Q:We are in quite a bit of debt and are maxxed out on our mortage (we knew we would be maxxed out when we bought this house 2 years ago but didn't know it would be this hard), although we are actually only paying the interest at the moment!
So basically we are struggling to live here and we don't have much of a life because of it. So we are considering downsizing but everyone keeps telling us it's a terrible idea.
Our current house cost 250k 2 years ago and we're looking at houses that are around 170-180k. I have an estate agent coming round on Friday to give us a valuation, if it's worth far less than 250k then it probably won't be worth downsizing.
I just wondered if anyone could give their expert opinion on us considering downsizing – is it really such a terrible idea? Surely it will be a relief to have less debt?
A:Given prices look like continuing to fall, would it be realistic for you to sell chain-free, then rent for a while while you assess your finances and the state of the market etc?
A:I was talking to someone who I don't know well the other day and was telling them how much I loved my flat and doing well at work. "Not that well though" they said, and went on to explain that they were refering to my flat. I had to explain how I chose to live in a small flat because it minimised my fixed costs, leaving me free to spend money on other things and to save. Maybe this is a clue as to why some people see a massive mortgage as normal – they are all desperate to impress other people with their property.
A:Our current house cost 250k 2 years ago and we're looking at houses that are around 170-180k. I have an estate agent coming round on Friday to give us a valuation, if it's worth far less than 250k then it probably won't be worth
downsizing.
Look at it this way …. you are looking at buying a house valued at 70% (ish) of the value of your current house. If all property prices move the same way – whether up or down – you will still have a property worth 70% of your current property. So …. if your current property rises to a value of ￡300k in the next 5 years, then your new property ought to be worth around ￡210k. If your current property falls to a value of ￡200k, then your new property ought to be worth around ￡140k. The ratio of the value of the new property to the old ought to be roughly the same – ignoring things like improvements or blight due to undesirable developments nearby.
So ….. downsizing is not the issue. It is, what it is
If downsizing gives you cash to clear your debts then I see one huge advantage …. your monthly outgoings will reduce by the amount of the current debt repayments. In fact, the reduction might be more than the current repayments, as they could rise in the future due to additional interest and/or increases in the interest rate.
well that's exactly my thoughts too! but everyone just keeps saying "ooooh bad time to sell/buy, you should sit it out, wait a year or two". I KNOW it's not a great time but we would still be better off so I dont understand why people are so against the idea!
If you are both a seller and a buyer then the position is neutral. You are potentially selling low and buying low. The problem comes when you expect to sell high AND AT THE SAME TIME buy low. Selling high in the current market is likely to prove impossible – so you must be realistic about the value of the property you are selling. Once you've sold, you're in a great position to negotiate on buying another property.
HTH
A:One note of caution though: those people you talked to are right about the timing, because the biggest hurdle in the current mortgage crisis is to find a proceedable buyer for your house. Sales have almost ground to a halt in some areas, and the few buyers in the market are looking to drive a hard bargain. Not the best news, sorry.
What you need is an up-to-date valuation and an idea of what asking price will get buyers' attention. If the figures still add up, go for it – and good luck!
A:Don't listen to everone who says you're making a mistake, they aren't paying your bills for you.
Just follow your heart, if you want to move to a smaller house, then do it. It'll be a lot cheaper to run.
A:No brainer if you ask me. Downsize. Think of the relief. I've lived in a rented bedsit for 10 years (I know you're not intending to do that) as buying's always been too expensive. I've got !!!!!! all but I do have £100k in the bank.
A:
Downsizing is the new "dream home".
Ignoring the obvious savings in mortgage interest/repayments, you'll also save on:
– council tax
– heating
– insurance
– buying "things" to fit in those rooms
– maintenance
My qualification? I downsized from a 6-bed house last year to a rented bedsit this year.
A:So we are considering
downsizing but everyone keeps telling us it's a terrible idea.
It's a very good idea. It's like selling an expensive car so you can run a cheaper one and have more disposable income to enjoy on other things.
Those telling you not to are probably doing so because it breaks the "house prices only ever go up, of course it's worth paying a massive mortgage" thoughts.
A:Goodness I am absolutely stunned at your replies (pleasantly so!) as seriously, everyone I so much as suggest it to goes completely off on one saying what an awful idea and that we should just ride it out – ride it out? It's not going to go away is it?!!!!!
Thanks so much for all your replies, I am very grateful.
A:I think it's a brilliant idea!! You only get one chance at life, and what's the point spending it up to your eyeballs in debt, when you could change all that, still have a home, and live comfortably!
Who ever told you it was a terrible idea probably hates your guts and likes seeing you struggle!
A:well that's exactly my thoughts too! but everyone just keeps saying "ooooh bad time to sell/buy, you should sit it out, wait a year or two". I KNOW it's not a great time but we would still be better off so I dont understand why people are so against the idea!
A:I can't see how reducing your debt could be a bad thing when you are struggling…?
Good luck!
A:oh yes I'm certain of it – plus our monthly mortgage repayments would be far less so overall I *think* we would be in a much more stable financial position.
A:If you sold, would you be able to clear your debts and still have enough left for a deposit?
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