To ask what you’d do (buying house situation)

[Houseconfusion2023]

Details - there are probably more, happy to clarify, don’t want to make it too long or to drip feed!

Live in a fairly LCOL area.

Combined salary £60k, based on one FT and one PT. Potential to raise this to £70k+ within the next year.

Low outgoings currently, bills come to about £1100 per month. Currently live in ex local authority flat, low mortgage etc, hence low outgoings.

Pensions in good order.

Home too small for needs, so need to move.

Ownership status confusing but under advice of lawyers so don’t need advice on this aspect - our parents took out a mortgage for us 10+ years ago, they did not actually financially contribute to this, we have paid this for 10+ years so the equity is ours. This equates to £50k-£75k (upper to lower estimate) - this was because we were very young and we were worried about applying for a mortgage at that stage, no financial issues.

Options:
-stay put til market stabilises (least favourite option)
-move to “doer upper” at bottom end of budget, have large budget for renovations, sell within a few years.
-move to “doer upper” at mid point of budget, renovate slower and to a less high spec, sell within 5 or so years.
-move to ready renovated house at low-mid end of budget, stay put for 5ish years. Lots of compromises.
-stretch ourself to top of budget ready to go home, be paying £££ for 25 years.

WWYD?

Oh I see. Would you be able to get a small cash loan from family to buy or lease some basic furniture? Sometimes developers are able to throw in a new fridge/washing machine etc when you enter into negotiations with them. When my brother bought his new build, they included all the built in kitchen appliances and even threw in a fridge and quashing machine.

Will the new mortgage be within 1/3 of your income? That's usually used as an affordability meter.

I am not keen on doer-uppers because firstly I do not like living in building sites and secondly, when it comes to time to sell, I'd question how much of a premium you can realise if you are still being surrounded by properties that are still being sold at the 'old' price.

Then I think your only sensible option left is

-move to ready renovated house at low-mid end of budget, stay put for 5ish years. Lots of compromises.

Your partner doesn’t want another renovation project. You said “we” are happy to live in a proverbial shithole for a few years if it means our next home can be “the one” but actually it doesn’t sound like “we”, it sounds like “you” - he’d prefer not to! And in 5 years if your works haven’t added the value you thought they would, plus there’s a house price correction (I’m not at all convinced there will be, but that’s just opinion) then you’re stuck. Whereas in a stretch house if you decided to just go for it you’d just ride it out because if you’re not selling or moving it doesn’t matter.

If top end stretch houses are £240-270, and you have (conservatively) £50K deposit, your mortgage on a £250K house should be about £1,100 rather than £1,400?

It comes with appliances so that wouldn’t be an issue. However, actual furniture wise we don’t have much.

We have one sofa, one TV unit, a bookcase, a nest of tables, beds for everyone, and two bedside cabinets. Oh, and some random kallax units in kids rooms. Our current house has huge built in wardrobes and only one public room, hence the lack of furniture.

I would hold fire for a year but start a separate savings account for your move to the forever home. This will help with furniture, stamp fees and legal costs.

My neighbour wants to renovate & was quoted 30% more than the original 2020 quote. The extra money you'd need to renovate, you might as well save for your forever house move budget.

That is the option that my partner likes least!

Initially he liked this option, we went to see a house in this category a few days ago and he loved it, until he saw the “fancy” house.

Both of us would PREFER not to live in a shithole. And yes, a lot of the renovations would be done by him (I’m the full-time worker and higher earner)

The doing up houses tend to sell at about £100k and go for £160k. We aren’t planning to make tonnes of money as we would probably have to spend 10-20k on renovations. The main difference is that by that time, we will have no childcare costs and we will have 2 full-time wages.

IMO the “doing up” house is better than a house someone else has renovated as we can actually have a house decorated to our tastes - most of the “already renovated” houses have glass induction/electric hobs which we both hate, a lot of them have those stupid handle-less doors in the kitchen which we hate, a lot of them have high gloss laminate flooring which is a nightmare to keep clean … so in reality, they aren’t where we would be “happy”

The £240k houses are older style which need redecorated over time but need no “big” works imminently - but do need new kitchens/bathrooms to our tastes, in time. Good area, but not necessarily a child friendly area as they tend to be on main roads. Part of the reason we are moving is so that we have younger neighbours, these 240k houses are in our immediate area so we know the area well and it’s basically all pensioners.

