Renovate house or save to trade up??

[jeva]

Age: 31
Spouse’s/Partner's age: 29

Annual gross income from employment or profession: 70k
Annual gross income of spouse: 40-45k

Type of employment: Nurse and IT consultant

In general are you:
(a) spending more than you earn, or
(b) saving? Saving

Rough estimate of value of home: 400k
Amount outstanding on your mortgage: 425k
What interest rate are you paying? 3.05%

Other borrowings – car loans/personal loans etc - 0

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: savings of 35K



Do you own any investment or other property? No

Ages of children: One on the way

Life insurance: yes


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

We live in a small three bedroom house in a great location in Dublin. Last year our plan was to extend as we have lots of space to the rear. Given the value of our house falling significantly however we have decided against. With a baby on the way we are thinking of doing some work to the existing house such as new windows, gas boiler and moving the bathroom upstairs. Would we be mad to spend 20k on a house thats currently worth less than we owe on it? Our original plan was to stay here another 6-7 years but given the falling house prices we may trade up sooner ie. 2-3years and hope to rent this house out.

 

[Flax]

If your house is in a great location, you have one/two spare bedrooms, and you have plenty of scope to extend, why do you want to trade up?

 

[jeva]

Thanks for reply. It has 3 bedrooms but no bathroom upstairs. Although we could extend there's only so much space you could add on to a terraced house. We know we'll trade up at some stage...just not sure when will be a good time and although we need to do a few bits with this house should we be spending on a house when we're already in negative equity??

 

[Happy_Harry]

Annual gross income from employment or profession: 70k
Annual gross income of spouse: 40-45k

Rough estimate of value of home: 400k
Amount outstanding on your mortgage: 425k

Savings and investments: savings of 35K
.....given the falling house prices we may trade up sooner ie. 2-3years and hope to rent this house out.

Out of curiosity, how would you buy a new house without selling your old one ? If house prices fall further your negative equity will grow. After what we are going through now, I can't see any banks lend you more money to buy a second house.

How much will the extension cost , if you can afford it without an additional loan, I would probably go for it, as being the only solution to getting you a bigger house, and reading from your post you like the location, you just need a bigger and more up-to-date home.

I am in a similar situation and if I had all required funds for the extension I would do it. Trading up will you cost you probably almost as much in stamp duty alone as an extension.

In terms of your renovation plans, is the renovation really necessary, or could it wait until you do an extension ?

I also know your feeling about pumping money into an asset that will only be worth less in value, but I consider it no longer as an asset but as a home in which I will (have to) live a lot longer that I might have envisaged when I bought it. That is why I today spent another 1000 euros on its infrastructure.

 

[Bob_tg]

Out of curiosity, how would you buy a new house without selling your old one ? If house prices fall further your negative equity will grow. After what we are going through now, I can't see any banks lend you more money to buy a second house.

I agree with Happy Harry. How could you finance the 2nd house?

As opposed to "being mad" to spend money on extending/renovating your house, I actually think it's the smart move if you like the area, have the funds and need the space.