I am a regular poster but this may be outing so changed my username.
Both DH and I are about to turn 40. We are planning to make our next move as we have outgrown our current home which is a two bed flat in a great area with great schools and transport links etc. Since the area is highly desirable and we had a good deposit to begin with, we have a good equity and can buy within this area for the next step up. It will be a bit closer to schools, wrap around care that we need for another few years and great secondaries. I love the area but we have run out of space. We cannot afford to move up the ladder here On DH’s pay alone and need both of us to pay the mortgage. For various reasons, including our desire to apply for grammar schools (none in our area), this next move may not be a long-term home and we may need to move again in about 3-4 years.
We have stable, above average job though not highly paid yet. DH has a chance of moving up in near future hopefully (no surety yet due to Covid, he has been nominated and he should have got the promotion six months ago if Covid hadn’t happened) though not sure about the timing yet.
Our mortgage payments are about 13% of our total income, and we can save about £1500-1800 per month if we stay here (this is relevant). I am retraining to move up in my field and, within a year or so, we will probably add about 50% more to our household income.
Both DCs are in primary and in good schools with wrap around care. We are happy about that and if we move about ten min away, we can still handle the drop off and pick up timings.
Our problem is that we have severely run out of space. Before going back to work, I took a few years off work due to a severe childbirth-related injury. I had never been out of work before that, had never imagined how quickly plans can come crashing down and I probably need therapy to get over that period of my life. I am in a much happier place and improving constantly. My health is back and so is my determination, hence retraining. But this has shocked me to the core and is making me anxious about what steps we should take next. So I need your help in deciding what to do. Here are the scenarios which I am unsure about:
- A close relative has offered us a loan to pay more off of our mortgage. This will bring our equity to ~40%. This dear relative knows how my finances suffered when I went out of work and they want me to keep this flat in family as a BTL property in case in case of any more trouble in future due to said injury (doctors say it is unlikely). They think we should not buy a 3/4 bed semi or detached house in our current area as it would eat up all our equity and mortgage will be very high. Plus it will not likely be our forever home anyway. They want us to buy about ten minutes away in a less desirable, but up and coming location, with good schools. The housing stock is very good and cheap and it will mean we can convert the flat to BTL and get a 3-bed terrace with enough space for the next few years. We will have enough spare income, Even without any promotions, to pay back this loan and, luckily, there are no strings attached (I know I am very lucky to be able to say this!).
DH is against this. He thinks this is a risk, what if the area doesn’t go up or the economy goes down etc.
- So his idea is to simply sell this place, buy the worst house in the best street in our current location and either do it up while living in it (I WFH and I will be managing most of it so not keen on it!) or sell it off when we have to make our next move.
I think this is risky in case the market goes down as all our eggs will be in one basket, my pension is dismal at the moment and BTL is luckily going to give me that cushion for both pension/any heath scare and to get the retraining done with peace of mind and a full-time job. We will still have enough space in the less desirable area and DCs will be able to stay in their current schools anyway without much hassle of morning commute etc. After paying the mortgage on the flat, we will have enough monthly from the rent to pay back the loan from our relative (monthly instalments as requested by the relative).
The new house in this less desirable area will be enough for our needs and we can not only afford the mortgage on one pay (I am always worried about it after my injury now) but we can over pay the mortgage there too.
I am sorry that this has become such a long post but didn’t want to drip feed. I think I have covered everything. Can I please have your opinion on which scenario would work best for us?
thank you if you have read this far!
TIA!