The new build we have seen is a 4 bed detached and is definitely a kid friendly area - it faces onto a small play park, we know several people who bought in phase 1 of the development and they all love it. The house in question was actually bought and the sellers dropped out, it’s ready in June and the woman actually let us pick the kitchen from her selections. The price has been dropped and she’s throwing in “extras” like £10k cash, turf and flooring, and a kitchen upgrade. It IS a good deal. That house is £280k.

I got the figures for a £280k house, 50k deposit and the mortgage was £1400/month from our current provider. The rate did look a lot higher than our current rate but I presumed that was because of the changes in interest rates.

I got the figures for a £280k house, 50k deposit and the mortgage was £1400/month from our current provider.

Halifax has deals from £1250-1350 on those figures. First Direct start at £1250-1300. Nationwide starting at £1285.

Honestly, it sounds like the new-build 4-bed suits your life the best. But I do understand it’s a huge jump. You’re not saying you can’t afford it, though? Just that it makes you nervous?

https://www.landc.co.uk/

I’ve been putting in figures for a house move though, not FTB which I assume you are technically if you’ve never had a mortgage in your name. That might change it a bit.

I’d also say, buying and moving is hellishly expensive once you’re into stamp duty, fees etc. If you can minimise moving costs and only do it once, not twice, that’s a good position to be in.

But ultimately this is just a decision of house vs lifestyle. And ‘lifestyle’ can be impacted in a few ways - by renovation eating time, money, headspace, disruption or also by having less disposable income over 3+ years until both kids are at school rather than 1-2 years whilst renovating. Or by buying in the wrong area that doesn’t tick the boxes.

Tricky!

....and pay additional stamp duty (who knows what rate, but...) plus EA & solicitors fees. I'd budget £15k+ for that

If the new build is a forever home just buy it. Looks like you'd still have money and time that way. But if these are all in the same area are the 100k houses that renovate to 160k 4 bed too or not comparable? As long as you are not selling the new build for 10 or 20 years if ever it's all irrelevant and your happiness and time is worth more.

A 280 new build seems way more than 160 fully renovated. Normally new builds have very small gardens but good parking. Is the new build a better area, detached not terraced that explains the 120k uplift there? Bigger garden?
If you sell within 3 yrs or so you often lose money as newbuilds come with a premium but not 120k, more like 10/15%.
You can get furniture from free cycle or next door free or cheap.

Doing up a house to your own taste is a great idea if you plan to stay a while... less so if you plan to move in 5 years.

We have moved too many times! We are in a house now that we LOVE, but the maintenance is slightly beyond us, both in terms of time, motivation and cost. When we pay off the mortgage in a few years time (we are 50), I am hoping we will be able to afford to do some of the things that need fixing / replacing.. but who knows what our kids will need by that stage (uni age) and what we will feel like doing.

We moved from a 1.5 bed flat into a 4 bed terrace house - we were totally lost when it came to furniture.. and really felt the cost of that. We went to one salary when my third child was born and the stretched mortgage left us feeling very broke... all of the time... which was a bit shit really... we could have chosen a smaller house and been mortgage free.. but then we wouldn't be in the house we are now... and yet... I am looking at where we might be in 5 years when all of the kids have left home... nothing is forever!

I’ve been so busy house hunting to come back to this! Lots of updates.

We had our house valued today and it’s worth significantly more than we thought - almost double what we bought it for.

We have ruled out the complete project type property, and also the low end renovated smaller properties.

We are now looking at moving slightly outside our desired area (our desired area is SMALL) to get an older but renovated property nearer top end of budget.

Alternatively there is a property in our immediate area due to come on the market soon. It’s freshly renovated but slightly smaller than we hoped (3 bed 1 public room as opposed to 4 bed/2 public rooms)

We pass affordability up to £280k with a £50k deposit but it looks like we are aiming more at 75+.

I couldn't be faffed with a do-er upper if you're going to sell in 5 years. Life is too short.

Your take home pay will be what? £3,500 - £4k per month. You say to get the forever home new build at max budget your mortgage will go by £1k a month. So £2,100 outgoings. That's still a whopping chunk of income left each month.

