Trading up question

Ollie11

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My wife has told me that she would like to have another baby and that sh would also like to move to a bigger house ( a lot to take in on a Friday morning). We currently own a 3 bed semi d with no mortgage. She has seen a house that she likes and we are viewing it today. ( fast mover my wife). Apparently the bank will lend us 90% of the purchase price and we have the deposit and stamp duty money. My question is: Should we sell our exisiting house before we trade up? Is there any tax implication if we buy the new before we sell the old one. I know the market is slow so it could take a couple of months to shift our 3 bed semi whereas the house of our dreams seems to have come along now.
 
I think you would be mad to expose yourself to debt now. If I had money in the bank and my house paid off I'd be celebrating my good fortune, not considering risking it all.

Have a chat to your wife about risk.
Babies don't take up a lot of space. Extensions are cheap compared to moving.
 
I agree that babies don't take up a lot of space but with 2 toddlers at home already we would really need more space in the long term. We do not have the option to build an extension due to garden restrictions. This would really be our dream house in our dream location and our house for life. We would be looking at a mortgage of about 100,00 after we sell our own house which would be very manageable. On the other side we could also afford the 90% mortgage for the new one while we would be waiting to sell the old but this would be for around 380,000 which would not be so desirable in the long run.
 
My wife has told me that she would like to have another baby and that sh would also like to move to a bigger house ( a lot to take in on a Friday morning). We currently own a 3 bed semi d with no mortgage. She has seen a house that she likes and we are viewing it today. ( fast mover my wife). Apparently the bank will lend us 90% of the purchase price and we have the deposit and stamp duty money. My question is: Should we sell our exisiting house before we trade up? Is there any tax implication if we buy the new before we sell the old one. I know the market is slow so it could take a couple of months to shift our 3 bed semi whereas the house of our dreams seems to have come along now.

Lots of big questions!

I'd personally think it is mad (in current climate) to think about taking on a mortgage & buying a new home when you haven't sold your current house. Also, you don't know what you'll get for your current house until you've sold it, so I wouldn't go counting any chickens (yet). A couple of months to sell a house (unless you sell at rock bottom price) is very optimistic IMO.

Put it this way, would it not be better to sell your house, know what cash you have in bank & then go & apply for a mortgage on that basis? It's crazy to rush just because you've found your "dream home". Talk to your wife. Put the brakes on a bit.
 
Go a buy a site and buy a house out in the country somewhere.

3/4 Acre site and build 2500 sq ft house for around 200-250k.

Rent your current property and use money from this to pay off mortgage on new build.
 
I would be different to the other posters - you have no mortgage, and you have a good deposit. If you can afford to buy the house of your dreams - why not. And you could rent out the other house.
Speak to a good broker, you are in a good position to do what your wife wants - you are not saddled with debt...
 
It is a very difficult question!

Personally I am of the view that a home is not an investment and as long as you can afford the repayments etc. even if faced with negative equity it does not mean a whole lot until the time comes to sell.

If you need and can afford a bigger house I think you should go for it.

However, I dont think house prices are going to increase anytime soon. You wont be having the baby for awhile so perhaps you should hold off on moving for the moment. Also, perhaps you should consider selling your house before buying a second house as you dont want to be stuck with two houses! This might also give you a further opportunity to save more money if the house prices continue to drop from the time your house is sold/sale agreed and the time you buy your new home.

However, if you own your current house I would not suggest that you stretch yourself to a 90% mortgage.
 
The 90% mortgage but only be an interim option if we did not sell our house before buying the new one. I would be hoping for as low a mortgage as possible and would be using the proceeds from the old house to achieve this. What I really want to know is what happens if we buy this new house before selling our own. Does the new house become our PPR, does this mean that we will have to pay CGT on the old one? Would prefer to sell it not keep it and rent it out. I know I will be paying the higher mortgage until we sell our old one. The alternative as I see it is to sell our old one however long that takes and then look for a new one. This will mean renting (with 3 children) until we find somewhere that we love. So would the rental expense be the same as paying the higher mortgage until we sell our old one?? The financial and emotional stress? Sorry...thinking out load here as I go along:)
 
Its a very difficult decision Ollie, you would not have to pay CGT on the disposal of your current house provided it was always used as your home and not an investment.

Renting is not a great idea and it is dead money. however, perhaps you would get lucky that you find a house shortly after you get an offer on your current house. There is no harm viewing houses while trying to sell your current house. If selling a house is hard at the moment then maybe it would be fair that any house you like will also be on the market for a long period of time.
 
You're getting all kinds of advice, hopefully this is of some help.

as far as I know you have about 12 months to sell a house after moving out before being liable for CGT

If there was potential to extend your current house this would be a seriously cheaper way of getting more space as you cut out stamp duty, legal bills, hassle of moving, etc

You seem like you have no intention of being a property investor, so if you are intent on moving you should definitely off load your own place first.

Rent is not dead money, and I'm shocked that anyone believes this in 2009. you are paying money for a benefit you get i.e. shelter

My personal opinion is that if you are intent on trading up you could probably get a good deal. You'll need to put in a bit of work at it and view many places and try keep the emotions in check (i.e. dream homes are a myth put out by sellers). There are literally thousands of fine houses on the market at the moment
 
You're getting all kinds of advice, hopefully this is of some help.

as far as I know you have about 12 months to sell a house after moving out before being liable for CGT

If there was potential to extend your current house this would be a seriously cheaper way of getting more space as you cut out stamp duty, legal bills, hassle of moving, etc

You seem like you have no intention of being a property investor, so if you are intent on moving you should definitely off load your own place first.

Rent is not dead money, and I'm shocked that anyone believes this in 2009. you are paying money for a benefit you get i.e. shelter

My personal opinion is that if you are intent on trading up you could probably get a good deal. You'll need to put in a bit of work at it and view many places and try keep the emotions in check (i.e. dream homes are a myth put out by sellers). There are literally thousands of fine houses on the market at the moment
 
If the house was always used as PPR then the 12 month rule does not apply.

Rent is dead money it would be much better in this situation if he could move from one house straight into an other. And as Ollie has indicated there is also the hassle of moving and living in rented accomodation that he might be better to pay the bank higher repayments.
 
Thank you all for your sound advice.
Well, we went to view the house at lunchtime and it is really very nice. The interior and garden are fantastic. We need to check out the road and green at different times of the day/week to get a feel for the place. Any other advice?
As this has all come out of the blue we are planning on hitting the estate agents and looking at similar houses in the area to see what else is out there but to be honest we really like this one.
We have also decided that we will be putting our house up for sale even if we do not go ahead with this purchase so if you know anyone looking for a 3 bed semi d in Carrigaline, let me know!
 
I'm renting with 3 kids. We have moved 4 times in the last 5 years from the time the oldest was 3 and the third child arrived just before move number 2. Kids cope - actually it's usually exciting for them. I'd sell up first and rent until you find the right house for you. It's also a good way to clean out 'stuff'. If it's sitting in a box for 6 months+ and it hasn't been missed - you don't need it!
 
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