In a financial panic, which idea is best please?

[ideasoutof]

I am no longer with my partner. We have an 11 month old. Luckily I had my own home I could move back into which I did last weekend. However, last week I have been taking stock of the situation and I am hugely panicking. Basically I don’t know whether to downside to mortgage free and save money from there, or keep plodding on in the hope the house goes up or retains value and then reconsider whether to sell in a year, two years or three years etc, with hopefully more equity. My family are of the opinion that I should stay put and hold on a bit… for context the house is valued at 490, and in the last year has only gone up by 8k, in contrast to the year before where it went up 17k. I know these are valuations and doesn’t mean anything unless someone pays that for it but it’s all I have to give a general idea of where I am potentially at. There’s only 210k equity so family are saying if I hold on a bit longer then I might get that up to 250k down the line and that would make life easier when I move. I’ve sort of accepted I will have to move at some point.

I have around 1k spare a month after expenses but the mortgage is 1,100 and I do feel if I got rid of that then I would be able to relax a bit and maybe even go part time. I can’t do that now. Ex will pay only 420 in maintenance so it’s not helping much.

Would you move into somewhere smaller now or wait it out? I haven’t even had such a stressful financial situation and I’m just so worried about the future.

Financial worries can be hard.Yes, give yourself time. Never make a life changing decision when under stress hun. Give it a couple of months, keep an eye out on the property market though! Deep breath hun. You are a strong lady.!

I think if you’re panicking you’ll be looking at this house move as a ‘fix’ to make you feel safe. In your shoes I had counselling and that helped me process all my fears about the future and I didn’t sell up in the end and I’m glad. I do have a lodger, they have the biggest bedroom and bathroom and share our kitchen but the living room is just for us. It works well, they are a single person who is out all the time and I never allow visitors/partners. They like living with a family for cost and not being alone and while they are lovely people they don’t spend any 1-2-1 time with my children.

I think PPs have got the wrong end of the stick and OP has £1,000 left before mortgage payment which is £1,100. What's not clear is if that's after including any maintenance extracted from ex. If that's not allowed for then position is very much sustainable, otherwise something's going to have to give medium term.

Looking for a fellow-single-mum lodger is a great idea, if you can find one. Not many people in that situation but also not many households want to take on a lodger with a baby.

I would stay put.

Mainly because you can afford your mortgage. But also because you are not factoring in the cost of moving. EA fees and legal fees, and taxes.

The last thing you want to do is keep moving house as it's so costly.

You really don't have a problem.

I looked at your post and assumed you could not afford the mortgage. You have £1K a month after all your bills.

No one is going to feel sorry for you with that income.

If you read her posts it’s quite clear!

I have around 1k spare a month after expenses but the mortgage is 1,100

Expenses surely include the mortgage otherwise she would be in debt each month.

No?

for context the house is valued at 490, and in the last year has only gone up by 8k, in contrast to the year before where it went up 17k

So the house has been valued at 490, up from 465 in 2021?

Personally I'd be very wary of valuations at present. EA's are trying to attract sellers to their books during a slump and many EA 'valuations' at the moment are laughable. Houses are being put on at prices far above what many are willing to risk paying and they just linger and get reduced.

If the house was valued at £465 in 2021 and 482 in 2022 then I'd be amazed if it could actually achieve 490 right now.

If you bought a 4-bed detached house on your own (which you say you did as you've 'moved back into your own house') you must have an excellent income without relying on a partner.

What's changed?

Is it fees for a nursery?

If you could afford a 4-bed detached house before you had a child, presumably your salary has and will increase?

I don't see the issue.

Downsize, go mortgage free!!!
There are many indicators for a recession, but they all suggest it is soon.

The yield curve inversion is the classic. There AVERAGE time between inversion (the blue line going below the black line) and a recession (the grey bars) is 14 months - i.e., this December.
The average time between the inverted yield curve normalising (i.e., an inverted yield curve going back to zero (above the black line)) and a recession is typically 0 to 7 months.

Click on the image, as you can see, the curve has started to normalise.
When it gets to the black line, the US will be in recession or, most likely, 7 months away. And the UK will follow the US - if we don't beat them to it.
The EU is already in recession.

I would see how things pan out in a couple of months. Remember you can use the ‘rent a room’ scheme and earn upto £7500 tax free by getting a lodger/lodgers or Airbnbing a room (especially good if you are in a good area and have a room with an en-suite). I did this for several years, easy money just alot of washing and ironing. You also get the money within days. Just two nights a week can get you £100-£200. You don’t need to provide breakfast. You can choose who to accept.