Instead of spending your money on doing-up, what about going for the new build but furnish with second hand? Then trade-up gradually until your income increases and eventually you'll be in a nice house with nice furnishings.

A mortgage of £240k on £60-70k salary is nothing to worry about. Negative equity is only an issue if you want to sell. Your house shouldn't be viewed as an asset but a home. Buying a do-er upper and all the stress it entails would only add to the risk of separation.

It seems like you are living in the future and need to do a bit more living in the now, with what you can afford now. I mean you have just said that you lived in a hit hole for a few years, and then you are planning to live in another renovation which could be a few more years. What kind of life is this?

If you can’t afford the house you want now, then don’t move, wait until you can. Doing a renovation just to move out in five years has zero appeal to me, to be honest I wouldn’t make any move if I thought it would only be for five years.

My advice is to minimise the amount of moves you'll need to make if you have/want children. I'd aim for a house of the correct size, or with scope to extend in future, in an area you like with schools you are happy with. A fixer upper is fine if you like that sort of thing but, again, kids do get to a point where living in a building site with parents who are renovating each weekend wears thin. My bil finished his family home just as his last child left home. That was kind of sad.

Thanks everyone! Certainly good for thought.

We are most certainly done at two kids - I had my tubes removed and partner is getting a vasectomy too to mitigate ANY risks!

Today I contacted lawyers, a financial advisor and a fourth and final estate agent for a valuation.

We are arranging childcare for this weekend and we are going to blitz the bits and pieces we need to do to stage our property (weeding between slabs and pressure washing them, touching up paintwork, resealing the bath, getting the boiler serviced and so on)

Absolutely no idea how we are going to do viewings with a dog in the house but here we are. The agents are all pretty certain we will sell within two weeks or go to closing date within 3. I’ll probably need to show people around alone and my partner will take the dog and kids out!

As for renovation work - none of them have been complete rip-outs. I maybe was unclear about that! What I mean is houses which may need cosmetic work, new windows, kitchen or bathroom. By “shithole” I didn’t mean a literal shit hole - just maybe an older style than we like. We also moved out of our house to a “holiday” (a serviced apartment!) while the worst of the works were going on, dd loved it. Obviously this adds expense but we can swing it.

And as for the affordability - we can afford all of them. We just don’t want to sacrifice our current lifestyle too much. Until fairly recently (maybe 4 years ago) we had literally no money left after bills, it was miserable. So now, we enjoy eating out, days out, holidays and such - we don’t want to go back to the same position but just in a bigger house! We are normally financially conservative people when it comes to committed spending (hence why we are living in such a modest house with reasonably high income; we only have one car, we don’t pay childcare and so on)

I think we have found our house! I’m just hoping it all goes through now.

We have an agreement in principle on a mortgage.
Our house has been valued three times and we are choosing an estate agent by Tuesday.
Home we are interested in goes on the market on Tuesday.
Both our mortgage broker and our preferred estate agent know the sellers personally, so I think we have a good chance given that both people will likely have told the sellers about our position.

Who's paying the capital gains tax?

There isn’t much to pay due to expenses, personal allowances, etc but it’s coming off the profits. So us, in effect.

What expenses?

New kitchen
new bathroom
lawyer fees

If you are ftb then there is no cgt. If you are second time buyers there is none if you are moving from one primary residence to another, ie you will live there. Your parents might have to pay cgt but not you surely?

@Houseconfusion2023 move to an affordable doer upper that meets current needs and with the most potential e.g. worst house on a good street.

You are right there is a balance and moving to forever home in 3 steps rather than 2 - current house, new house, forever home, makes sense.

My parents would be liable for the gains as they hold the title deeds of this property as well as theirs.

However, they have not benefited financially whatsoever from this property purchase, whereas we have, so obviously we would be the ones to pay the tax bill and not them. Although they would obviously be the ones to submit the money to HMRC.

Although they bought a second property they aren’t wealthy or anything - they remortgaged their house to do so. They did this because they would not be able to gift us money for a deposit otherwise. No money exchanged hands.

We are meeting an accountant on Tuesday to look into it further, after already discussing it with a lawyer and a financial advisor. The lawyer arrived at a figure of approximately £6800, the financial advisor said it would be quite a bit less once allowable deductions are made, so worst case scenario is £6800. We have allowed for £10k in our calculations for mortgage purposes so we should be good!