Should we go into rented?

[InTheCludgie]

We have just found a buyer for our house this week and they offered a better price than we hoped for, which is fantastic. We're looking to move from this 2 bed to a 3 bed within our current area as our kids (DS13 and DD8) are settled in schools here. Kids are sharing and desperate for their own rooms.

However, where we live is highly in demand due to the good schools and houses can go for silly money at times due to that. We've so far lost out on five houses, two as other buyers were more procedable and other times as our offer wasn't the highest one.

I'm currently a student and graduate in May next year, should get a job quick as the area I want to work in struggles to recruit. We're limited in what we can borrow atm due to my student status but we have a deposit of about 210k due to two lots of inheritances.

We're not getting pressure from our buyer yet but we're debating if going into rented would be an idea. However, two things are stopping us - we have a fixed rate of 1.19% which our lender has agreed to port (£87k left on mortgage, borrowing an extra 13 k on top of this), we will lose that if we end up renting and there are still three years on it. Also, we have a cat and I know most landlords aren't keen on pets.

The upside would be we don't lose the good offer on our house and we become more attractive to vendors. We would have a bit of a bigger budget next year too by the time the rental term is up. WWYD?

Should also say, we struggled to sell this place last year (lost four buyers for various reasons) and none of the offers were as good as this current one. We were really stressed out with it all.

When I saw of my last house I went into rented and ended up being there longer than I thought because house prices exploded and I wanted a particular type of house in a particular area. But it meant I didn't benefit from a low interest rate.

But it made me much more valuable to a buyer and it gave me a fire break which I needed. We had 2 cats at the time and I offered pet rent to cover them which quite a few landlords were happy with.

House prices in my city are falling so you might find something cheaper. But if course interest rates are climbing.

I would rent if I were you to put yourselves in the best bargaining position.

Firstly, congratulations on your good offer!

I would be very reluctant to lose the 3 years you have left on your mortgage at 1.19% so I think plan A should be to find a suitable 3 bed house to buy. You are in a much better position to be taken seriously by sellers now you have sold your own property. You now fell into the category of proceedable buyers so will be taken very seriously by Sellers & EAs.
I would throw everything into finding a property, maybe even widening your search area slightly or making other compromises.
Plan B would indeed be to move into a rental property but only if you really, really can’t find anywhere suitable to buy. Whatever you do, you need to keep your buyer and that would be my number 1 priority.

@user1471538283 did you eventually find something you wanted?

@Twiglets1 thanks! We were very surprised at the offer we got, I'm not convinced we would do so well if we had to remarket again. Additionally, our house has certain elements which makes it less attractive to buyers - its definitely not one of the most sought after types of house in what is otherwise a sought-after area!

I'd grab the good offer whilst you have it. House prices are falling in price ATM. It looks like mortgage rates will be static for a while before coming down slightly. Once you get a job you will have 2 incomes so will get much higher multipliers. I'd wait till you get a job and move into rental until then.

Hmm.
Despite falling house prices nationally- demand, and hence prices are still high in your area.
That doesn't make your 'better offer' surprising but was it only from one buyer - were there others?
How hard is it to get a rental?

I'd try to buy before considering rented personally although October may not be the best time. You're proceedable now. And given that there is so much demand... even if your house has off-putting features they'll have no choice but to consider yours if they desperately want to stay in that area.

Give yourself a cutoff point, maybe a month? After that move into rented.

@PAfsapfujasfp we had three other viewers, they weren't interested.

There's not a lot of choice in terms of rentals, partly due to the pet situation. There's one that's just reduced this week, that will consider pets. It's twice our current mortgage but we've been making ok amounts from investments that will help cover it.

I wouldn’t want to give up the good mortgage rate.

The reason you lost out on 5 houses is because you weren’t actually proceedable. Now you are!
Nobody is going to accept an offer from someone who hasn’t sold yet.
So you are in a really good position now to port the mortgage and make the move. Maybe just ask your buyers if they wait a month for you to find your onward..?

Exactly!

OP lost out on 2 houses they offered on because they weren’t proceedable.

