To not understand how people afford next house up?

[evilnaggingwife]

We purchased our first house about 3 years ago. A 3 bed terraced house with a tiny garden for around 230k. As first time buyers, we only saved a 5percent deposit and got a mortgage with a high rate! That will end next year when I hope we can get a more sensible rate.

Our house has probably gone up to around 280-300k I'd imagine based on local prices.

dh and I earn around £60k combined (although he is self employed so always tricky to prove income). We have saved enough to pay cost of moving and stamp duty and fees etc of next move.

I keep looking on right move and houses that I would consider next one up are stupid money. I'm talking 3 bed semi with a drive and larger garden... £400-500k!!!! How on earth do people manage this? Are we stuck here forever?

I go to a mortgage calculator online, it tells me how much I can borrow and when I do a search on right move the same types as our house come up... Terraced, not in town, no drive, small garden, small 3rd bedroom.

I expect because it's done over time, you probably aren't putting in a top range kitchen etc. it's all doable but it's a time consuming process.

How on earth do people find the money to "do up" these "dumps" though??

my job. I got a cheap house, so small mortgage. It took 18 months to do up. I did as much as I could myself. As did dh when he moved in.

It meant we had to have a small wedding and didn't go out a lot. We made sacrifices to do it.

I opted to not go to uni so I could get a full time job, save a deposit for a house and went from there.

Its harder than it used to be and only getting worse.

I think people manage by doing one of or a combination of the following:

buying "doer upers" and doing them up and selling quite quickly at a profit and doing it again - a mix of hard work, the right skills and also luck with the market.

selling up in an expensive area and then moving somewhere cheaper (through a lucky career move coming up that took them to a cheaper area or very deliberately seeking new jobs on similar salaries but in cheaper housing areas - which only works in careers with broadly similar pay in different parts of the country)

inheriting either property or money

tightening their belts and taking no holidays, buying no new cars and living very cheaply indeed in order to save large amounts of their income towards a bigger deposit. Possibly works best for one reasonable income families with no childcare costs or where children are past the age for childcare, or of course where there are no children.

borrowing or being given very large sums from/ by still living relatives (parents probably) who have perhaps sold their own property or are just well off

very significantly increasing their family income by "climbing the career ladder" without simultaneously increasing their outgoings in terms of childcare costs or whatever. Not every job has this kind of career ladder of course and plenty of people's pay doesn't go up in real terms once they reach a certain level unless they get a promotion to management, or whatever...

Maybe you'll be in a better position to save a bigger deposit once your child care costs are reduced in a few years OP.

I've wondered this in the past, bearing in mind that when house prices rise bigger houses get dearer too! But yes, in the case of my friends (I rent) they've got promotions or new jobs that pay more and moved when childcare is no longer needed so they can put more into monthly and overpayments.

My parents got a 3 bed semi with only my dad working many moons ago, so I can see why people now get so upset. But I also think there is a lot more aspirational media at work, making people feel they've only succeeded once they have a bedroom per child (I shared a room as a child, my dad shared a bed!), ensuites and so on. So some people do have unrealistic ideas of what's normal, or at least of what's perfectly acceptable.

The way you move up is :
1stly the longer you stay in current home more equity youll have before sale,especially if making regular overpayments
2ndly home improvements made by you will increase its value for the sale..
So you sell it for bit more then you bought if for and because of equity have a larger deposit for next house and should be able to afford cheaper mortgage rate -due to decreased LTV percentage.

We started in a 2 up 2 down house and stayed there for almost 5 years.

How we afforded the next house:
Put in new kitchen and completely redecorated, including wiring and plumbing.
Both moved up the career ladder (I had been a student so any income was a massive boost)
Always stayed well within our income - we lived very frugally - and saved up.
Put a lot of research into the next house. I literally spent days walking around the city finding streets we could afford and like.

And the big one : we did ALL of this before we had kids. Not sure how possible some of this would have been (e.g. the weekend we had no water) if we had kids in the house!

House prices actually dropped while we were in our first house, so we didn't benefit from any false inflation.

