Sell now and rent

I am living in a house with my recently extended family that has become to small for our needs.
We are not in negative equity land yet but we think selling the house would cover the mortgage only at this stage, ie we have a mortgage of 250g, the houses in our area are still selling for that amount.

We will have a lump sum coming our way in about a year, 150g.

Should we sell now, while we can still pay off the mortgage with the proceeds and rent, with the possibilty that house prices will drop further so our 150g will get more bang for its buck and we wont have gone into negative equity ourselves?

The idea being that if we do go down into negative equity we might never be able to move in the future.

Any advice?

Obviously there is a risk that house prices will not fall but will go up etc.

given what you say if i were in your position I'd sell now. houses are selling once the seller is realistic about the price that they want. two people i know are in the process of selling at the moment, well one has sold theirs already. the person who has sold, has told me that even now that their renting, a faboulous house in howth, that in the boom you would never have been able to buy,the fact that they've no pressure mortage wise every month is fantastic. but the second girl thats selling could'nt and cannot get around how 'cheeky' some of the offers she's getting at the moment.
also there's great value in the rental market in the moment. but check your lease if that' the way you decide to go.

I think you are right to sell now and rent and not risk being in negative equity. Plus it means that at the moment you can live in a house that's bigger and more suited to your needs rather than hold on in the too small property.

Although the initial move from owning to renting is tough, it is very manageable with forward planning, even with a young family.
You can get a great house and lots of flexibility with renting.
Also you will gain the massive advantage of not being in a chain when you do find the next house to buy.

Just make sure that the house you are renting is not also currently for sale, so that you know you can stay in it a good long time if you choose to.
And aim to rent something you will really enjoy living in, rather than something that is cheap to rent in order to save money.

If you are going to trade up to a bigger house in the future anyway, then you most likely would have to rent in between due to not being able to match up the Sell and Buy at the same dates.
In the current climate Sell, Rent, and Buy Again are the norms, so you may as well just get on with the first stage.

Thanks for your replies. my wife said my post wasnt very clear but you seemed to understand what I meant.

Yes it is likely we will go with the sell, rent and buy again when our money might be worth more. Thanks.

I think selling and renting is a very bad idea. You are asically gambling on property prices which could get you in a lot of trouble.

If prices fall further, although you will be in negative equity, you have a lump sum coming to you which you could use to clear the debt. You should then be able to buy the new place cheaper as well so it should pretty much even out.

If you sell and rent, you will do better if prices fall further but do worse if prices rise

I dont' think it makes sense in your position to take these sorts of risks

.

In a similar situation to FLID. Also contemplating selling now and renting until we find something suitable. Also due to come into about 180k (but CGT will reduce this). Our mortgage is quite low-so should clear about 100k (not including fees) on sale of our house. However, there seems to be a shortage of rental properties in our area! Seems hard to believe and looks like we might have to pay up to €200 extra per month if renting. We did also consider maybe hanging on to our house and renting it out instead; and then using the inheritance to go towards buying a new house. I know there are lots of things to consider before becoming a landlord too. Not sure what to do, any advice most welcomed.

One concern I always have with the 'sell, rent then buy later' approach is if - God forbid - something happened to either Mum or Dad while in the rental phase.

I know this sounds very morbid, but my father did die totally unexpectedly when we were relatively young. When this happened I can guarantee you it did not matter one bit what type of house we were living in. It did however matter a great deal that the mortgage was cleared by insurance and that we at least had a roof over our heads. Like many of her generation, my mum stayed at home and had we been renting, she simply would not have been able to earn enough to ever buy a home again - leaving her kids and her future in serious trouble.

I know this sounds very morbid but you did mention you have a recenly extended family (as do I) so you do have to consider these things. We are also desperately cramped where we are but are very slow to consider a phase where we do not own a family home - even a teeny weeny one!

Good luck

You don't just have to have life assurance if you have a mortgage. you could take it out on the life of the person if your in rented accommodation so not a problem .

Do you really want to go through the sell move rent move buy process again ? Think about it, in a years time you will have funding for an extension. Is that an option ? What borrowing have you ? If you have a tracker then you may never get a deal again like it. As you say prices of houses could go up or down. If it goes down your buying power is better but you will get else for paying now. Regardless of how much your house is worth it only matter sif you sell. If you mortgage free by paying off most as soon as possible would that be an option ?I really feel you should consider not moving.

