Housing ladder- when to move up from first rung
Discussion
Morning all.
I know the topic is very subjective, but i am toying with flogging the first home, and looking to move the ladder. Purchased the house cheap (directly from Bank as housing developer went pop), and believe the value has now caught up with market values generally. Given a nice build up of equity, i'm questioning what to do next.
Were both 29; combined salary of circa £70k; equity of £80k in a £230k home. We have no kids (yet) and so can afford to take a bit of gamble. Would rather buy one now when we dont need a bigger one, than buy a bigger one when we need to.
I have no pension, although will be doing 15% when the work place pension kicks in. About 10k savings between us. We have all the toys we need between us; bikes, cars, holidays etc so looking for a bit of help re: financial planning generally for the future.
Any advise as to when to take the plunge or what to do next, or should i go down the coke/hooker/V8 route?
I know the topic is very subjective, but i am toying with flogging the first home, and looking to move the ladder. Purchased the house cheap (directly from Bank as housing developer went pop), and believe the value has now caught up with market values generally. Given a nice build up of equity, i'm questioning what to do next.
Were both 29; combined salary of circa £70k; equity of £80k in a £230k home. We have no kids (yet) and so can afford to take a bit of gamble. Would rather buy one now when we dont need a bigger one, than buy a bigger one when we need to.
I have no pension, although will be doing 15% when the work place pension kicks in. About 10k savings between us. We have all the toys we need between us; bikes, cars, holidays etc so looking for a bit of help re: financial planning generally for the future.
Any advise as to when to take the plunge or what to do next, or should i go down the coke/hooker/V8 route?
dan_almond said:
Were both 29; combined salary of circa £70k; equity of £80k in a £230k home.
If I've understood correctly you therefore still have a mortgage of £150K.Lenders will probably do 3 x combined without too much bother so you could borrow another £60k
You could potentially have £210k mortgage plus £80k equity to spend. £290k total. You then have LTV to look at and the best rates tend to be available for around 60% LTV or less. If you spent the full £290k your LTV would be around 72%.
In summary can you get a nicer house for £290k than the one you are in and would you be happy with a £210k mortgage?
Edited by trickywoo on Monday 16th May 10:46
trickywoo said:
dan_almond said:
Were both 29; combined salary of circa £70k; equity of £80k in a £230k home.
If I've understood correctly you therefore still have a mortgage of £150K.Lenders will probably do 3 x combined without too much bother so you could borrow another £60k
You could potentially have £210k mortgage plus £80k equity to spend. £290k total. You then have LTV to look at and the best rates tend to be available for around 60% LTV or less. If you spent the full £290k your LTV would be around 72%.
In summary can you get a nicer house for £290k than the one you are in and would you be happy with a £210k mortgage?
Edited by trickywoo on Monday 16th May 10:46
And can you afford it when the babies start to arrive?
Are the local schools good where you are now, or in your target area when you move? If they need any kind of pre-entry criteria then I would move sooner rather than later and start building up entry points, eg faith schools often need regular church attendance.
Are the local schools good where you are now, or in your target area when you move? If they need any kind of pre-entry criteria then I would move sooner rather than later and start building up entry points, eg faith schools often need regular church attendance.
All depends where you are looking to buy, prices are so strong and heading upwards in certain areas that the longer the wait the worse it'll be, so if you can afford a bigger house now you will be far better off doing it than waiting a year when its gone up 10/20/30%.
Also it doesn't look like interest rates are going to go up a sharp amount in the imminent future, so buy - pay off what you can and enjoy the equity you should accumulate, if you wait a few years you might struggle to afford what you could easily now..
Also it doesn't look like interest rates are going to go up a sharp amount in the imminent future, so buy - pay off what you can and enjoy the equity you should accumulate, if you wait a few years you might struggle to afford what you could easily now..
I think what you are contemplating makes perfect sense, and I (+ Mrs Irrelevant) recently did exactly this. We bought a house that's easily big enough for when kids come along and are in the process of steadily doing it up with a view to staying there for a long time. I know a few people who have left moving until they've basically been forced to by a growing family and it looks like a total ballache so I wanted to avoid that!
