Request for your advice on the best option.

What about option 1a, wait for a year. If house prices are falling chances are the 200k one will fall faster than your 120k one so you'll be quids in. Or in a years time maybe you'll hate it where you are so much you'll want to move anyway, or you'll be so impressed at how much they have fallen you'll wait for another year of falls. Seems unlikely they will rise much in the nex year (but plenty of people thought that last year and the year before that and.....)

Obviously nobody can possibly answer that question without knowing what's going to happen to house prices, mortgage rates, council tax, stamp duty etc etc.

As a rough guide, you're better off moving now if house price inflation exceeds the mortgage interest rate plus the extra costs involved in owning the more expensive house (ie extra insurance, maintenance, council tax, gas/electric/water etc).

Typically mortgage interest rates are about 5%, insurance/maintenance costs are about 2-3%, extra council tax plus extra utility bills etc perhaps 1% of the extra value.

So to be financially better off moving now house prices would have to rise about

8-9% pa.

You can adjust the figures depending on your circumstances, eg if the more expensive house is no bigger but simply in a better area then the insurance/maintenance/bills etc probably won't go up so much if at all. You can probably find out what the new council tax will be.

Of course you have to weigh the costs against the benefits, so if eg you think house prices will rise with RPI (2-3%) over the next 5 years then is the benefit of living in the more expensive house worth losing about 6% pa of the extra value (ie 400 a month)?

"Andy Pandy" wrote in message news:415d8cdb$0$69726$ snipped-for-privacy@ptn-nntp-reader01.plus.net...

you also have the factor in the benefit of getting the house you want to live in, rather than the one you don't

John

Er, yes, that's what I said in my last paragraph. But you need to be aware of how much that benefit is likely to cost you.

I think the overriding factor is to only move to an house you want to move to.

Therefore if an house is available now you really want then go for it, otherwise wait indefinitely.

You say you dislike where you are now, but its human nature to dislike things, something will annoy you with your new house.

You have benefited a lot from the increase in house prices, there was a report the other day saying that homeowners moving up the ladder require on average an extra 20k than a few years ago. If you look at it like this then if things do crash, if they return to the level where you bought your house you will only have lost 20k. Do you know how much your preferred new house was when you purchased yours? What is the cost to change now compared to then? I doubt an all out crash so as an estimate, the difference between the two multiplied by how much house prices have reduced in percentage will be your actual loss. When you are on the ladder I wouldn't recommend gambling and selling waiting to return, if history as shown anything its best riding out any bad periods.

Interest rates. The most important bit is to make sure that you can comfortably afford your repayments, don't under estimate changes in interest rates and your ability to adequately live, not to mention the emotional distress it causes. If it were me where my mortgage repayment had increased from 290 to 700 at 5% I would be tempted to edge my bets with a 10 year fix, if interest rates went up to 10% could you afford your mortgage payments?, whereas if they came down or stopped low you would at least benefit from the cheaper credit propping up house prices.

My memories of the last so called crash is of people desperate to sell their houses and no one wanting to buy. This is one that as always stuck with me and something I considered when I purchased my house, and this is one about location. If there was a crash how sellable do you think your house is? Some areas although prices will decrease in line with the average will sell, others houses won't. You should know your areas, do you live in one of these sellable area. Other members may have stories to share on how big a problem this was but it could certainly bugger up any plans to move if you chose option A and no one wanted to buy, after all you can't afford to give it away, trying to move in these times could be stressful, its much easier to move when people are begging you to sell.

I still think my first point is the most important, although at the end of the day what you pay for your house is also important.

Hope you are lucky either way.

In message , Bob writes

Given the theory that prices are going to crash, they will crash on whichever house you live in.

Personally, if I can afford it, I am going to experience the crash in the house I want to live in.

Hi Folks,

Many thanks for all your valued advice, you've provided plenty to think about.

Bob.

"Andy Pandy" wrote in message news:415d947f$0$80628$ snipped-for-privacy@ptn-nntp-reader01.plus.net...

Can't see that, could you point our where you said it?

"Jane Tweedynn" wrote

That's a very sad outlook on life.

"Jane Tweedynn" wrote

Doesn't a "move" require both sides - a "buy" *and* a "sell" ? Thus if it is very easy to sell your current house, it may be difficult to buy your next one - because so many people are bidding for the same places ...

Not an unrealistic one.

Logic would suggest the opposite is equally true, but if you have sold your house and looking to buy, sellers will consider you more favourably than if you have not sold your house and looking to buy.

I was trying make the OP aware that when a crash happens it may be very difficult to sell his house, even find an house where he wants to live as people will sit tight and try to ride out the crash, in order to sell he may have to offer it at lower than market value. Using his initial figures, if house prices did crash he may find himself bidding for houses with first time buyers, at the moment a lot of these first time buyers will be priced out at these levels, yes this may then push up house prices again on his own house but looking at the recent increases in house prices, not all houses rose at the same level at the same time, the semi/detached house increased first as these included first time buyers then when more people where being priced out did we see the catch up of terraced type housing.

I speak generally from what has happened to houses in my area.

Really?

That's all very well if you own the current house outright, but in real life you're likely to have a mortgage outstanding on it. Say it's £60k, which is not untypical nowadays for a £200k house. Then, in addition to the expected £32k sale proceeds, you'd need to find £28k of real money before you can redeem the loan in order to be able to sell the old house. [*]

In the climate after such a crash, it's unlikely that high LTV mortgages will be readily available. So if you were thinking of securing a £68k loan on the £40k house (i.e. carry over the £28k negative equity to the new house), you can forget it.

A 50% loan might be thinkable. That would mean you'd need £48k of real money. But that means needing more cash than the new house actually costs. If you can scrape that much together, then you might as well not bother selling the old house.

[*] Today, of course, the norm is to sell houses unencumbered, and if the new buyer needs a loan, he has to make his own arrangements to obtain one. In the new apocalyptic climate, it's conceivable that houses will sell *with loans outstanding*, so that the buyer agrees to take over the commitment to service the loan. But when a house in effect has a negative value, the seller should expect to pay the buyer handsomely to take it off his hands. I'm not sure if that's as daft as it sounds, because of course the seller will be buying another house, possibly with a larger negative value, so moving upmarket could in principle be self-financing, so long as you go for a house that has a large enough loan outstanding. It's interesting to contemplate how the market value of houses could be dominated by the size of their negative equity instead of by what they are "really" worth.

In message , Timothy Lee writes

I used to use this argument with clients, (although not quite so extreme ), and I almost always got the answer:

"I'm not dropping the price of my house for that!"

During 17 years in the business, one couple actually understood the principle, and ended up in the house that they really wanted.

I already have.

Option 3. Refinance your existing home with an interest-only mortgage and rent it out, using the equity from the refinancing as a deposit to purchase your new home. Rent received should exceed the interest-only payments, thus freeing up additional income to repay the mortgage or invest elsewhere.

Taking a long-term view (i.e. 10 to 20 years) the capital growth of both homes will be positive. Depending on where you are (e.g. North-East) you may find that even short term growth on your properties will be positive.

Shano

and

So which is it? House prices will definitely crash, or just maybe crash? Or maybe it's just wishful thinking and they're not going to crash at all?

Ah. Obviously not from the North then, where house prices are still rising?

Shano