I think you might have missed the boat on the whole sell rent buy.


That would have been a good call 2 years ago.

I think you need to take the following into account - first, what is your current interest rate and type of mortgage? If you have a competitive tracker rate now, I would think very very seriously about selling and rentingm because you are not likely to get a cheap mortgage again any time soon. Any new mortgage is likely to be at a relatively high interest rate (that is, in comparison to the types of rates we saw during the boom). Second, stamp duty. What % fall in house prices would make it worth your while having to pay stamp duty again and what % of the total cost of the mortage will it represent? I would base my decision on the answers to those questions. We were thinking of doing exactly what you are planning but we have a very competitive mortgage (ECB plus 0.5%) and worked out that if we put the sum it would cost us in stamp duty to move to a bigger house/better area into improving our current house, we could make it much nicer and more suitable for our needs, so that is what we have decided to do. (Of course, that is also a gamble, my mother thinks I am mad to put money into doing up a house that is falling rapidly in value and which we will 'never' get back when we sell!). Having said that, our next door neighbours have 4 kids and made the opposite choice six months ago and are paying reasonable rent for an enormous house in a smarter part of the same general area and are delighted with themselves! Good luck with your family whatever you choose to do.

We are on a variable rate mortgage, which we will be fixing in the near future so the tracker consideration isnt one we have to think about, (wish it was).
Yes putting the money into a house that is falling in value is the thing that has made us contemplate sell rent buy. I cant see the house prices stabilizing in the near future, and this may be our chance to get a bigger house in a smarter neighbourhood. Still making our minds up, getting closer to selling though.

So thanks for your posts.

Families who choose to rent can provide extra stability for themselves by keeping their mortgage life insurance policies going, or increasing it while they are renting.
This is especially important for single income families where one parent stays home and has no job.
Because we are renting, we took out dual life cover on both our lives so that in the event of one spouse dying, the other has a lump sum to buy a modest house outright.

I also think that this would have been a good gamble, which is what it is, a year or two ago.

You need to consider the possibility that you could sell now, while the market is depressed, and make little or no gain and then find that in a year or two when you want to buy again that property values have increased again and the difference between your "sell" and "buy" price actually increased rather than decreased.

If you sell and buy at the same time you would be selling low AND buying low(or high as the case may be) therefore neutralising any risk. Buying and selling at different times is a gamble, pure and simple.

flid said:

this may be our chance to get a bigger house in a smarter neighbourhood. Still making our minds up, getting closer to selling though.

So thanks for your posts.

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It could also be your chance to live in a smaller house in a dingier estate. I really don't thinkt hat you have thought this through.

If you need some action, get some scratchcards but gambling your family's future like that is a bit reckless.

Pros and Cons

Flid

We are in a very similiar situation to yourselves, except:
-we have a tracker mortgage at ECB + 0.51%
- we don't have a lump sum coming to us, but from a house that recently sold in our area think we have about 100k equity in our present house

We are very reluctant to give up our tracker mortgage but are certain that the area that we live in currently is not where we want to bring up our children. We think that it is better to move now before they start school rather than leave it til later (eldest is just 2 years old). The house is a bit small but if it was in a better area we would probably stay put. I have a public sector job (husband is in private sector) so that is reassuring. But my commute isn't great so we would hope to improve on that also.

We feel that we have no choice apart from sell, rent and buy because we understand that the bank will not lend money until our house is sold. We are not planning on renting long term, just until we find a house that we are happy to buy, hopefully for less than a year.

I am very interested to hear advice from people who would be against this approach. Although not in negative equity, we are going to lose money on our house (bought 2004), but feel that when trading up, the cost of the bigger house will also have come down. The key thing is that we know we don't want to live where we are now long-term. With the oldest due to start school in 3 years, why not move now rather than later?

C

The key thing is that we know we don't want to live where we are now long-term.

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You have answered your own question. I wouldn't bother trying to time the housing market. I would get the ball rolling and sell when you have the contingency plan in place.

flid said:

We are on a variable rate mortgage, which we will be fixing in the near future

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If you are planning to sell shortly DO NOT fix.
By Fixing and selling after you will pay a fee that could be substantial

Cheers,

nadnerB