How do we best keep our property options open?

[GoaterHell]

Age: 34
Spouse’s/Partner's age: 35

Annual gross income from employment or profession: €110k
Annual gross income of spouse: €25k

My Employment: Manager (Software Industry)
Spouses Employment : Nurse (job share)


In general are you:
(b) saving

Rough estimate of value of home : I reckon currently about €380k, but falling fast! Was valued at around €560k close to peak and EA valued at around €460k 2 weeks ago
Amount outstanding on your mortgage : €265k
What interest rate are you paying? tracker - ECB + 0.5%

Other borrowings – car loans/personal loans etc

car loan : €11k outstanding over 2 yrs (€400pm)

Do you pay off your full credit card balance each month? yes
If not, what is the balance on your credit card?

Savings and investments:

approx €25k in aggressive equity fund with Acorn Life (€300 per month paid in)
approx €9k in FTSE/DOW tracker with Eagle Star
€10k in Savings Account (3.5% interest)
€1k remaining in Irish bank shares (ahem)

Do you have a pension scheme? yes

mine : Employer Contribution 5%, AVC 15%
wife : Defined Benefit

Do you own any investment or other property?

Ages of children: 4, 2

Life insurance:

€270k Flat 25 yr Term - €130pm
4 x salary with work pension


What specific question do you have or what issues are of concern to you?

My main question is around our private home. I'd say that we definitely have some equity left in it, but it is difficult to say how much and I'd say it is falling fast. I know we are in a reasonably healthy situation, but we do have a sizeable mortgage and if fall from peak ends up being anything over 50% we are likely to end up in negative equity. What I want to avoid is ending up stuck in our house if we want to trade up (positive) or if the worst happens and I lose my job (negative). We aren't unhappy in our current house, but it isn't our dream home either and we'd like something with more space outside for the kids as they get older.

The way I see it our options are

1. Sell up now for whatever we can get and take any remaining equity out of the house, then rent for the forseable future. This at least leaves us flexible in terms of positive and negative futures.

2. Stick tight and hope for the best. If the worst comes to the worst, then we'll either have to use savings to cover the mortgage costs or to bridge the negative equity gap and sell up.

I'd appreciate any advice, as I feel that although we are currently in a positive position with regards to our employment but still seem to be going backwards.

 

[kopq]

There are lots of people here who will have more detailed advice than I will, but my feeling would be not to go for Option 1. You would uproot your family and face an uncertain future in renting if you were to sell up now. None of us know what way the market will go and it seems like it would be a decision based on panic rather than any sound financial reasoning.

Your house was valued at €460k two weeks ago, I don't understand how you think it has fallen a further €80k in the last 2 weeks.

You have a good income, good savings and you're reasonably happy in your house. My advice would be to stay put for now.

 

[coppers]

Have to agree with kopq.

For you to fall into negative equity prices would have to fall a lot more than 50% from peak (perhps you're in very vulnerable area, you didn;t say)
280k is 50% of 560 but takes no account of inflation over the number of years you have your house so 280K would be a 60%+ drop.

Aside from that and uprooting your family, ECB +.5% is a rate you will never see again. Selling now and taking a new mortage in a few years at ECB + 1.5%min would see you paying a lot more for your 265K than you are now.

Rates are likely to drop and stay low for the next few years; I would expect renting to be far more expensive for the duration.