As to whether it makes sense financially for you in particular only you can answer that. I'll admit that the size of mortgage you'd be looking at on your salary would be make me a bit uncomfortable, but then I'm quite debt averse and for all I know you might be getting big salary increases each year in which case no problem. Plus if you're anywhere near the south east then I understand you may not have much choice!
As to whether it makes sense financially for you in particular only you can answer that. I'll admit that the size of mortgage you'd be looking at on your salary would be make me a bit uncomfortable, but then I'm quite debt averse and for all I know you might be getting big salary increases each year in which case no problem. Plus if you're anywhere near the south east then I understand you may not have much choice!
Thanks for your input guys.
trickywoo/Sarnie - Recently remortgaged, so i know i can obtain around £320k from bank. Bit of a punt if i borrow the lot, or hold back slightly.
Collectingbrass - Valid point, one that i (for obviously reasons) haven't explored. No idea how much babies cost, haha?
NickCW - Thanks. It is for that reason, that id rather do 10% on a bigger place than an smaller one.
Roger Irrelevant - Thanks. We are currently in a 3 bed semi, but keen to make my money work more than i think it is now. The size of the mortgage doesn't make me uncomfortable (yet). I'm based slab bang on the South East/West border.
At a guess, i believe many move to a bigger place to cover the every growing size of the family etc. Would prefer to do this before i have to. I'm in a good position to act on the 'never need to buy, never need to sell' idea.
trickywoo/Sarnie - Recently remortgaged, so i know i can obtain around £320k from bank. Bit of a punt if i borrow the lot, or hold back slightly.
Collectingbrass - Valid point, one that i (for obviously reasons) haven't explored. No idea how much babies cost, haha?
NickCW - Thanks. It is for that reason, that id rather do 10% on a bigger place than an smaller one.
Roger Irrelevant - Thanks. We are currently in a 3 bed semi, but keen to make my money work more than i think it is now. The size of the mortgage doesn't make me uncomfortable (yet). I'm based slab bang on the South East/West border.
At a guess, i believe many move to a bigger place to cover the every growing size of the family etc. Would prefer to do this before i have to. I'm in a good position to act on the 'never need to buy, never need to sell' idea.
Go big while you are young. To a point where you won't struggle to pay for it.
When you lose an income with kids, that hugely drops the amount you can borrow. Thankfully our income is 70% me, 30% her - you may come off worse in this if you are quite equal earners?
I got a 4 bed house (still just the two of us) in prep for kids whom are on the way and near to good schools. Don't regret it one bit but it was a bit of a stretch when we did it.
When you lose an income with kids, that hugely drops the amount you can borrow. Thankfully our income is 70% me, 30% her - you may come off worse in this if you are quite equal earners?
I got a 4 bed house (still just the two of us) in prep for kids whom are on the way and near to good schools. Don't regret it one bit but it was a bit of a stretch when we did it.
Edited by p1stonhead on Tuesday 17th May 06:53
p1stonhead said:
Go big while you are young. To a point where you won't struggle to pay for it.
When you lose an income with kids, that hugely drops the amount you can borrow. Thankfully our income is 70% me, 30% her - you may come off worse in this if you are quite equal earners?
I got a 4 bed house (still just the two of us) in prep for kids whom are on the way and near to good schools. Don't regret it one bit but it was a bit of a stretch when we did it.
I'm in the process of doing this. 2 of us and getting a 4 bed "because we can".When you lose an income with kids, that hugely drops the amount you can borrow. Thankfully our income is 70% me, 30% her - you may come off worse in this if you are quite equal earners?
I got a 4 bed house (still just the two of us) in prep for kids whom are on the way and near to good schools. Don't regret it one bit but it was a bit of a stretch when we did it.
I figured houses aren't getting any cheaper, so it's not likely to get any easier.
Also gives us a bit of time to chip away at the mortgage and overpay before kids etc.
I am in the max yourself out camp. Yes its a risk - but in the grand scheme of thing its a very small risk. Rates will never be this low, prices will always climb over time. Your income will probably go up. After the first 5-10 years of the mortgage your risk exposure will fall as you start to reduce the balance.
The biggest mistake we made was going cheap on our first place - it ended up costing us 10 years in a house we hated, could not sell as we waaay overpaid for it (bought a new build at the peak in 05) and probably lost £100-£200k in appreciation on the houses we had been looking at that were more expensive.
