I'm not sure if we can afford our house :(

[benetint]

Hi everyone, I was wondering if anyone could give me some advice? We relocated last Christmas as dh got a job in a new company. We managed to sell our house but because we didn't know the area we were moving to we decided to rent for a year before buying. However just after we signed our tenancy our house sale fell through so we were left with a mortgage to pay (£990/month) alongside an expensive rent £1200/month)

Luckily we've managed to find a tenant to occupy our old property but they're only able to pay £500 per month, so just over half.

We're struggling along with this and managing to put food on the table but every time we get a utility bill or breakage somewhere it's tough.
We really wanted to save up for a deposit for a new house for when we do sell our old one but there's no way we could at the moment. Our old house probably wouldn't make more than £10k deposit if we did manage to sell it. And I'm terrified they're going to up our rent. The house prices here have rocketed past what we'd be allowed to borrow (we can borrow £300k but the houses start at £400k here). We could move somewhere a bit cheaper after the year is up but dd is settled in her new school now and we still have ds to apply for in 2 years.

Sorry to sound pathetic. What would you do?

Ps I've taken on a second job to help but there's not really any more hours in the day

is £500 a market rent ? tbh your best bet is to try to sell at earliest opportunity. If you have to fund the deficit each month indefinitely the situation will worsen.

It sounds like you're doing your tenant a favour. You need to be charging market rent until you can sell, put your family first

You can't afford to buy a £400,000 house even if you do sell the existing house. That means you resign yourself to renting in your current area or move somewhere else.If you buy at £300,000 with a 95 per cent mortgage you would need a deposit of 15,000 and Stamp Duty of £9,000. Your currently owned property is a millstone round your necks and hard to sell. The house/its area/your mortgage deal must be dreadful if you are getting such a low rent to mortgage ratio. Discuss its marketing and rental with the estate agent and your solicitor and explore changing your mortgage. I would find out what areas within commuting distance of your husband's work are actually affordable for you. Try a Mumsnet thread. I would look to rent in that area as soon as possible rather than becoming any more settled somewhere you just can't afford to live.

You have got to get a new tenant or look to sell, they are massively taking the p*. How do you know for sure they can only afford £500pcm? Also, why aren't they on HB if they are so hard up?

Thank you everyone for your speedy replies. The tenants are old friends. They pay reliably and keep the house nicely. Our neighbours have had tenants from hell so we feel quite lucky to have them? Estate agents said our house should command £800 rent a month but we got no interest so we steadily reduced it. The house is beautiful and new build but the area isn't the best.

Both our tenancy and theirs run out in November.

Thanks so much again for any help.

Ps we're a bit worried about selling our old house and just renting here as we won't be on the ladder any more. Do you think the £500 shortfall now negates the benefit of being on the property ladder? Thanks again

Dh's job moved to Birmingham so we moved to Solihull as it's only 15 minutes on the train. We did it in such a rush I had no idea it was so much more expensive than where we we living. It just seems to have got worse - the houses here have gone up loads but the houses in our old area have stayed stagnant

You'd be in a stronger bargaining position without having anywhere to sell. £500 loss per month is 6k pa

Solihull is an expensive place to live. Now the children are in school could you rent a bit further away ( and cheaper)

That's a good point Lizs. It's difficult because if we hang onto it the housing market could increase, making the profit more than 6k... But I guess there's no way if knowing?

Thanks hoppingreen. We have to get ds into school still - we apply October 2015 so it would be good to stay until then - viscous circle!

Vicious!

What makes you think your old house is worth keeping? You want to gamble on house prices going up? New builds tend to attract a premium and lose say 10 per cent of value at once which you will only recover if the market goes up. Do you think the area is improving? The true market rent does not even cover the mortgage,I would only keep it or any other house that didn't take enough rent to pay all its costs if I wanted the house long term as my own dream home for retirement or holiday. If it doesn't fit the bill for that then get rid and think about buying yourselves either a commercially rentable house that pays its way or ticks the boxes for your retirement/holiday.

Have you got consent to let your old house? If so then switch to interest only and you might not have a rental shortfall.

It isn't only the mortgage shortfall though , you have to fund maintenance, insurance, gas certificate etc as well.

This happened to us and we reduced our house to sell asap with little profit and now rent.
I don't think we had any other choice at the time tbh. I didn't fancy getting in arrears, bailiffs calling etc and you can soon fall into that spiral

And yes Solihull is posh. What about somewhere like erdington?

I would move to a cheaper rental and get the market rent on the old place

If DH works in Birmingham, what about Worcester? It's a cheaper area and on the edge of gone gorgeous countryside. With Solihull you pay through the nose but it's quite bland despite being well heeled.

Apply for primary schools in a good secondary catchment area in Worcester like Blessed Edward or wood high.

Is it worth extending the mortgage so payments are lower?