trading up in current climate

Any advice on the best approach to trading up in the present climate?

A nice house has come on the market in our area which would be an ideal next step up the ladder for us. It's worth maybe 100k more than ours which is worth about 700k (or at least it used to be!).

We would of course need to sell our current house to afford it and I'm wondering are we crazy to even think about buying/selling at the moment?

We have secure jobs and are not under any pressure to move- we aren't desperate for more room or anything like that.

I'm cautious as I've heard nightmare stories of people who've put down deposits on bigger houses that have since dropped in value, meanwhile the price they could hope to get for their current place has also dropped- leaving them in trouble from both ends!


Should we sell first?
That could take ages and the other house could be gone by the time we sell ours.

All advice appreciated

rrrrrrrrrr said:

ent?

We have secure jobs and are not under any pressure to move- we aren't desperate for more room or anything like that.

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Then why are you considering to move at all?

We don't NEED to move as such but it's a nicer house with a bigger garden on a quieter road. We could afford the difference in mortgage repayments so why not?

I'm just afraid of falling between stools with the current climate.

I don't think that it is worth trading up for a difference of €100k.


You will be paying around €50k in stamp duties alone. You will want to change the new house which will cost more money. So you will be getting an extra €100k of a house for around €200k in costs.

It would be better to wait until you make a really substantial move up the property ladder.

Moving is tricky in the current market. You will have to have a signed up buyer for your current home. The theoretical steps to avoid getting caught out are as follows:

1) Get the buyers of your house to sign the contracts
2) Sign the contracts for the purchase of the other house and demand that they return them within 7 days.
3)When you get the signed contracts back from the vendors, then you can sign your sales contract.

Very messy and doesn't work out in practice.

Brendan

I agree with previous poster - if you don't have to move, stay put.

However, if you had to move, you could release equity from and rent out first property while switching to an interest only mortgage. You could get a fair bit more in rent than the interest only which could be used to repay the mortgage on house 2 (bearing in mind the rental income, minus interest, capital allownaces etc, is taxable).

We had to trade up due to expanding family and so far we are happy. It is riskier though as all our assets are in the Dublin property market!

Be careful and do your sums!

But wouldn't I then own two houses that are dropping in value instead of one and so be doubly worse off?

Another thought... What if I agreed to buy the house on condition I sold mine first? Like a property chain? Do property chains exist in Ireland like the UK?

It's an executor's sale and the house has been vacant for a few years, so maybe they're not in so much of a hurry?

Yes, your exposure to property market shifts, up or down, would be total. Remember - I did mention that if you don't need to move then stay put. For us, we needed a bigger house, saw the one we wanted, low-balled on the price and came to an agreement which was suitable. For us the issue was what to do with the first house - and as some houses on our road have been up for sale for ages, it seemed like the only solution was to rent out the property. Fortunately we appear to have some good tennants and they are paying the (interest only) mortgage off for us. We will use the excess after tax to build up some cash in hand, then pay off the mortgage on the new house at a slightly accelerated pace to shorten the period.

Smarter people than me will tell you that we should have tried to sell anyway and borrow less on our new PPP, but then, as you point out, we would have been in a chain, with even less chance of securing the property we wanted. As it was, we didn't need to sell the first house to afford the second, so we didn't.

I would say that in the current climate, investing in property appears to be a very long term bet.

chippengael said:

However, if you had to move, you could release equity from and rent out first property while switching to an interest only mortgage. You could get a fair bit more in rent than the interest only which could be used to repay the mortgage on house 2 (bearing in mind the rental income, minus interest, capital allownaces etc, is taxable).

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Just remember that the interest on the equity release portion of your mortgage is not deductable when calculating your income tax liability.

lightup said:

Just remember that the interest on the equity release portion of your mortgage is not deductable when calculating your income tax liability.

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Yes, that's true. I just became aware of this. However, the original, outstanding mortgage interest is deductable.

Brendan said:

I don't think that it is worth trading up for a difference of €100k.


You will be paying around €50k in stamp duties alone. You will want to change the new house which will cost more money. So you will be getting an extra €100k of a house for around €200k in costs.

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Brendan I think you have to look at this from other points of view, not just financially. If it improves the lifestyle of the OP then maybe it is worth it.

"but it's a nicer house with a bigger garden on a quieter road"

Just my opinion.