As you can still afford to live there I wouldn't make any decisions just yet especially while things are still a bit up and down.
Also, and I know this will happen as to whether you move now or later but how much it costs to move should be taken into account, as in Estate agents fee, moving fees, stamp duty, solicitors and any other hidden costs.

How much would your moving fees be?

I would stay at least for now. Too much going on. Also, the market is very slow and people are being very flakey. Cancelling viewings and messing people about. There are not guarantees if you are in a chain and that is very stressful.

If you have anything valuable aside for your house sell it. Art, furniture, designer clothes. Those things can be a top up for a few months.

I am happy for you that you have some options and family. Everything would be better in a few months. Stay strong!

I would hold on for the moment. is your mortgage fixed? If not, you could consider increasing the term or temporarily going to interest only just while baby is in nursery. From 3 dc will get some funding so it’s only for 2 years to get you through that tricky time.

Op it's not clear whether you have 1 grand left afternoon mortgage or one grand including mortgage.

If you read her posts it’s quite clear!
Ah, I missed one- so the £1000 does include the maintenance? But does the mortgage need to be paid out of it? She could be making a small loss each month and covering it from savings for the time being, which would explain the panic.

Or she could actually have a comfortable margin each month and just be nervous because she isn't used to managing finances alone. In which case save save save to build up an emergencies buffer, but no rush to do anything about the housing situation.

I've always been against viewing housing as an investment too much. It's a volatile market, beyond what most people would gamble on as a stand alone investment. It's where you want to live and better than paying rent as long as the interest cost isn't too high. Any capital gains are a bonus but absolutely not to be relied upon, and will probably come out of moving costs/stamp duty if you move in the short term and cost of your next place varying in line.

If you have £1k after expenses each month why not overpay your mortgage every month you can afford to ? I know additional expenses can crop up from time to time. Doing that will effectively be investing for your future and reducing your current expenses

In addition to all of the above, do consider the costs of selling (legal fees and estate agent fees, for what you say your house is worth, would be about £10k here). Also the costs of buying: legal fees, survey (more than one potentially if first property doesn’t go ahead for whatever reason, fairly common). Could be another £5k. Plus moving costs, with a young child you’d probably need packers as well as movers, that’s another few thousand. There’s stamp duty too.You need to budget about £20k total for the cost of moving. You’d still have a mortgage, just a smaller one, and less space, maybe worse area too. Would you be able to stay in a good school catchment area? If buying a flat, lots are leasehold, and the service charges can be high. I was lucky, it was just over £100pcm in my old flat, but I’ve had friends whose changes went up to several times that. Plus there’s neighbour noise etc. Haven’t RTTT so forgive me if already mentioned! I just remember when I realised I needed to downsize (went from large 3 bed to small 2 bed) and it saved less than I’d hoped because of the mentioned costs - plus were struggling with not having enough space now DD is getting older.

Stay where you are for the time being. Moving is expensive, you might end up not feeling the advantage of a smaller mortgage for a while as moving expenses get paid off. If you have a spare room in the current house that gives you the option of a lodger, or even letting the room as a home office/ storage space for someone .

There is no way I’d move if I could afford the mortgage. That house could be your nest egg/pension in the future. Keep it if you can. Think long term

The housing market is dead at the moment with buyers expecting big discounts and is onlyworking for upsizers, not thosedown sizing.. Stay put OP.

I would consider taking in a professional lodger. We had a lovely female doctor in our annexe for a good few years. You can earn approx £600 a month without having to declare it for tax. Choose lodger carefully and this could work for you.

Just a thought, does the rent a room tax free allowance still apply. It used to be that you could charge up to £7500 pa for renting out a room and this income was TAX FREE!

I have to say, in your situation I certainly would not sell if you can afford the mortgage (is the rate due to increase before your DC starts school?) and you have £1k left over after expenses. You may well regret moving somewhere smaller when your DC get bigger!

Assuming you are paying childcare right now, I’d accept things may be tight for the next 3 years until DC start school and stay put. You may meet someone else and wish to have another DC in the future so the bigger house will be worth holding onto.

One thing I’ve learnt over the years is don’t make a decision right now. If you can afford to stay there for a little while, then do so and then make your choice.

I think you are in a good position. So try not too worry. I am not sure if you have £1000 left after you include the £420 from your ex or after, so if he doesn't pay you have £580 left only?

Moving is expensive estate agency fees, solicitor fees stamp duty. At least £12k.
What deal are you on mortgage wise? There will be a penalty getting out and the next rate will almost certainly be more expensive.

I think you just need to take a step back. You can manage for now and are comfortable in your home. I think you will be giving up a reasonable amount of your equity to move making it counter productive.