Opinions needed - Rent, Extend or Buy?

Hi all,

I'd be interested in any views on our situation.

We are a couple with 2 kids (girl 2, boy 3months). We bought a 2-bed terraced house in Dublin city in 2006. Tracker mortgage 330k, 298k outstanding. So, massive negative equity and no realistic prospect of buying/selling in the near future. We are already very cramped and in the long term our kids will need separate rooms.

We have savings of 20k.

We also have room to extend this house over two storeys. It would make the place a bit more liveable if still not massive, and would add a bedroom.

I've looked at our mortgage documentation and from what I can see there is nothing stating that renting our house out would forfeit our tracker.

The area is fine but even with an extension my long-term goal would be to buy somewhere else - if that's possible. (I accept it may not be.)

So my question is whether we should pump our savings plus more money into an extension, rent our house and use the savings to plug the rental income gap, or hang on to our savings and keep adding to them in the hope that there might be some change in the lending market in the future and we will need to have as much cash as possible then.

Any thoughts?

I would be very interested to hear the replies to this post.
I'm in exactly the same situation myself. Small 2 bed terrace in Dublin, circa 300k owing, worth about 150k, growing family. There is the room to extend but would never be a big enough house. The only difference between us is I don't want to stay in the area long term.

If extending the house still wont make it a comfortable place to live then I would look at renting it out and then renting a suitable house for you and your family.
Have you done any research on how much it would cost to add the extension? With 20k in savings you would be looking at borrowing for the extension and the banks may not be too interested in lending you more.

We have had a couple of people in recently. The architect flat out suggested we not bother with an extension and go straight to renting. Builders are more pragmatic. We have yet to get a quote for the work but are saving hard at the moment and would hope to scrape it together ourselves. If we have to go to the banks and they rule us out then it's a matter of waiting til we do have it ourselves.

You do not have massive negative equity, only 32K. In addition you have 20K saved already. Would you not be better selling and going to rent somewhere more suitable, rather than doing a two storey extension on a 2 bed terrace which sounds like a nightmare as space is cramped already and there is a young family there. If you rent cheap you might be able to continue saving's and get a deposit to buy again in say 5 years.

How much would an extension cost, how long would it take. What added value would it add to the house. Have you seen what other similar extensions look like on neighbouring houses.

And I don't consider the builder to be more pragmatic than the architect. The builder wants work.

Sorry, I should clarify, there is 298k outstanding on our mortgage. The house is worth about 100k. Repayments are 1100on.

We're aware that the extension won't add much to the value of the house, although it might ultimately make it a little easier to rent. It would simply give us space for a finite amount of time, say 5 years or so.