the whole 'house is only worth what someone will pay for it' argument, but nobody mentions price as an issue. We were considering doing the kitchen and then remarketing, as that's the only thing that keeps coming up, but our EA advisors us not to do that, as we probably wouldn't get our money back, although I suspect this is just a customer retention tactic. Yes, people could put in their own kitchen and make an offer reflecting that, but I think as long as we keep it neutral and it's brand spanking new, it would attract more interest and hopefully a decent offer!

It takes over everything, this moving malarkey! It becomes an obsession and it's so draining.

Be good to hear some more opinions

Honestly, I would wait until after Brexit is settled one way or another - housing market is funny right now in places because of the uncertainty, and there's another global recession in the offing Brexit or no Brexit (I mean, there's always one in the offing, as that's the nature of capitalism, but I think we're really close to the brink, going by Germany, Italy, ECB talking about negative interest rates, France, Turkey, US-China trade war etc etc). You could end up in a bit of a mess, especially if you are going to leave work to have a baby etc - you could end up in negative equity for a while etc, and what if you dislike the new place as well? I know it's not what you want to hear, but I'd hold out for a reasonable price/come off the market until things are more certain with whether or not we will leave the EU, and work on over-paying as much as you can in the meantime.

Thanks for your reply Hefzi. I know you're speaking a lot of sense.

We're actually waiting to hear back from a second viewing, but that was two days ago now, so it's unlikely an offer will transpire.

So general consensus is, we'd be foolish?

I'd personally take it off, save and speak to a really good mortgage advisor. Firstly, buying and selling now, is a daft idea.
We had a 10% deposit for our house. Our mortgage repayments would have been over £900 a month. Our mortgage advisor worked out that if we could bump it to about 13%, it would lower out repayments to nearer £700 so that extra few thousand makes a huge difference.
And lastly, don't stop growing your family just because your going to be somewhere you don't want to be for another year or so. A baby won't care, it won't affect moving if you can afford the mortgage without you working or on mat leave and you'll regret letting a house and area dictate big decisions.

Thanks for that, Juno. I think I'm feeling extra frustrated at the prospect of coming off, because we were on last year and decided to come off just before Christmas, so it's becoming something of a habit. We were over valued that time round though and were very naive. I'm worried that going on and coming off so many times will make us look bad.

I think so many houses are going on and off again in this market, I'm not sure it will make any difference.

I don't think another 5 year house makes financial sense. If it were me and I was desperate to love for the reasons you mention, I'd prioritise selling the house then rent in the area you want to live in longer term. Save my butt off and buy the forever house. I don't think you'll lose much but renting versus the costs associated with buying and selling a 5 year home.

What's the point staying where you are if it means another 2/3 years of being miserable? You could put the 5% deposit down and then overpay (whatever you can afford). You say you've got decent money coming in, so it's a possibility.

Single, this is also true. Although it would be very tight with the higher interest rates and over payments.

Arghhh! It's a really difficult decision.

Op I'm in the hold off camp. Wait until after Brexit. Go for another baby and save as much as you can. Then move when things are more stable and you can get your forever home

Thanks, Ed.

We were going to hold off until next year, but then the market round here really picked up and it made sense to give it a go.

My MH has suffered here, which was another reason to go, but actually I could be blaming it on the wrong thing.

It's been 3 days now since the second viewing. It's a no isn't it 🙄 Might be a blessing in disguise, but still, it would be nice if people bothered to give feedback, even if it is no. It's just rude.

Usually at this point the op posts a link to the house and someone cleverer than I makes useful suggestions on how to market it better

Sorry, coffee it probably is My DP are in a similar situation - on the market, off the market, now have to stay on (otherwise will be forced to auction by the lenders - 17% LTV, interest only, over-paying every month, but can't realistically repay capital until they sell) - originally rather optimistically valued by first estate agent, now very competitively priced, but nothing is moving round them, nor has been for last 2/2 1/2 years. They've had a couple of second viewings, but no one has an actual reason - just "not for us". Theirs is always going to be a niche house to sell, though, as it's got 8 bedrooms and a much larger garden than seems to fit a modern taste.

Uncertainty is a real fucker for the economy in general, and is biting not just on the 1-3 million market (disproportionately hammered by the so-called mansion tax) but right up and down the scale now. The only things moving in their region are very average 2 and 3 beds, and even then, not if they are priced at the top end of what the market will currently bear.

It's shit when you hate where you are living, though, and having endured that for years myself, you have my sympathy. It also makes everything else feel worse.

Oh, and at the moment, I don't think it's just about the price being too high - of course, as you say, it's only worth what someone will pay, but the way the market is at the moment, you could put it on at 20% under a realistic valuation (which is what my DP have done) and still get no takers.

What is the size of your property? Small Starter homes have tended to be the most affected by the Brexit uncertainty in my area as FTB / buy to let landlords who would normally snap them up are hoping for a slowdown in the property market after October 31st and these tiny properties tend to be the least attractive to home movers. You might be better off speaking to a mortgage broker about the possibility of renting your property and getting a new mortgage for your new property

When we bought the place we're in now we had to put a 10% down. We couldn't get the mortgage offer we wanted with just a 5% deposit.

Hefzi, I'm sorry to hear you're struggling too. Your life is kind of put on hold isn't it. Keeping everything crossed for you.

Teddy, it's a 3 bed semi. I would say it was a typical FTB home or investor/buy to let. Thing is, there were a lot of 3 bed semi new builds on for the same price and they got snapped up quickly. Ours has more to offer in terms of garden space, garage, parking,l and character, but with new builds, it's all done for you and a lot of them have offers for stamp duty and help to buy schemes. Think we just fell into a really awkward category at the worst time, which we didn't see coming as our neighbours identical house, sold in a matter of days, 10k over the asking price.

Got a late email from our EA last night to say that the viewer has now realised he isn't proceedable until he sells his house. Originally saying they had funds to buy ours outright and didn't need to sell, but apparently they got their figures wrong. Strange thing about this is I met him and he told me he had sold 🤔 Anyway, he is still keen.

We could still get a 10% deposit assuming he makes a fair offer, but it would be for a smaller house, so I guess we'll just re-evaluate if and when an offer comes in.