The biggest mistake we made was going cheap on our first place - it ended up costing us 10 years in a house we hated, could not sell as we waaay overpaid for it (bought a new build at the peak in 05) and probably lost £100-£200k in appreciation on the houses we had been looking at that were more expensive.
I agree with above, did this 3 years ago. After few years you always feel better again after the initial blow of getting anew house. If no offspring, you can be more risky as worse case, can start again. It unlikely but a risk none the less.
Bottom line (IMO), moving houses costs money so if can jump the ladder few steps, I think it's a good thing, obviously if you see yourself in that area long term. Interest rates are lowest well likely see them
Bottom line (IMO), moving houses costs money so if can jump the ladder few steps, I think it's a good thing, obviously if you see yourself in that area long term. Interest rates are lowest well likely see them
dan_almond said:
Collectingbrass - Valid point, one that i (for obviously reasons) haven't explored. No idea how much babies cost, haha?
Plenty of threads on this but consider that her(most often) salary is gone for 9 months to a year and then if she returns to full time work professional childcare is around £1k a month per child.jdw1234 said:
Does anyone ever consider in their decision that house prices might decline?
Yes, but it really depends on your time frame. If you are moving with a view to staying in your house for 10+ years I wouldn't worry too much. As long as you can afford your mortgage payments who cares what the house is worth.If it is a shorter term move then there is the risk prices could dip at just the wrong time. But it's a double sided coin as should also mean your next house up the ladder is cheaper.
We did something similar and moved to a more ideal house about two years before kids arrived (9 years ago). In the meantime my salary almost doubled and we were very comfortable. Three years ago, our second child arrived and my wife has not been working for three years. I have taken a career move which has reduced salary by 25%. All happy though and we don't regret stretching ourselves then 
Therefore I would recommend what you are planning. Seriously make sure you get your pensions in order soon. Those early years make a big difference and you are a little late in starting.
Mike
Therefore I would recommend what you are planning. Seriously make sure you get your pensions in order soon. Those early years make a big difference and you are a little late in starting.
Mike
I was kind of forced in to it just over a year ago because the price differential in the area between 1 bedroom flats (which I was in) and a family sized home was growing so quickly that I feared that I would be priced out.
It meant borrowing 5x salary for both of us which was a risk (albeit calculated), 1 year on and the house has been revalued at £75k more than we paid, whereas the flat has probably gone up by less than half of that, so much so that I wouldn't be able to afford to make the same move today. Because of the LTV change, the mortgage rate is also far lower now so the difference in monthly payment is negligible.
Horses for courses and all that, its clearly not the same for everyone. I took the risk knowing that I'm in as secure a job as anyone can hope to be and haven't reached anywhere near my earning potential, kids are some way off and that there are things happening in the local area which should make it less susceptible to any price corrections for the time being. If any of those factors were different however then it would have taken far more consideration.
It meant borrowing 5x salary for both of us which was a risk (albeit calculated), 1 year on and the house has been revalued at £75k more than we paid, whereas the flat has probably gone up by less than half of that, so much so that I wouldn't be able to afford to make the same move today. Because of the LTV change, the mortgage rate is also far lower now so the difference in monthly payment is negligible.
Horses for courses and all that, its clearly not the same for everyone. I took the risk knowing that I'm in as secure a job as anyone can hope to be and haven't reached anywhere near my earning potential, kids are some way off and that there are things happening in the local area which should make it less susceptible to any price corrections for the time being. If any of those factors were different however then it would have taken far more consideration.
All thanks for your input.
I work for a small practice, and understand that we are imminent to enrole and begin to make contributions. I've budgeted circa 13-15% gross salary- Ill ensure she does the same, although she has a good 5 years head start on me.
Given we have no kids yet, i am going to push to move beforehand. Obviously factoring in child care costs, and a lesser wage for her when shes on maternity leave. Another reason again to source a higher mortgage do it before kids.
I work for a small practice, and understand that we are imminent to enrole and begin to make contributions. I've budgeted circa 13-15% gross salary- Ill ensure she does the same, although she has a good 5 years head start on me.
Given we have no kids yet, i am going to push to move beforehand. Obviously factoring in child care costs, and a lesser wage for her when shes on maternity leave. Another reason again to source a higher mortgage do it before kids.
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