Oh, and our second house was also a fixer upper, with awkward tenants who tried to stop us buying. It was a pretty stressful house purchase, and we only knew it was going to happen at 4 pm the day before we moved.

Oh yeah - or buy a house that has potential e.g. extension or loft conversion.

Cheaper to put one of those in than to buy a property with one already there,.

OP, at least you have a 3 bedrooms

being a Londoner, I have 2, and will only ever have 2

We did it by doing it all before having children. Childcare is excruciatingly expensive and while we can meet our mortgage payments we certainly can't overpay it, take on extra work [anticipating bonus/additional income] and save in the same way that we did before children.

Both houses to date have needed a lot of work, and with our 2nd house we deliberately bought something to do a loft conversion with. If you can steel yourself to live through a home conversion project or have family locally who could put you up for a while when you have no water or safe environment then your funds will stretch a lot further.

We bought a small house in a great area when we first got married nearly 20 years ago. We lived in it for 15 years, completely renovating and extending it over that time, while also moving up in our careers.

A few years ago we sold it, and used the large amount of equity and our increased earning capacity to buy a house double value of the old one.

To say our friends were surprised is an understatement, I think they had assumed that we weren't in that earning bracket (not something we discuss).

I'm sure that lots of our friends and mil assume my parents help us but we did it all on our own.

A lot of people save the price of a mortgage by having family do all the childcare not jealous at all

It's not expensive to do a house up if you are only paying for materials mrsgiraffes
We did a massive farmhouse up and lived "The Good Life" for a while.
Not a penny was spent that needn't be spent and the kids loved growing up like that and have a great sense of managing money and following in our footsteps.

It was our long term plan to have a sahp and be mortgage free on 2 properties by 50.
Our home was paid off before 40. There were so hard times as well, including 15% interest rates on mortgage. People have such high mortgages these days they wouldn't stand a chance of keeping their homes at half this rate. I don't think it's always necessary tbh, but they haven't lived through it themselves and have no idea.

We had no holidays as had no reason to want to "Get away from anything".

I don't think everybody should do this but disagree that it was easier in the past, we just realised that we couldn't have it all and prioritised what was important to us.

It's all relative
I was a child of the fabled "easy" 1970s. Mum and dad both worked but unskilled/semi skilled so working poor.
I shared a bed room til I was 26!
No holidays
No nice days out
No en suites or drives, or conservatives, fitted kitchens, utility rooms, or any of the stuff people think is standard now.

Buying a doer upper is,ok if your have the skills to do most of the work yourself, otherwise it will just become a money pit bitter experience

I am moving further and further from London. My first place was a very average 1 bed in Central London, sold for nearly double the price to buy a luxury 2 bed 2 bath apartment in Greater London. I am not trying to boast, but you can imagine how much money I made on that one, the prices are crazy! Sold it very well and bought a big house out of the M25. I wouldn't have had the deposit without the equity. We are extending it this summer, so we will eventually sell it well.

If I had known the prices would keep on climbing, I would have bought another flat in central London before I had the kids, but I stupidly didn't want to go into debts. I don't know how people upsize when they stay in the same area.

Doing up a dump only works in an area where prices are generally going up, though.

Our 2 bed terrace isn't really worth much more than we paid for it, 13 years ago. It's not in an horrible area, but it's in a cheap area which will always be cheap.

However, the fact that we did buy cheap meant that we had the security when the boys were small. Once we had a bit more liquid cash, we overpaid like hell, so now it's completely paid for and will provide a good deposit for the next house up, which will cost us at least 3 times as much as this is worth.

We have lost out on overall equity by having a cheap house, but we're not in a position to have to worry about negative equity and are safe in the knowledge that, even if we have to take a fairly low offer on this house, we're still a lot better off than if we'd rented for 13 years. So while we've not benefited from being in a part of the country where you can make a tidy profit on a do-er upper, we have benefited from not having to over-stretch ourselves to afford a home.

Shark...we did it by going back to a 25 year mortgage again :(
We are hoping to shorten the term next year when our rate ends....

When we moved from our first house to our "family" house, we had to move further away from London to a less "posh" town. We'll never be able to afford to move back to DH's home town but our house meets all our family's needs until the DCs leave home.

