Buy, rent or stay? - WWYD?

[roomforfour]

Hi wondering if any of you would help to give me another perspective on our current situation as I fell a bit like my thoughts on this are just going round in ever decreasing circles.

I have just found out I'm pregnant with DC2 and I'm trying to work out a plan of action regarding our housing situation. We currently live in a 3 bedroom house, which sounds fine but it's not very big, as in all bedrooms are small (as in 1 small double, 1 that can just about squeeze in a 3/4 bed and another that makes a v. nice nursery but would struggle to take a single bed) and there is just one large reception room and a galley kitchen downstairs and whilst there is a hallway it becomes overcrowded once there are two pairs of shoes in it. Overall, it's a really nice house it just feels a bit compact and we always envisaged that we would think about moving post DC1 and definitely with DC2.

The problem we have is that since we bought in 2007 prices in this area have halved, despite making quite large inroads to our mortgage we are in at least £60K worth of negative equity. I don't really see this situation changing anytime soon although I am hoping that at the very least our negative equity won't get any bigger.

Am I mad for even considering moving? As I see it our options are:

1. Rent out current house, use savings for deposit on a new house, that is assuming that we could even get a new mortgage whilst still in negative equity on this house.

1. Rent out current house, whilst renting out another larger property to live in.

1. Stay where we are and possibly extend downstairs to create a larger kitchen/ diner and creating a smaller seperate reception room. Feels a bit like throwing money away given the falling house value.

1. Stop moaning, become better at finding appropriate storage solutions and make friends & relatives stay in B&Bs/ air matress on our living room floor.

I don't know if this helps but I think I heard something on the news the other day about lenders now moving negativity equity to the new property iyswim. Best bet is to find a decent independant broker - I can recommend one if you want that I've used a couple of times.

Think you need to find out how much rent you could expect for your current house, and how this compares to your mortgage.

Thanks for taking the time to reply

MrsZoidberg - yes I've heard of these mortgages and it is something I would think about pursuing this option if our negative equity was around £10-20K. However, for us it would mean basically totally writing off at least £120K (including our original deposit and the amount we've paid off the mortgage in the meantime) which psychologically is a big step. Perhaps it's naive but I retain some kind of foolish hope that over time we would at least see the current level of this loss decrease if we kept hold of the house and rented it out over the long term.

BlueChampagne we could rent the house out for pretty much the same as the mortgage amount, although I do realise that this is at current interest rate levels.

Hmm, I think if you're in negative equity you'll struggle to do anything much really. I know it's a horrible situation to be in.

IIWY I think I'd de clutter as much as possible, repay the mortgage as fast as possible and hope prices improve in the next few years.

Your new baby can have a tiny room for a good year or more.

If your head is still in the house you can make the most of it. Small bunk beds in smallest room an option? Second bedroom becomes childrens playroom? Keeping downstairs free of some clutter.
I am not a propertyexpert but would be staying put and trying to ride it out.
What part of the country are you in?

We are not in the same situation but we are facing similar storage issues as we are renting a small three bed house now but it has a shed and a garage for storage but we are moving to an even smaller three bed house with no built in wardrobes, no shed (yet but we are going to buy one) and no garage.

But we have decided to make the new house work because even though we need more room than we currently have, the house we have bought is all we can afford. We have two DCs, DP works from home and we have DSD staying with us a lot so it will be a bit of a squeeze.

We are decluttering like mad and I am trying to be as ruthless as possible without selling/freecycling/binning anything I will have to buy again a bit further down the line.

We are trying to be more space savvy as well, eg it is DDs 3rd bday on Sunday and instead of the GPs getting her more toys she doesn't need, I have asked them to pay for a batch of swimming lessons instead so she gets something worthwhile for her birthday and I don't have to find room for more toys.

Can you use your loft space? We are going to board the loft in the new place and put as much stuff up there as we can. I have a friend who has a summer/winter wardrobe and puts her clothes in those vacuum packs in the loft when they aren't needed to make more space.

Thanks again people.

I'm in Northern Ireland. The key problem is that there really doesn't seem to be an end in sight, I can't see there being any rise in property prices for quite some time, and even if there was a rise it would be so small as to be insignificant. We've already paid off a substantial chunk of the mortgage in the last couple of years, and have only managed to cover yet another steep decline in prices, it's soul destroying. We don't want to spend any more money on the house, but spending so much time in on maternity leave just magnifies every fault, and it feels so frustrating that on the one hand we need to stay but on the other it's foolish to make it into the best home it could be.

Sorry that was a bit of a self-indulgant rant, it's just seems so unfair, we bought well within our means with a good deposit, we just forgot to consult our crystal ball.

Option 4 and ride it out longer if you can

To rent out your house you usually need a buy to let mortgage product which usually means you need 25% plus equity and then the rent has to be 150% of the mortgage repayments. It maybe different in NI but a mortgage advisor should be able to quickly advise you on the viability.

I would try and move as you can now afford something that will see you through until the children leave home. If your house has dropped 50% so has the next step up the ladder.
No point in throwing good money after bad and ending up with a house that'll never be worth what you've spent on it.

I also agree that option 4 is your best bet.

I have a friend who found herself in similar circumstances (2 small kids bedrooms in a 3 bed house) though for different reasons. Here are a few suggestions based on how she has handled the practicalities

Depending on the age of DC1, a bunk bed with storage underneath, or one of those cabin beds which isn't too high, but still has storage underneath?

DC2 can have a toddler bed once he/she is too big for a cot - my friend's 3yo is still happy in her toddler bed!

Also, installing shelves up high (eg. above bed, out of "grabbing reach" of small children) offers storage for boxes of toys/clothes that are out of season (or outgrown by DC1 but still too big/grown up for DC2), on a wall that would otherwise be "unused" IYSWIM.

Sorry, I'm probably teaching you to suck eggs but I was so impressed with my friend's set up I just had to share it! I know another family who have a much larger house but their three kids still share a bedroom and have another bedroom as a playroom (rather than be split into 2 bedrooms IYSWIM) so the PP's suggestion of bunks in the smaller room is also a good idea.

You may be able to get your current lender to allow you to rent your house out, which will then cover the mortgage payments and then you can apply for a mortgage on a new house if you have enough saved for the deposit. I know this can be done in England as I have just done it! The lender on the new house was just interested to see that the rental payments covered the mortgage on the first house. I did have a good reason for doing this ie escaping from dv situation, which I think might have helped as I had to write a letter saying why I wanted to rent out the house.

Some lenders are concerned with LTV when you apply for consent to let, and others aren't. If yours is and that is a stumbling block, you could look at someone who doesn't have a fixed LTV ratio for this when you get a new mortgage produce. There is info on line about this and what criteria particular lenders have for consent to let. Are you on a fixed rate mortgage on your existing property ie are you tied in to that product for any particular length of time?

HTH

cowboylover I'd be very surprised if banks in NI would have those requirements as the most pessimistic estimates have about 1/3 of homeowners here in negative equity. I know people who are renting out houses bought as homes due to their circumstances changing, although I suppose whether or not they are telling their mortgage companies is another matter entirely. I think the only way we'll know for sure is by getting some proper financial advice.

OhWesternWind That's very interesting thank you. Our mortgage product ran out over two years ago and we're now just on SVR, which thankfully at the moment is working to our benefit.

Heswall this is definitely a consideration, I do worry that houseprices will start to rise, not enough to eat into our negative equity but enough to mean we're facing higher prices to buy.

Thank you everyone for the tips on making our home more liveable, the chances are we'll end up staying for a while so these will come in handy.