Have cash but can we move?

Age: 35
Spouse’s/Partner's age: 34

Annual gross income from employment or profession: 89,000 + bonus
Annual gross income of spouse: 48,000

Type of employment: private sector and civil service

In general are you:

Saving about 1200 a month into pension and saving account

Rough estimate of value of home: 225,000
Amount outstanding on your mortgage: 375,000
What interest rate are you paying? ECB + 1%

No other borrowings & credit cards are paid each month.

Savings and investments:

Savings: 215,000
Pension: Yes, going about 10 years with average monthly payments
No other investments or property.


Ages of children: 2yrs + one on the way


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In short we bought a very small 3 bed terraced property at the height of the boom. We have 150k of negative equity and the nature of the property (won't go into all reasons) is starting to have a negative effect on our lives. This will be magnified when family increases by one.

We want to move to a different property and are looking in the 450k-550k range. The bank has approved a mortgage provided we rent our current property. We will get approx 900-1000 per month in rent.

What I would love some advice on is:

- how stupid would we be to execute such a move?
- how much exposure realistically are we opening ourselves up to?
- is there another route to getting out of the mess, e.g. selling, paying off mortgage with savings, renting and save, then buy at a later date?

Any pointers, personal experiences or info would be gratefully received.

I appreciate that we are not in dire straits. Even still it would be great to get some general financial advice, e.g. pay off some of mortgage? Or perhaps a pointer to someone who can advise.

Thanks.

If I were you on your incomes etc i would seek independant financial advice. However a few things come to mind

1. You will loose the 1% tracker if you go to a investment mortgage. This will increase very substantially your monthly payments.

2. How secure is the private sector job?

This is not primarily a financial decision - it's a lifestyle decision.

You have to decide the urgency of moving to a more suitable house.

You are in the very lucky position of being able to do it.

If you buy another house for €500k, you will have around €700k in debt and €700k exposure to the property market. That seems too high, even on your very good salary. The high level of borrowings will limit your options e.g. if you want to take a career break to look after the kids.

I would suggest selling your current home and use your savngs to pay off the negative equity. You will be able to accumulate a good deposit fairly quickly and in the meantime you can rent.

You will not automatically lose your tracker if you do choose to let your current house. Check the Mortgage Offer.

Why don't you sell your current proerty. You are lucky in that you have very substantial savings that will clear the negative equity and leave you with 65K as a deposit for new property (give or take). Maybe rent a larger place for a while and in no time you will have a very big deposit for your new house, and a manageable mortgage.

Is it the location or the size of house / layout that is the nature of the property reason that you wish to move.
If it is the size/layout is there an option to extend in any way or alter the layout to better use - perhaps have a meeting with an architect to determine this.
If it is location perhaps renting it out may not be an option as if you are not happy in area others might not be either so limiting your potential renters.

I think you would be totally over exposed and really tying a noose around your neck buy renting out current house and buying for such a high price.

I would be thinking (if the extending/altering layout is not an option) of selling current house renting for a while, building up substantial savings, see where property prices/interest rates are going over next 6 -12 months then buy.
I would not then even with the great wages be buying at such a price. Enjoy your life, holidays etc and don't be mortgage slaves, after all you will have spent a lot clearing the neg equity.

Thanks all for the feedback. I agree that the exposure ultimately is just too much. We will also seek out from independent financial advice and take things from there.