1% rate above BoE for life but need to sell

[Assurance]

Hi Guys,

I'm new here, this is an interesting forum.

I have a two bedroom property, we like it but we have three kids, under 6 years old!!!! So a nightmare.

The dilema is, do we sell and move to a worst off area in town with more room or do I extend the loft and a conservatory?

The thing is our mortgage is 1% above the BoE for the life of the mortgage and we are repaying fast. I know the interest won't hang around for much longer at 0.5% but hey it's been like that for 2 years now and by the time it reaches 5 or 6% I might have repaid even more!. We are capitalising £800 a month and paying £200 of interest only. If we move, our mortage will be bigger and the interest rate too and after all it won't be the house we want...

Has somebody come across this dilemma? oh! also my parents would lend us the cash to either convert the loft or to renovate the new property at no interest and to give back whenever is convinient...

Any advice will be appreciated, hope I'm posting in the write place...

Thank you

[Dan S]

Hi Assurance

You're in a very enviable position but I can see that having 3 children would be a bit of a handful with only two bedrooms.

Your situation seems to be split quite starkly between finance lifestyle. I'm sure most homebuyers would kill to be in your position of paying just 1.5%, but only you know what your priorities are.

It's difficult to suggest anything without knowing how much you could sell your two bedroom home for and what the price of larger homes are in both your current area and the less well-off areas you mention.

If the figures aren't too out, a compromise would be to ask your parents to contribute their interest-free loan towards attaining a larger property in your area with a decent LTV. Whatever you do, it would be a crime to completely throw away your low interest rate with buying at a high Loan To Value.

I suggest you try to stick it out for as long as you can, because you'll never get another opportunity to pay 1% above Base Rate. Once at breaking point I would definitely go down the loft conversion route since your issue is space as well as intending to add value.

A conversion would typically cost around £20,000 and add around 12% in value to your home. The conservatory would add around 7% and is a variable feast when it comes to price and quality.

The primary reason I would suggest a loft conversion is you're reclaiming valuable space that wasn't being used (assuming it's not full of boxes). A conservatory will add space but eat into your garden.

These are all only suggestions, and it's all down to your personal circumstances, but I hope it helps

Dan

[Assurance]

Hi Dan,

Thank you for your very complete answer. I needed someone outside my family to remind me what you just said and I appreciate it a lot. I think the best thing is stay where we are.

the max we could afford to buy is a modest £250k and for this sort of price where we live you get something this is deem to be not nice and if you are very very lucky have some space. But it will be a house that has something odd...

£30-40k from 'mum & dad' as generous as it is would not solve the problem because houses between £250-£290k are difficult to sell as the stamp duty and at those prices the difference isn't really that much to be honest.

However if we convert the loft, we could just about still live in a nice area in town with all the amenities around the corner, including Tesco, school, garage and wife's works. But most Importantly we get the benefit of a free loan and s small manageable low interest rate mortgage.

Our house is in the Market as we speak while we take a decision at £210k, if we sell we get £50k as deposit towards the new home. Our mortgage is £154k which combined with the interest rate and dad's free interest loan it can work really well don't you thing?

Having said that, the loft conversion does not solve the problem downstairs... But hey we need to sacrifice something!

The well off areas are unreachable for us at the moment. A detach property with. A garage a decent garden and 4 beds could go easily for £500-£1m

I am still thinking that we are young and hopefully might be able to reach the 500k level one day...

[The Mortgage Hut]

Apologises if this has been done already, but have you asked your existing mortgage lender if you can port your rate to your new property. This way you would only have a higher rate on the extra borrowing you take.

Most lenders, from my experience are more than happy to do this subject to your meeting there affordability criteria.

Regards,

Chris

[Murray Whelan]

On the stamp duty issue my tax guys reduced my stamp duty by more than half totally legally just using clever accounting. I am happy to share this info with anyone interested!! Only really worth it for properties over £500k tho!

Muz

[Dan S]

No problem Assurance

Good luck with everything!

[New Homes Expert]

Youn need to think about the total costs involved with moving.
You could extend into your roof but you will have the nuisance and mess whilt the building work is being done.

It is normally better to get a bigger house even if it means a bigger loan provided you can afford it when rates go up.

[Dan S]

I notice the post about a 50% reduction in stamp duty has made its way here too!