Author Topic: What should we do with our house?  (Read 2895 times)

StiffUpperLip

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What should we do with our house?
« on: June 06, 2016, 05:07:14 AM »
We bought our home in 2008, bad plan, and are now wanting to move.  We have a three-storey terraced house (townhouse?) which cost us £125k at 100% mortgage when we bought it.  Our only saving grace has been that we didn’t buy anywhere near the top of what we could ‘afford’ ( read what the bank would lend…) and so haven’t struggled to pay the mortgage once we’ve come down from the fixed rate to a variable.

However (and potentially face-punch ready here…) we really want to move as we have no garden for my now 2 children to play in and I hate the way the house is laid out as it doesn’t work very well for family living.   

The house is no longer worth what we paid and we have sunk at least £15k into renovations and upkeep.  The house has been on the market for an age and is currently getting some interest at £105k but no offers.  The mortgage is at around £95k left to pay and obviously there would be moving costs. 

Our original plan was to sell and rent in the short term while I try to get a new job to relocate closer to family (family health and kids growing up near extended family are the reasons for this – there may also be childcare cost reductions in this as we pay full-time childcare for 1 child at the moment and if we moved there would be two sets of grandparents nearby to help with some of the strain).

As the house isn’t selling, I’ve started to reconsider, although the overall plan to move away from the area stands, but the timing of this is very dependent on my job hunt as main breadwinner and as my area is a niche market the jobs at my level are few and far between.

So the options on the table are:
1 – Leave the house on the market as is and hope for more interest over the summer.
2 – Reduce the sale price to prompt more interest in the house and swallow the fact that this will likely mean dipping into the emergency fund to move (my SO is not keen on this as he’s stuck with the sunk costs in mind and hates that we’re selling at a loss) but will allow us to start over without the house tying us down.
3 – Sink every available £ into the mortgage til we can pay it down to a level where renting the house out becomes a viable option – i.e. rent would cover mortgage + maintenance + fees.

We’re basically just getting to understand and manage our finances better and it feels like the house is a sticking point.  We have an emergency fund of £10k, my final salary pension through work and my SO has practically no retirement savings to speak of.  I’m 33 and my SO will be 40 this year!

We’re focussing on expenses and bearing down to increase our monthly savings rate, so may well be back with a full case study at a later date to see what we might have missed.  So really the house is the dragging point at the moment and we really unsure where to go from here. 

Any advice welcome (and any necessary face-punches well prepared for!).

Rezdent

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Re: What should we do with our house?
« Reply #1 on: June 06, 2016, 06:29:15 AM »
How long has the house been on the market?

sokoloff

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Re: What should we do with our house?
« Reply #2 on: June 06, 2016, 06:30:15 AM »
If you'd bought the house for 90K (or 75K), and somehow borrowed money such that you're total debt was 95K, would it change what you do? If so, you're not thinking about it rationally. (I suspect your SO is falling into this trap. If the house *never* recovered in value, would that mean you'd live in it permanently, until you both died, all over maybe a 20K loss?)

When a house isn't selling, it's for one reason only: the price is too high. It's not because the garden isn't right, because the street is too busy, because the appliances are too dated, or anything else. All of those inform the right price, but it's still a price issue. If you want to move, knock the price down a bit, maybe even to 99.5K (to get it into the "search window" of a new category of shoppers) and get it done and behind you. Depending on your market (real estate is famously local), you might have luck with 99.5K listing and a deadline for offers. Around here, houses are selling for way over ask, the Tuesday after the open house weekend, but that's all very cyclical (and local, of course).

All of that assumes that moving is the right plan for your family. Figure that out first, and then figure out how to get it to happen.

If you want to be a landlord, do that. If you find yourself pushed into being a landlord because the house isn't selling for an extra 6K (105 vs 99), I think you're crazy to take on the burdens and hassles of landlording over 6K. (If you want to do it and it makes financial sense, it's a perfectly fine idea. If 6K is holding you hostage to force you into it, that's when crazytown starts.)

If you lost money on housing, so be it. What's done is done. You needed a place to live anyway. In 8 years, you may have lost 40K. That's 5K/year, or about 415/month. Would rent have cost you that much in your area? (I have no idea, but it seems likely.)  Don't think of it as "losing 40K". Think instead that you spent 40K on housing, just like a most other people did...

Edit: you have to include interest paid (the big one, net of tax savings), property taxes, and the difference in insurance to the above math. That will change the math a lot, but still might be compared to slightly overpaying rent for the time in exchange for having more control over housing and moving fewer times (big hidden time and money suck)
« Last Edit: June 06, 2016, 07:16:34 AM by sokoloff »

StiffUpperLip

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Re: What should we do with our house?
« Reply #3 on: June 06, 2016, 03:56:33 PM »
Rezdent - The house first went on the market last May, so just over a year! The first agent we had it with pushed us to keep the (I now realise)  inflated asking price, although I can't imagine why! Moved agents as we weren't getting any interest, for obvious reasons.

Sokoloff - Thanks for helping me see this another way! Yay for maths too (says the nerd in me!) I've been talking to my SO tonight about this way of thinking about the money we've put in and think he can see it this way too. We're likely to drop the price and move on as I didn't really fancy a rental property hours away from where we hope to live...

Thanks again!

The Money Monk

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Re: What should we do with our house?
« Reply #4 on: June 07, 2016, 12:29:17 AM »

If you lost money on housing, so be it. What's done is done. You needed a place to live anyway. In 8 years, you may have lost 40K. That's 5K/year, or about 415/month. Would rent have cost you that much in your area? (I have no idea, but it seems likely.)  Don't think of it as "losing 40K". Think instead that you spent 40K on housing, just like a most other people did...

Edit: you have to include interest paid (the big one, net of tax savings), property taxes, and the difference in insurance to the above math. That will change the math a lot, but still might be compared to slightly overpaying rent for the time in exchange for having more control over housing and moving fewer times (big hidden time and money suck)

I agree. I wouldn't let a few grand hold up your life plans. If you sell lower and "lose" 5 to ten grand since 2008, you will probably have spent about what you would have if you rented instead during those years anyway. $6000 over 8 years is less than $65 a month. You probably would have spent more than that if you rented, so you may have actually still saved money by buying over that time period.

yeah selling a house for less than you bought it for may make you feel like you made a bad decision, but unless you have a concrete, actionable plan for addressing that, just sell it for what it is worth right now and move on with your life.




Drifterrider

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Re: What should we do with our house?
« Reply #5 on: June 07, 2016, 07:59:42 AM »
Is it possible for you to rent the house?  If so, what is the difference between what you could collect in rent and what you pay in mortgage?

Sibley

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Re: What should we do with our house?
« Reply #6 on: June 08, 2016, 08:54:55 AM »
Get your expenses under control, and beef up your emergency fund some. Also, start purging excess belongings. Make the house show better, but more importantly make it easier to move later.

Playing with Fire UK

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Re: What should we do with our house?
« Reply #7 on: June 08, 2016, 10:02:43 AM »
What has happened to house prices in general in the area your house is in, and in the area you are thinking of moving to?

pdxmonkey

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Re: What should we do with our house?
« Reply #8 on: June 08, 2016, 08:47:32 PM »
Is it made of gingerbread? NOM NOM NOM...

worthless post of the day.