Now they are in a much better position so the situation is completely different. They are not getting pressure from their buyers (yet) so I would be frantically looking on Righmove every day to find something. And phoning the local EAs to tell them we’re ready to go.

I wouldn’t go into rented. What if this buyer pulls out abd you’re halfway through organising moving into a rented place!? Plus losing 3 years at 1%. As others have said you’re better prepared to proceed now than previously! X

I really hope it makes a difference! Decent houses are going for about 10% over HR but there is the odd buyer who will pay way over the odds, especially if houses go to sealed bids, so we're still a bit up against it due to these type of situations.

@InTheCludgie - I did thank you! I've got exactly what I wanted in the specific area I wanted!

I hope it goes well!

Have you actually quantified what losing the 3 year fixed would be? How does that compare with how much “better” the new offer is?
Find out how much a new mortgage rate would be and compare. Eg a 5% rate would mean losing 3.81% of 87k every year, so about £10k over the 3 years. So you could accept an offer of £10k less later on and not be any worse off without the hassle of moving (and obviously there’s quite a bit of cost to moving as well).

A lack of interest from other buyers at all is more worrying, so I would be mindful of that. But high offers often get reviewed when surveys and reality kick in…

I’d definitely leave it unless you start getting serious pressure from the buyers once they’re properly invested (surveys done).

Thanks @user1471538283 and congrats in getting your new home in the end!

@Severe I'd need to work that out later, my brain hurts too much atm. When you say surveys, do you mean the home survey? That's already been done

Porting your mortgage sounds like it’s worth around £10k. Keeping your buyer is probably worth more.

If you don’t find a house in the next couple of months then you may as well rent until you get a job - which in turn should improve your borrowing capacity.

Put like that - that the porting element is “only” worth 10k over 3 years, I think PP are correct that actually, that’s not a huge amount in relation to moving house.

Taking that into consideration, I would say porting the mortgage is less important than I previously thought. So I would agree with others that renting could be the best option. Keep your buyers, get a good price, put yourselves in a strong position to get your offer accepted when a great house next comes to market.

It isn't just the £10k in extra interest on the mortgage though. Op will be paying rent which is double her mortgage payment and not gaining equity.

Yes, I’d also assume rental costs would be more than the mortgage, but the OP would need to do the calculations for their own case.

For those saying it’s “only” 10k, it all depends on the house price. If the OP has 20% deposit/equity and an 87k mortgage, that would mean the house was worth about 105k. That 10k would then be about 10%. But if they’ve got a very high percentage of equity, 10k could be rather small in comparison.

She will be paying extra in rent yes but will be gaining the advantage of being in a strong buying position. If she loses her buyer she will not be taken seriously when she makes offers as she has already found.

Yes I just meant homebuyer’s survey, as that can often lead to renegotiations.

If the buyer starts pushing and sounding worried, agreed I’d consider rental to avoid losing them. I just wouldn’t go into rental preemptively as it’s a lot of cost and upheaval.

Yes agree it’s better to find another property to buy as long as the buyer stays patient.

The renting option is plan B but losing the low rate fixed mortgage is not such a big issue as I assumed in my first post. Now the cost has been worked out.

Thanks for the new replies. Renting is definitely Plan B, we'd much sooner buy a new home than rent. I was dead against renting when we started this process last year but tbh I'm just done with it all - we should have moved in June and since then we've spent about 3k on fixing issues that have since cropped up. I'm fed up spending money on a house I just want out of. I dread what issues might pop up over the winter if we remain here and cost us even more.

We save about £120 a month into our home 'emergency' fund, we could put that towards the extra cost of renting, along with the interest we're earning from the deposit money.

Looking at sums for holding on to our fixed rate, if we had to start over again on a higher interest rate, it would cost us about £300 a month more so a PP was right about it costing 10k over the 3 year period.

Do rentals usually have a minimum term? What if we found a nice house during that time, would we be 'fined' if we left early?

Rentals are often for a 6 month minimum term. Or 12 months with a break clause at the 6 month point.