Author Topic: Brexit woes: advise on house buying  (Read 1419 times)

kvaruni

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Brexit woes: advise on house buying
« on: October 07, 2016, 03:30:55 AM »
I'll try to keep this as brief as possible. We are in the middle of quite a few major life changes. Notably, after 5 years of living apart due to our jobs, I decided to quit and become a trailing spouse. I need it to avert a burnout, and we need it to ensure our relationship stays healthy. At the moment there are no plans for me to pick up any particular job, but the ideas range from a SAHD (no kids just yet, mind you), a writer (fiction and textbook), teaching, or a start-up. Luckily, we are m(o)ustachians so we can easily live on one income and still save close to half of that.

The real problem has to do with our relocation. I need to sell my house in Northern Ireland (which was bought cash), and we need to buy a house in Scotland. Renting is not an option due to our dogs, and moving out of the UK would be career suicide for my wife at this stage. The best option is to stay here for at least 2 years (hopefully much longer, but that entirely depends on job options for myself and how Brexit turns out).

We are originally from continental Europe, with a fair amount of funds still in EUR, and this puts us in an awkward position. Buying a house in our area of Scotland would probably cost about 150,000 for what we want. Selling the house in Northern Ireland should net us at least 75,000. We have another 35,000 on our current accounts at the moment that is available for buying a house. This means we still need to cover an extra 40,000.

The problem comes down to Brexit. The GBP is really being slammed and the EUR/GBP could get a lot lower in the weeks/months/years to come. This makes me hesitant to transfer EUR to GBP as it seems it's on a downward slope, and because chances are at some stage we move back to a EUR country. We also have investments in GBP, about 15,000, which we could use to fund the purchase. These are invested in a worldwide index fund so they have provided a formidable shelter from any GBP woes (up 20% in 3 months). Do we touch those, or leave them alone? We could also borrow the money. This is a bit tricky as I may not have work and my wife has a poor credit history (she only officially started living in the UK 3 months ago). We could borrow up to 350,000 on both our incomes, but I expect this would drop to no more than 90,000 in the new situation (2% interest first two years, 4.5% afterwards). Do we take out a small loan, or a big loan? In the latter case we can invest the remaining GBP, with the risk that GBP has bottomed out and we just bought our index funds very expensively.

So, what to do?
  • Downsize (this would get small: 2 bedrooms, 70m2/750sq ft). Only buy with cash what you can afford.
  • Downsize. Borrow as much as you can and invest the rest.
  • Buy the house cash. First get money out of the GBP investment, only then use EUR money.
  • Buy the house cash. Only use the EUR money.
  • Go for a loan. Try to borrow as little as possible.
  • Go for a loan. Try to get as big a loan as possible and get all remaining GBP invested.
  • I have a better idea! See my reply below.
« Last Edit: October 07, 2016, 10:45:26 AM by kvaruni »

Irishtache

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Re: Brexit woes: advise on house buying
« Reply #1 on: October 07, 2016, 04:32:03 AM »
Hi. I'm not far from you and I understand your concerns about Brexit. Stg really getting slammed today. I note yoyr lifestyle seems unsettled at present, you may relocate from Scotland in the next few years? I would suggest you consider renting for the meantime. Invest the proceeds of the house sale in NI. Stay flexible. No one knows how Brexit will affect the UK economy long term so you may wish to head back to Europe sooner rather than later.

By the way, your English is amazing so forgive me for correcting a term you are using. You write 'lend' when I think you mean 'borrow'. I'm not being pedantic but it may cause you embarrassment or awkwardness later on. Best of luck.

PS: your username suggests it's based on your real name and that might not be wise on a finance forum.
« Last Edit: October 07, 2016, 04:33:34 AM by Irishtache »

ShoulderThingThatGoesUp

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Re: Brexit woes: advise on house buying
« Reply #2 on: October 07, 2016, 05:41:14 AM »
Well, inflation helps borrowers, right? So if you see GBP falling more, you'd definitely want to have a loan on the house...weakening of the currency your loan is in will make it easier to pay back. On the other hand, this could be a low point in the pound and Brexit could be a success. I think keeping your pound-denominated global investments and getting a loan on the house offers you the most protection.

kvaruni

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Re: Brexit woes: advise on house buying
« Reply #3 on: October 07, 2016, 11:01:19 AM »
I note your lifestyle seems unsettled at present, you may relocate from Scotland in the next few years? I would suggest you consider renting for the meantime. Invest the proceeds of the house sale in NI. Stay flexible. No one knows how Brexit will affect the UK economy long term so you may wish to head back to Europe sooner rather than later.
It's not like we do not want to stay in Scotland as my wife has a very good job there with good growth potential. The big "if" is how Brexit will turn out. We're somewhat safer in Scotland than other parts of the UK, but it still sounds like they will be dragged down with everything else. If it is up to us we're staying 5+ years, but Brexit may force us out in a number of ways.

The big issue is that we can't really rent. We have been looking for quite some time for a rental property that allows our dogs, but it is close to impossible to find anything decent in our area of Scotland. So, I'm afraid our only option will be to buy a property.

By the way, your English is amazing so forgive me for correcting a term you are using. You write 'lend' when I think you mean 'borrow'. I'm not being pedantic but it may cause you embarrassment or awkwardness later on. Best of luck.
Thanks for that, and no need to apologise for pointing this out. The only way to learn a language is through feedback! Stupid oversight on my end, which is now fixed!

PS: your username suggests it's based on your real name and that might not be wise on a finance forum.
It isn't, no worries :).

Well, inflation helps borrowers, right? So if you see GBP falling more, you'd definitely want to have a loan on the house...weakening of the currency your loan is in will make it easier to pay back. On the other hand, this could be a low point in the pound and Brexit could be a success. I think keeping your pound-denominated global investments and getting a loan on the house offers you the most protection.
Your reasoning definitely makes sense, it looks like borrowing (however much we can) is the way to go. As for Brexit being a success? It could be, but I think we are talking about a 10+ years timescale before any signs of success start to appear. Maybe I'm being too pessimistic, but I foresee a rough 2 years of negotiation, followed by a country that will be adrift for the better part of the 2020's as it tries to find its place in the world.

Any idea on house size, assuming we could only borrow half of the amount we need for a decently sized house? If we downscale, we would probably be able to borrow close to the full amount (but we would have to upscale fairly quickly if we ever have kids, and are able to stay in Scotland).