OP, what are the options for building into the loft, extending etc.?

Yes, location, location, location
Our house has gone up by about £40k since we bought 4 years ago.
Insane!
Partially because we bought -and sold- in the slump and partially because it's a nice area

OP - 3 years isn't very long to stay in a house before trying to move on - a lot of people stay more like a decade, pay down the debt so they have more equity in it.

We were planning on buying a huge reck of a house that needed a lot being done before I found out I was pregnant - it would have been 'doable' because the mortgage and bills would be covered by my wage, DH's would be spent on the work, assuming a year or so before it was all done. However, this had to be dumped as an idea when I found out I was pregnant as I'd have had to go on mat pay (and so not be able to cover the bills) before half the work was done.

Agree with most of what has been said, you can only "move up" if you increase your equity or your income.

If you're buying a house at the edge of your buying power using a small deposit and only paying the basic mortage, you're going to have a hard time getting anywhere much more expensive unless you come into money or increase your salary.

But overtime, especially if you add value to your house through (canny) improvements, or pay an extra month or two on your mortgage each year, you can normally build up equity faster than the house you are aiming for raises in price. But where house prices are rising faster than other prices (and, crucially, your salary) you will see that next step "up" move increasingly out of your reach. The only people fast rising house prices benefit are those who want to downsize.

One thing you could consider, depending on the mortgage you've got, is remortgaging now. Since it sounds like your house has increased significantly you would be getting a mortgage for a lot less than 95% of the value so could probably get a lower interest rate. Then use the extra money to pay off more equity.

We did it by using all the equity in the first house ( bought in 2000 just pre-boom) but then of course it meant we still tripled the mortgage and had to go to 25 years again, when we only had 14 left on the old one.

We have done it up whilst living in it, by you-tubing like crazy, getting stuff second-hand or really cheaply eg waiting for online discounts - and learning how to do stuff myself. Last weekend for example I put up a utility area in the outbuilding, complete with worktop and sink. And it only leaks a bit.....

The bathroom was replaced with a clearance suite for the loo and bath (got a tradesman in to do that - word of mouth recommendation for a semi-retired chap that only charged 150 for taking out the old toilet and bath and fitting the new ones as I didn't fancy taking a toilet out!) and then I bought a reduced sink and cheap taps from Ikea and did that myself. I tiled it myself - with cheap plain 4 x 4 white tiles - stripped the hideous wallpaper and we pretend not to notice that it needs replastering.

We buy flooring from roll ends where possible, get cheap paint, shop around like crazy and simply wait until we have saved up. Which is why 5 years in we still have a back door which lets in drafts and slugs......

Quite what our kids will do I don't know - I can't see how they could ever afford it

We're in a one bed maisonette and unless we win the lottery or inherit a huge sum (both unlikely!) we won't be able to move. Moving out of the area isn't an option and my the only way to increase my earning potential (some people make it sound so easy!) would be to change jobs and go into management, which isn't something I want to do. DH is self employed and is too old to retrain so we're stuck.

I live in the south east and it's impossible for us to buy again. We have a substantial deposit but until the dc leave home we can't afford the size of house we need.

Plus currently our rent is cheaper than the mortgage we would pay. Albeit in a new property so less maintenance. Current rent is £1000 on an 80's built extended three bed semi priced up to buy a new three bed mid terrace as not getting any younger and the mortgage alone was £1400 a month. Then insurances etc in top. We can't afford it.
So plan is to keep saving and buy a retirement property once dc leave home.

My parents started off in a two bed terrace, moved to a three bed semi, then a 4 bed end terraced then a 4 bed detached and now a 5 bed detached with land. Despite only them living there and my mum moaning constantly about how hard it is to keep on top of the housework my mum has never worked and my dad isn't exactly raking it in.

I never understood it either. Everything happens morevslowly now than it did in the 70s/80s. Give it another 4-5 years, overpay on your mortgage in the meantime (or save towards bunging in a cash wodge, but overpaying normally makes more sense at the moment), hopefully increase your income, and then it'll start to make sense.